A) Bennet Company paid cash dividends totaling $150,000 in 2006 and $75,000 in 2007. In 2008, Bennett intends to pay cash dividends of $800,000. Compute the amount of cash dividends per share to be received by common stockholders in 2008 under each of the following assumptions. Treat each case independently. There were no dividends in arrears as of January 1, 2006.
1. 25,000 shares of common; 100,000 shares of 6 percent, $50 par cumulative
2. 25,000 shares of common; 50,000 shares of 6 percent, $50 par noncumulative
3. 25,000 shares of common; 70,000 shares of 6 percent, $100 par cumulative
B) Webster Inc. carries the following marketable equity securities on its books at Dec 31, 2007, and 2008. All securities were purchased during 2007 and there were no beginning balances in any market adjustment accounts.
Trading Securities:
Cost Market Dec 31, 2007 Market Dec 31, 2008
V Company 50,000 26,000 40,000
W Company 26,000 40,000 40,000
X Company 70,000 60,000 50,000
Total 146,000 126,000 130,000
Available for Sale Securities:
Y Company 420,000 360,000 200,000
Z Company 100,000 120,000 240,000
Total 520,000 480,000 440,000
The Cost method is used in accounting for all investments in securities.
1. Give the entries necessary to record the valuations for both trading and available for sale securities at Dec 31, 2007 and 2008
2. What net effect would these valuations have on 2007 and 2008 net income?
C) On January 2, 2005 the Wilcox Studios leased six computers for use in the engineering department. The lease period is for 13 years and the estimated economic life of the leased property is 15 years. The lease does not contain automatic title transer or a bargin purchase option. Lease payments are $9,000 per year, payable each Dec 31. The incremental borrowing rate for Wilcox is 12 percent and the implicit interest rate (known by Wilcox) is 10 percent. The company uses straight-line depreciation for this type of equipment.
Provide the necessary journal entries to record the transactions for Wilcox for the period January 2, 2005 through Dec 31, 2006