Exercise 19-24E 18–18 - Brenner-Jude Corporation -Transactions affecting retained earnings ● LO6 LO7Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares, $1 par per share.Required:1. From the information provided by the account changes you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2011. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions.2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2011.Exercise 18-18Requirement 1Retirement of common shares ($ in millions)Common stock (5 million shares x $1 par per share)..................... 5Paid-in capital – excess of par ($22 – 5 – 2)............................. 15Retained earnings (given)........................................................ 2Cash (given)......................................................................... 22Net income closed to retained earningsIncome summary ............................................................................. 88Retained earnings (given).................................................... 88Declaration of a cash dividendRetained earnings (given)........................................................ 33Cash ................................................................................................ 33Declaration of a stock dividendRetained earnings (given)........................................................ 20Common stock ([105-5] x 4%) million shares at $1 par per share) 4Paid-in capital – excess of par (difference)........................... 16Requirement 2Brenner-Jude CorporationStatement of Retained EarningsFOR THE YEAR ENDED DECEMBER 31, 2011 ($ in millions)Balance at January 1 $ 90Net income for the year 88Deductions:Retirement of common stock (2)Cash dividends of $.33 per share (33)4% stock dividend (20 ) Balance at December 31 $123E 18–24 - Softech Canvas Goods - Profitability ratio ● LO1Comparative balance sheets for Softech Canvas Goods for 2011 and 2010 are shown below. Softech paysno dividends, and instead reinvests all earnings for future growth.Required:1. Determine the return on shareholders’ equity for 2011. 2. What does the ratio measure?Exercise 18-24The return on shareholders' equity is computed by dividing net income byaverage shareholders' equity. [$200 – 120]* ÷ ([$600 + 520] /2) = 14.29%* increase in retained earnings, which equals netincome since no dividends were paidThe ratio is a summary measure of profitability often used by investors andpotential investors, particularly common shareholders. It measures the ability ofcompany management to generate net income from the resources that ownersprovide. However, because shareholders’ equity is a measure of the book value ofequity, investors often relate earnings to the market value of equity, calculating theearnings-price ratio. Information available in the exercise is insufficient to do so.E 19–2 - VKI Corporation - Restricted stock award plan ● LO1On January 1, 2011, VKI Corporation awarded 12 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. On the grant date, the shares have a market price of $2.50 per share.Required:1. Determine the total compensation cost pertaining to the restricted shares. 2. Prepare the appropriate journal entry to record the award of restricted shares on January 1, 2011. 3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011. 4. Prepare the appropriate journal entry to record compensation expense on December 31, 2012. 5. Prepare the appropriate journal entry to record compensation expense on December 31, 2013. 6. Prepare the appropriate journal entry to record the lifting of restrictions on the shares at December 31, 2013.Exercise 19-2Requirement 1 $2.50 fair value per share x 12 million shares granted= $30 million fair value of awardRequirement 2 no entryRequirement 3 ($ in millions)Compensation expense ($30 million ÷ 3 years)... 10Paid-in capital – restricted stock................. 10Requirement 4 Compensation expense ($30 million ÷ 3 years)... 10Paid-in capital – restricted stock................. 10Requirement 5 Compensation expense ($30 million ÷ 3 years)... 10Paid-in capital – restricted stock................. 10Requirement 6 Paid-in capital – restricted stock..................... 30Common stock (12 million shares x $1 par)...... 12Paid-in capital – excess of par (remainder).... 18E 19–5 - American Optical Corporation - Stock options ● LO2American Optical Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2011, that permit executives to acquire 4 million of the company’s $1 par common shares within the next five years, but not before December 31, 2012 (the vesting date). The exercise price is the market price of the shares on the date of grant, $14 per share. The fair value of the 4 million options, estimated by an appropriate option pricing model, is $3 per option. No forfeitures are anticipated. Ignore taxes.Required:1. Determine the total compensation cost pertaining to the options. 2. Prepare the appropriate journal entry to record the award of options on January 1, 2011. 3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011. 4. Prepare the appropriate journal entry to record compensation expense on December 31, 2012.Exercise 19-5Requirement 1 $3 fair value per option x 4 million options granted= $12 million total compensationRequirement 2 no entryRequirement 3 ($ in millions)Compensation expense ($12 million ÷ 2 years)... 6Paid-in capital – stock options.................... 6Requirement 4 Compensation expense ($12 million ÷ 2 years)... 6Paid-in capital – stock options.................... 6E 19–9 - Washington Distribution - Employee share purchase plan ● LO3In order to encourage employee ownership of the company’s $1 par common shares, Washington Distribution permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can