Otter Tail, Inc., began operations in January 2015 and had the following reported net income or loss for each of its 5 years of operations:
At December 31, 2019, Otter Tail’s capital stock was comprised of the following:
Otter Tail has never paid a cash or stock dividend. There has been no change in the capital accounts since Otter Tail began operations. The appropriate state law permits dividends only from
Required:
Prepare a worksheet showing the maximum amount available for cash dividends on December 31, 2019, and how it would be distributable to the holders of the common shares and each of the
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Chapter 16 Solutions
Intermediate Accounting: Reporting And Analysis
- At the beginning of 2021, Pioneer Products’ ownership interest in the common stock of LLB Co. increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment account was $44 million at the time of the change but would have been $56 million if Pioneer had used the equity method since first investing in LLB. How should Pioneer report the change? Would your answer be the same if Pioneer is changing from the equity method rather than to the equity method?arrow_forwardThe controller of Red Lake Corporation has requested assistance in determining income, basic earnings per share, and diluted earnings per share for presentation on the companys income statement for the year ended September 30, 2020. As currently calculated, Red Lakes net income is 540,000 for fiscal year 2019-2020. Your working papers disclose the following opening balances and transactions in the companys capital stock accounts during the year: 1. Common stock (at October 1, 2019, stated value 10, authorized 300,000 shares; effective December 1, 2019, stated value 5, authorized 600,000 shares): Balance, October 1, 2019issued and outstanding 60,000 shares December 1, 201960,000 shares issued in a 2-for-l stock split December 1, 2019280,000 shares (stated value 5) issued at 39 per share 2. Treasury stockcommon: March 3, 2020purchased 40,000 shares at 38 per share April 1, 2020sold 40,000 shares at 40 per share 3. Noncompensatory stock purchase warrants, Series A (initially, each warrant was exchangeable with 60 for 1 common share; effective December 1, 2019, each warrant became exchangeable for 2 common shares at 30 per share): October 1, 201925,000 warrants issued at 6 each 4. Noncompensatory stock purchase warrants, Series B (each warrant is exchangeable with 40 for 1 common share): April 1, 202020,000 warrants authorized and issued at 10 each 5. First mortgage bonds, 5%, due 2029 (nonconvertible; priced to yield 5% when issued): Balance October 1, 2019authorized, issued, and outstandingthe face value of 1,400,000 6. Convertible debentures, 7%, due 2036 (initially, each 1,000 bond was convertible at any time until maturity into 20 common shares; effective December 1, 2019, the conversion rate became 40 shares for each bond): October 1, 2019authorized and issued at their face value (no premium or discount) of 2,400,000 The following table shows the average market prices for the companys securities during 2019-2020: Adjusted for stock split Required: Prepare a schedule computing: 1. the basic earnings per share 2. the diluted earnings per share that should be presented on Red Lakes income statement for the year ended September 30, 2020 A supporting schedule computing the numbers of shares to be used in these computations should also be prepared. Assume an income tax rate of 30%.arrow_forwardOn January 1, 2019, Kittson Company had a retained earnings balance of 218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of 67,000, and the following events occurred: 1. Cash dividends of 3 per share on 4,000 shares of common stock were declared and paid. 2. A small stock dividend was declared and issued. The dividend consisted of 600 shares of 10 par common stock. On the date of declaration, the market price of the companys common stock was 36 per share. 3. The company recalled and retired 500 shares of 100 par preferred stock. The call price was 125 per share; the stock had originally been issued for 110 per share. 4. The company discovered that it had erroneously recorded depreciation expense of 45,000 in 2018 for both financial reporting and income tax reporting. The correct depreciation for 2018 should have been 20,000. This is considered a material error. Required: 1. Prepare journal entries to record Items 1 through 4. 2. Prepare Kittsons statement of retained earnings for the year ended December 31, 2019.arrow_forward
- The Maria Incorporated was established in 2018. The Corporation issued 100,000, ₱20 par value shares of stocks at an issue price of ₱25. On May 1, 2019, the corporation issued 20,000 new shares at an issue price of ₱30 per share. The corporation reported a net income of ₱356,785 and ₱425,000 in 2018 and 2019, respectively. Dividends of ₱2 per share were declared and distributed to shareholders on March 31, 2019. There were no dividends distributed on the first year of operation of the corporation. Make a Statement of Changes in Equity of Maria Incorporated for the year 2019arrow_forwardOn January 1, 2020, Concord Corporation had cash and common shares of $80,000. At that date, the company had no other asset, liability, or shareholders’ equity balances. On January 2, 2020, Concord Corporation paid $60,000 cash for equity securities that it designated as fair value through other comprehensive income (FV-OCI) investments. During the year, Concord Corporationreceived non-taxable cash dividends of $26,000 and had an unrealized holding gain of $21,000 (net of tax) on these securities. Determine the following amounts for 2020: (a) Net Income / (Loss) $enter a dollar amount (b) Other Comprehensive Income $enter a dollar amount (c) Comprehensive Income $enter a dollar amount (d) Accumulated Other Comprehensive Income (as at the end of 2020) $enter a dollar amountarrow_forwardRingmeup Inc. had net income of $112,400 for the year ended December 31, 2019. At the beginning of the year, 35,000 shares of common stock were outstanding. On May 1, an additional 18,000 shares were issued. On December 1, the company purchased 4,700 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Ringmeup paid the annual dividend on the 5,000 shares of 4.05%, $100 par value preferred stock that were outstanding the entire year.Required:Calculate basic earnings per share of common stock for the year ended December 31, 2019. (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forward
- The Crump Companies, Inc. has ownership interests in several public companies. At the beginning of 2021, the company’s ownership interest in the common stock of Silken Properties increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment in equity securities account was $31 million at the time of the change. Accountants working with company records determined that the balance in an investment in equity affiliate account would have been $48 million if the equity method had been used previously.Required:1. Will Crump apply the new method retrospectively or apply the new method prospectively?2. Suppose Crump is changing from the equity method rather than to the equity method. Will Crump apply the new method retrospectively or prospectively?arrow_forwardSince its incorporation in 2010, Park Inc. has qualifed as a CCPC. During the period since incor-poration until December 31, 2021, the company has had the following transactions that might involve the capital dividend account: 1. In 2012, the company sold depreciable property with an ACB of $225,000. It was the last property in its class and the balance in the class at the time of the sale was $129,600. The proceeds from the sale were $275,000. No additional property was purchased in 2012. 2. In 2014, the company received a capital dividend of $46,000. 3. In 2015, the company received life insurance proceeds, net of the adjusted cost basis of the policy, in the amount of $27,500. 4. In 2016, the company paid a capital dividend of $38,000 and eligible dividends of $19,000. The required election and designation was made. 5. In 2016, the company sold a parcel of land for $100,000. The ACB of this land was $145,000. 6. In January 2021, Park acquired all of the shares of a small…arrow_forwardThe Trump Companies Inc. has ownership interests in several public companies. At the beginning of 2016, the company’s ownership interest in the common stock of Milken Properties increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment account was $31 million at the time of the change. Accountants working with company records determined that the balance would have been $48 million if the account had been adjusted for investee net income and dividends as prescribed by the equity method. Required: 1. Prepare the journal entry to record the change in principle. 2. Briefly describe other steps Trump should take to report the change. 3. Suppose Trump is changing from the equity method rather than to the equity method. How would your answers to requirements 1 and 2 differ?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning