Extreme Company

Problem-1

Extreme Company reported the following information about its stock on its December 31, 2016, balance sheet:

 

Preferred stock, $2 par value, 5% cumulative, 300,000 shares authorized, 120,000 shares issued
and outstanding
$240,000
Common stock, $1 par value, 500,000 shares authorized, 240,000 shares issued and outstanding 240,000

The following amounts were taken from Extreme’s income statement:

Income from continuing operations before income taxes $680,000
Income tax expense (204,000)
Income from continuing operations $476,000
Loss from discontinued operations, net of $13,000 tax benefit (36,000)
Net income $440,000

 

 

The only stock issued during 2016 was 80,000 shares of common stock issued on June 30, 2016. No dividends were declared during 2016.

Required:

  1. Calculate all earnings per share amounts for 2016. If required, round your answer to two decimals.
    $  per share
  2. If the preferred stock is cumulative, the dividend for the current period should be  taken into account while calculating earning per share.
    If the preferred stock is not cumulative, the dividend should be  taken into account only if it has been declared.

Problem-2

The shareholders’ equity section of Superior Corporation’s balance sheet as of December 31, 2015, is as follows:

Shareholders’ Equity
Preferred stock, $100 par value; authorized, 300,000 shares; issued, 30,000 shares $3,000,000
Common stock, $5 par value; authorized, 2,000,000 shares; issued, 400,000 shares 2,000,000
Paid-in capital in excess of par—preferred 90,000
Paid-in capital in excess of par—common 850,000
Retained earnings 3,000,000
Total $8,940,000

The following events occurred during 2016:

Jan. 5 10,000 shares of authorized and unissued common stock were sold for $8 per share.
16 10,000 shares of authorized and unissued preferred stock were sold for $109 per share.
Apr. 1 80,000 shares of common stock were repurchased for the treasury at a price of $19 per share. Superior uses the cost method to account for treasury stock.
Sept. 1 3,000 shares of preferred stock are issued in exchange for a piece of land. The land has an appraised value of $336,000. The preferred stock currently trades on the New York Stock Exchange at a price of $109 per share.
Dec. 1 25,000 shares of treasury stock are reissued at a price of $24 per share.

Required:

1. Prepare journal entries for each of the above transactions.
2. Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2016.
3. Calculate

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