Problem 1 - During 2012 J & J made several treasury stock transactions. For each of the following give the entry(s) that J & J would have made. J & J uses the cost method and the par value of common stock is $10.
a. On February 1st J & J purchased in the stock market 2000 shares of their $10 par value stock. They paid $15 per share.
b. On March 1, J & J reissued 600 shares of its common stock at $20 per share.
c. On June 2, J & J reissued another 300 shares of its common stock at $20 per share.
d. On July 1st, J & J reissued the remaining shares of its treasury stock at $11 per share
Required: Give necessary entries for each event.
Problem 2 - a. On January 5th, J & J issued a property dividend. Investments (stock in the Duh Company) comprising of 1000 shares was issued. The stock has a fair market value of $25 per share. The stock cost J & J $20 per share. They issued the Duh stock one month later. Prepare the entry.
b. On May 15th, J & J issued 5,000 shares of cumulative, 10% preferred stock, with a par value of $100 for $112 per share. Prepare the entry.
c. A subsidiary of J and J had outstanding, at the end of the year, 10,000 shares of common stock outstanding and 5,000 shares of non-cumulative/non-participating preferred stock. J & J wants to issue cash dividends totaling $80,000. Calculate how much goes to preferred stock holders and common stock holders.
Problem 3 - Assume that the above subsidiary reported net income of $105,000 and had 1200 convertible bonds payable outstanding. In addition, the subsidiary had 5,000 shares of cumulative 8%, $100 par value preferred stock. The bonds pay 2% interest annually and mature in 2020. Further assume that the bonds are convertible at the rate of 100 shares of $10 par value stock per bond. The stock's market value is $12 per share. Calculate diluted earnings per share. The marginal tax rate is 30%.