E3-4 On January 1, 2002, the stockholders' equity section of Ted Parge Corporation shows:
common stock ($5 par value) $1,500,000; paid-in capital in excess of par value $1,000,000; and
retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.
Mar. 1 Purchased 50,000 shares for cash at $14 per share.
July 1 Sold 10,000 treasury shares for cash at $16 per share.
Sept. 1 Sold 8,000 treasury shares for cash at $13 per share.
Instructions
(a) Journalize the treasury stock transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at $11 per share.

E3-7 Art Wyatt Corporation recently hired a new accountant with extensive experience in
accounting for partnerships. Because of the pressure of the new job, the accountant was unable
to review what he had learned earlier about corporation accounting. During the first month,
the accountant made the following entries for the corporation's capital stock.

May 2 / Cash 144,000
Capital Stock 144,000
(Issued 12,000 shares of $5 par value common stock
at $12 per share)
10 / Cash 600,000
Capital Stock 600,000
(Issued 10,000 shares of $50 par value preferred stock
at $60 per share)
15 / Capital Stock 14,000
Cash 14,000
(Purchased 1,000 shares of common stock for the
treasury at $14 per share)
31 / Cash 7,500
Capital Stock 2,500
Gain on Sale of Stock 5,000
(Sold 500 shares of treasury stock at $15 per share)

Instructions
On the basis of the explanation for each entry, prepare the entry that should have been made
for the capital stock transactions.

Page 2

E3-10 On October 31, the stockholders' equity section of Hinckley Company consists of com-mon
stock $800,000 and retained earnings $400,000. Hinckley is considering the following two
courses of action: (1) Declare a 10% stock dividend on the 80,000, $10 par value shares out-standing,
or (2) effect a 2-for-1 stock split that will reduce par value to $5 per share. The cur-rent
market price is $15 per share.
Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of stock-holders'
equity, outstanding shares, and book value per share. Use the following column head-ings:
Before Action, After Stock Dividend, and After Stock Split.

E3-22 Presented below are two independent situations.
1. Roscoe Cosmetics acquired 10% of the 200,000 shares of common stock of Ling Fashion
at a total cost of $13 per share on March 18, 2002. On June 30, Ling declared and paid a
$75,000 dividend. On December 31, Ling reported net income of $122,000 for the year. At
December 31, the market price of Ling Fashion was $14 per share. The stock is classified
as available-for-sale.
2. Juan, Inc., obtained significant influence over Orlando Corporation by buying 30% of Or-lando's
30,000 outstanding shares of common stock at a total cost of $9 per share on Jan-uary
1, 2002. On June 15, Orlando declared and paid a cash dividend of $35,000. On De-cember
31, Orlando reported a net income of $80,000 for the year.
Instructions
Prepare all the necessary journal entries for 2002 for (a) Roscoe Cosmetics and (b) Juan,
Inc.

Page 3

E3-23 At December 31, 2002, the trading securities for Yanu, Inc. are as follows.
Security Cost Fair Value
A $17,500 $16,000
B 12,500 14,000
C 23,000 19,000
$53,000 $49,000
Instructions
(a) Prepare the adjusting entry at December 31, 2002, to report the securities at fair value.
(b) Show the balance sheet and income statement presentation at December 31, 2002, after adjustment to fair value.

P3-13A The following securities are in Hi-Tech Company's portfolio of long-term available-for-
sale securities at December 31, 2002.
On December 31, 2002, the total cost of the portfolio equaled total fair value. Hi-Tech had the
following transactions related to the securities during 2003.
Jan. 20 Sold 1,000 shares of Awixa Corporation common stock at $56 per share
less brokerage fees of $600.
28 Purchased 400 shares of $70 par value common stock of Mintor
Corporation at $78 per share, plus brokerage fees of $480.
30 Received a cash dividend of $1.15 per share on HAL Corp. common
stock.
Feb. 8 Received cash dividends of $0.40 per share on Renda Corp. preferred
stock.
18 Sold all 800 shares of Renda Corp. preferred stock at $30.00 per share
less brokerage fees of $360.
July 30 Received a cash dividend of $1.00 per share on HAL Corp. common
stock.
Sept. 6 Purchased an additional 800 shares of $10 par value common stock of
Mintor Corporation at $82 per share, plus brokerage fees of $800.
Dec. 1 Received a cash dividend of $1.50 per share on Mintor Corporation
common stock.
At December 31, 2003, the fair values of the securities were:
Hi-Tech Company uses separate account titles for each investment, such as "Investment in HAL
Corporation Common Stock."
Instructions
(a) Prepare journal entries to record the transactions.
(b) Post to the investment accounts. (Use T accounts.)
(c) Prepare the adjusting entry at December 31, 2003, to report the portfolio at fair value.
(d) Show the balance sheet presentation at December 31, 2003.