33) From its inception through the year of 2017, First Mart, Inc. was profitable and made strong dividend
payments each year. In the year 2018, First Mart had major losses and paid no dividends. In 2019, the
company started making large profits again, and they were able to pay dividends to all shareholders—
both common and preferred. There are 2000 shares of cumulative, 10% preferred stock outstanding. The
preferred stock has a par value of $100. What is the total amount of dividends that should be paid to the
preferred stockholders in December, 2019?
A) $60,000
B) $90
C) $20,000
D) $40,000
34) A corporation has 20,000 shares of 17%, $50 par cumulative preferred stock outstanding and 25,000
shares of no-par common stock outstanding. Preferred dividends of $36,000 are in arrears. At the end of
the current year, the corporation declares a dividend of $208,000. How is the dividend allocated between
preferred and common stockholders?
A) The dividend is allocated $2000 to preferred stockholders and $206,000 to common stockholders.
B) The dividend is allocated $206,000 to preferred stockholders and $2000 to common stockholders.
C) The dividend is allocated $208,000 to preferred stockholders and no dividend is paid to common
stockholders.
D) The dividend is allocated $170,000 to preferred stockholders and $38,000 to common stockholders.
35) A corporation has 10,000 shares of 20%, $60 par cumulative preferred stock outstanding and 32,000
shares of no-par common stock outstanding. Preferred dividends of $22,000 are in arrears. At the end of
the current year, the corporation declares a dividend of $236,000. What is the dividend per share for
preferred stock and for common stock? (Round your answer to the nearest cent.)
A) The dividend per share is $6.00 for preferred stock and $13.57 per share for common stock.
B) The dividend per share is $23.60 for preferred stock and $0 per share for common stock.
C) The dividend per share is $14.20 for preferred stock and $2.94 per share for common stock.
D) The dividend per share is $23.60 for preferred stock and $2.94 per share for common stock.
36) On November 1, 2018, Worldwide, Inc. declared a dividend of $3.00 per share. Worldwide, Inc. has
20,000 shares of common stock outstanding and no preferred stock. Prepare the journal entry to record
this transaction. Omit explanation.
37) On November 1, 2019, Stateside, Inc. declared a dividend of $3.00 per share. Stateside, Inc. has 20,000
shares of common stock outstanding and no preferred stock. The date of record is November 15, and the
payment date is November 30, 2019. Provide the journal entry needed on November 30. Omit
explanation.
38) XD7, Inc. has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock
outstanding. The common stock has a $1.00 par value. The preferred stock has a $100 par value, a 5%
dividend rate, and is noncumulative. On October 31, 2018, the company declares the annual preferred
dividend and dividends of $0.25 per share for common. Prepare the journal entry for the declaration of
dividends. Omit explanation.
39) Jameson Company earned net income of $75,000 during the year ended December 31, 2018. On
December 20, Jameson declared the annual cash dividend on its 8% noncumulative preferred stock (par
value, $150,000) and a $0.50 per share cash dividend on its common stock (45,000 shares). Jameson then
paid the dividends on January 10, 2019.
Prepare the journal entries to record the declaration and the distribution of the dividends. Explanations
are not required.
40) Define the following dividend dates for a cash dividend. For each date, state whether a journal entry
should be recorded. In addition, if a journal entry should be record, state the effect on assets, liabilities or
equity.
Term
Definition
Should an entry
be recorded?
If so, what is the effect
on the accounting
equation?
Declaration date
Date of record
Payment date
intention to pay the
dividend.
Date of record
The date on which the
stockholders that
receive dividend checks
No effect
Payment date
The date of payment.
Yes
Assets decrease
Liabilities decrease
41) With a stock dividend, the total number of shares issued and outstanding increases, and the
percentage of total ownership of individual stockholders also increases.
42) Stock dividends have no effect on the total amount of stockholders’ equity.
43) Depending on its size, a stock dividend may cause the company’s market price to rise because of the
increased supply of stock.
44) Stock dividends are distributed to stockholders in proportion to the number of shares that
stockholders already own.
45) The declaration of a stock dividend creates a liability for the corporation.
46) Small stock dividends are accounted for at the stock‘s par value.
47) When a 5% stock dividend is declared, which account is debited?
A) Common Stock—Par Value
B) Common Stock Dividend Distributable
C) Stock Dividends
D) Paid-In Capital in Excess of Par—Common
48) The distribution of a stock dividend ________.
A) decreases both assets and liabilities
B) decreases assets and increase liabilities
C) affects only stockholders’ equity accounts
D) increases both dividends payable and cash
49) When the corporation declares a stock dividend, a stockholder’s percentage ownership in the stock of
the corporation ________.
A) will decrease
B) can increase or decrease
C) will increase
D) remains unchanged
50) Which of the following occurs when a corporation distributes a stock dividend?
A) Total liabilities would increase.
B) Total stockholders’ equity would increase.
C) Total assets would decrease.
D) Total stockholders‘ equity would be unchanged.
51) Which of the following occurs when a corporation’s board of directors declares a 10% stock dividend?
A) Stock Dividends will be credited for the new shares times the current market value of the stock.
B) Stock Dividends will be debited for the new shares times the current market value of the stock.
C) Stock Dividends will be debited for the new shares times the par value of the stock.
D) Stock Dividends will be credited for the new shares times the par value of the stock.
52) Stock dividends are declared by the ________.
A) chief financial officer of the company
B) board of directors of the company
C) chief executive officer of the company
D) stockholders of the company
53) A company originally issued 13,000 shares of $6 par value common stock at $12 per share. The board
of directors declares a 12% stock dividend when the market price of the stock is $22 a share. Which of the
following is included in the entry to record the declaration of a stock dividend?
A) Stock Dividends is debited for $34,320.
B) Stock Dividends is credited for $34,320.
C) Stock Dividends is debited for $18,720.
D) Paid-In Capital in Excess of Par—Common is credited for $18,720.
54) A company originally issued 14,000 shares of $5 par value common stock at $12 per share. The board
of directors declares a 14% stock dividend when the market price of the stock is $25 a share. Which of the
following is included in the entry to record the declaration of a stock dividend?
A) Stock Dividends is debited for $24,500.
B) Common Stock—$5 Par Value is credited for $47,040.
C) Common Stock is credited for $49,000.
D) Stock Dividends is debited for $49,000.
55) A corporation reported the following equity section on its current balance sheet. The common stock is
currently selling for $15.00 per share.
Common Stock, $6 par, 106,000 shares authorized, 57,000 shares issued
and outstanding
$342,000
Paid in Capital in Excess of Par
150,000
Retained Earnings
500,000
Total Stockholders’ Equity
$992,000
Which of the following would be included in the entry to record the distribution of a 15% stock dividend?
A) Common Stock—$6 Par Value would be credited for $51,300.
B) Stock Dividends would be debited for $95,400.
C) Paid-In Capital in Excess of Par—Common is debited for $95,400.
D) Stock Dividends would be credited for $51,300.
56) Superstar Corporation reported the following equity section on its current balance sheet. The common
stock is currently selling for $12.00 per share.
Common Stock, $10 Par, 103,000 shares authorized, 58,000 shares issued
and outstanding
$580,000
Paid-in Capital in Excess of Par—Common
125,000
Retained Earnings
302,000
Total Stockholders’ Equity
$1,007,000
What would be the total stockholders’ equity after a 15% common stock dividend?
A) $1,073,700
B) $705,000
C) $1,007,000
D) $604,200
57) Megastar Corporation reported the following equity section on its current balance sheet. The common
stock is currently selling for $18.25 per share.
Common Stock, $14 Par, 129,000 shares authorized, 48,000 shares issued
and outstanding
$672,000
Paid-in Capital in Excess of Par—Common
167,000
Retained Earnings
350,000
Total Stockholders’ Equity
$1,189,000
What would be the balance in the Common Stock account after the issuance of a 10% stock dividend?
A) $334,000
B) $604,800
C) $739,200
D) $672,000