978-1337276337 Test Bank Chapter 11 Part 4

Chapter 11

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157. Net income that has been earned by the corporation but not paid out as dividends.

158. Total stockholders’ equity divided by the number of shares of common stock outstanding.

159. The maximum number of shares a corporation may issue as indicated in the corporate charter.

160. The number of shares issued less the number of shares held as treasury stock.

161. The amount received for the issuance of stock in excess of the par value of the stock.

162. Stock that has a provision allowing the stockholders to share in the distribution of an abnormally large dividend on a

percentage basis.

163. Allows the issuing firm to eliminate a class of stock by paying the stockholders a fixed amount.

164. When the stock of a corporation is repurchased with no intention to reissue at a later date.

165. Issuance of common stock.

166. Net income for the period.

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167. Dividends for the period.

168. Foreign currency translation adjustments.

169. Issuance of common stock for cash

170. Issuance of common stock for equipment

171. Conversion of preferred stock into common stock

172. Repurchase of common stock as treasury stock

173. Payment of cash dividend on preferred stock

174. Declaration of stock split

175. Distribution of stock dividend

176. Reissuance of common stock (held as treasury stock)

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In addition, the Stockholders’ Equity section of the balance sheet showed:

Preferred stock, 10%, $2 par value, 10,000 authorized, 8,000 issued and outstanding, $5 liquidation value $16,000

Common stock, $4 par value, 20,000 shares authorized, 10,000 issued and outstanding 40,000

The common stock had a year-end market price of $24.

A)

Calculate the book value per common share at year-end.

B) Indicate the usefulness of this ratio for Cloud Co.

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185. Cloud Co. had the following account balances at December 31, 2017:

Retained earnings $52,000

Treasury stock, 500 common shares at cost (10,000)

Common stock, $1 par value, 10,000 shares authorized, 4,000 shares issued and outstanding 4,000

Cash dividends payable—common 6,000

Additional paid-in capital—common 1,200

Additional paid-in capital—treasury stock 900

Common stock dividend distributable 6,200

Prepare the Stockholders’ Equity section of the balance sheet for Cloud Co. at December 31, 2017.

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186. The Stockholders’ Equity section of Stallion Tack Shack balance sheet on January 1, 2017, appeared as follows:

Common stock, $5 par, 30,000 shares issued and outstanding $150,000

Additional paid-in capital—common 120,000

Retained earnings 300,000

Total stockholders’ equity $570,000

On March 1, 2017, Stallion reacquired 3,000 shares of common stock at $8 per share. Answer the following questions:

A) What amount would be reported on the March 31, 2017, balance sheet for treasury stock?

B) What is the number of outstanding shares at March 31, 2017?

C) How much is total stockholders’ equity to be reported on the March 31, 2018, balance sheet?

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187. Bradford Parts reported the following information at December 31, 2017:

Preferred stock, 12%, $1 par, 50,000 shares authorized, issued, and outstanding; cumulative; non-participating; callable at

par value

$ 50,000

Common stock, $2 par, 30,000 shares authorized 40,000

Additional paid-in capital—common 50,000

Retained earnings 30,000

Total contributed capital and retained earnings $170,000

Less: Treasury stock (500 common shares at cost) (5,000)

Total stockholders’ equity $165,000

Answer the following questions for Bradford Parts by placing the correct response in the space provided.

___________ A) How many shares of common stock are issued?

___________ B) How many shares of preferred stock are issued?

___________ C) How many common shares are outstanding?

___________ D) How many preferred shares are outstanding?

___________ E) How many of the common shares will receive dividends if and when they are paid?

___________ F) How many of the preferred shares will receive dividends if and when they are paid?

188. Overton Supply reported the following information at December 31, 2017:

Common stock, $1 par, 100,000 shares authorized $ 80,000

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Additional paid-in capital—common 60,000

Retained earnings 40,000

Total contributed capital and retained earnings $180,000

Less: Treasury stock (2,000 common shares at cost) (20,000)

Total stockholders’ equity $160,000

Answer the following questions for Overton Supply.

1)

Assuming that all shares were sold at the same price, for how much did each share of common stock originally

sell?

2)

What is the total amount of contributed capital at December 31, 2017?

3)

What is the amount of the book value per share at December 31, 2017?

4)

Would the book value per share increase, decrease, or remain the same, if the company declared a 2-for-1 stock

split on December 31, 2017? Explain.

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189. The Stockholders’ Equity section of Calabro, Inc. is as follows:

Preferred stock, 7%, $10 par, 1,000 shares authorized, 300 shares issued $ 3,000

Additional paid-in capital—preferred 9,000

Common stock, $1 par value, authorized 15,000 shares, issued 4,000 shares 4,000

Additional paid-in capital—common 20,000

Retained earnings 50,000

Total contributed capital and retained earnings $86,000

Less: Treasury stock (1,000 common shares at cost ) (6,000)

Total stockholders’ equity $80,000

The market price of the stock on December 31, 2017, was $8 per share. Answer the following independent questions:

A)

Calculate the average amount at which each share of common stock was initially sold.

B)

What balance will be in the Retained Earnings account immediately after the declaration of a 2-for-1 stock split?

C)

If a cash dividend of $1 per share was declared to both common and preferred stockholders, what would be

the balance in retained earnings immediately after the declaration?

D)

What balance will be in the Retained Earnings account immediately after the declaration of a 20% common stock

dividend on December 31, 2017?

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190. Given below are several transactions for Vision Inc. In the space provided, indicate the impact on each of the

stockholders’ equity accounts given, by placing the dollar amount and either a plus sign (+) or a minus sign (–) in the box

1.

2.

3.

4.

Vision Inc. issued 100 shares of stock in exchange for a patent. The patent had an undeterminable market value. The

stock was selling for $14 per share.

1.

X

2.

Vision Inc. issued 500 shares of common stock for cash at $15 per share.

X

3.

Vision Inc. issued 200 shares in exchange for a truck worth $3,000.

X

4.

Vision Inc. issued 100 shares of stock in exchange for a patent. The patent had an undeterminable market value.

The stock was selling for $14 per share.

+$200

+$1,200

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X

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191. Below are two transactions for Navaho Co.

1. On June 1, Navaho Co. issued 2,000 shares of $5 par common stock for $16 per share.

2. On June 15, Navaho Co. issued 1,200 shares of $5 par preferred stock to acquire a building. The stock is not widely

traded, and the current market value of the stock is not evident. The building has recently been appraised by an

independent firm as having a market value of $15,000.

Required

For each of these transactions, determine the impact on the accounting equation of the journal entry that Navaho Co.

would make.

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192. The Stockholders’ Equity section of Catanzaro, Inc.’s balance sheet on January 1, 2017, appeared as follows:

Common stock, $2 par, 20,000 shares issued and outstanding $ 40,000

Additional paid-in capital—common 120,000

Retained earnings 300,000

Total contributed capital and retained earnings $460,000

Less: Cost of treasury stock (10,000 shares) (80,000)

Total stockholders’ equity $380,000

A)

On March 1, 2017, Catanzaro resold 800 shares of treasury stock at $25 per share. What is the effect of the March 1

transaction on the accounting equation?

Balance Sheet Income Statement

Assets = Liabilities + Stockholders’

Equity Revenues – Expenses = Net

Income

B)

Why is the excess of the sales price of the 800 shares of treasury stock over the cost not reported on the income

statement?

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193. Assume that the Stockholders’ Equity section of Cherokee Company’s balance sheet on December 31, 2017, appears

as follows:

1. If on February 1, 2018, Cherokee buys 120 of its shares as treasury stock at $30 per share, determine the impact of this

2. How will the Stockholders’ Equity section of Cherokee’s balance sheet appear on February 1, 2018, after the purchase

of the treasury stock?

2.

Common stock, $10 par value, 1,500 shares issued, 900 outstanding $15,000

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194. Lear Flower Shop presented the Stockholders’ Equity section of its balance sheet on January 1, 2017, as follows:

Common stock, $2 par, 10,000 shares issued and outstanding $20,000

Additional paid-in capital—common 40,000

Retained earnings 10,000

Total stockholders’ equity $70,000

All common shares were originally sold for $6 each. The following transactions occurred during 2017:

—Reacquired 3,000 shares of common stock at $15 per share on February 16.

—Sold 2,000 shares of treasury stock at $20 per share on June 1.

Part 1. Show the effects of the transactions on the accounting equation.

Balance Sheet Income Statement

Assets = Liabilities + Stockholders’

Equity Revenues – Expenses = Net

Income

Part 2. How many shares of stock are outstanding at June 1, immediately after the sale of the 2,000 shares of treasury

stock?

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196. In the space provided, indicate the effect of the dividend transactions on each account listed by writing the amount

and whether the account would be increased or decreased. The company has 10,000 shares of $1 par value common stock

authorized and 8,000 shares issued. In instances where there is no effect on that account, place an X in the box.

Item

Common

Stock Common

Stock

Dividend

Distributable Additional

Paid-In

Capital—Common

Retained

Earnings

a.

May 1, declared cash dividend totaling $2,000.

b.

May 15, paid the cash dividend declared on May 1.

c.

May 25, declared a 10% stock dividend when the market price of the stock was $8.

d.

May 30, distributed the stock dividend.

e.

June 15, declared a 2-for-1 stock split.