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Product code: Accounts-AW605


P15-6 (Treasury Stock—Cost Method—Equity Section Preparation) Washington Company has the following stockholders’ equity accounts at December 31, 2012.

Common Stock ($100 par value, authorized 8,000 shares)                $480,000

Retained Earnings                                                                   294,000



(a) Prepare entries in journal form to record the following transactions, which took place during 2013.

(1) 280 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.)

(2) A $20 per share cash dividend was declared.

(3) The dividend declared in (2) above was paid.

(4) The treasury shares purchased in (1) above were resold at $102 per share.

(5) 500 shares of outstanding stock were purchased at $105 per share.

(6) 350 of the shares purchased in (5) above were resold at $96 per share.

(b) Prepare the stockholders’ equity section of Washington Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2013 was $94,000. State law requires restriction of retained earnings for the amount of treasury stock.


P16-8 (Computation of Basic and Diluted EPS) The information below pertains to Barkley Company for 2013.

Net income for the year                                                                                  $1,200,000

8% convertible bonds issued at par ($1,000 per bond); each bond is convertible into

30 shares of common stock                                                                             2,000,000

6% convertible, cumulative preferred stock, $100 par value; each share is convertible

into 3 shares of common stock                                                                       4,000,000

Common stock, $10 par value                                                                        6,000,000

Tax rate for 2013                                                                                            40%

Average market price of common stock                                                         $25 per share


There were no changes during 2013 in the number of common shares, preferred shares, or convertible                                                                                                                                                                                                                                                                                                                                                                                                                                              bonds outstanding. There is no treasury stock. The company also has common stock options (granted in  prior year) to purchase 75,000 shares of common stock at $20 per share.

Instructions (a) Compute basic earnings per share for 2013.

(b) Compute diluted earnings per share for 2013.

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Product code: Accounts-AW605

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