Chapter 11 – Reporting and Interpreting Owners’ Equity
51. Which of the following entries would be recorded when a company reissues 1,000 shares
of treasury stock for $40 per share when they were repurchased at a cost of $44 per share and
have a $1 par value?
Chapter 11 – Reporting and Interpreting Owners’ Equity
52. A company reported the following asset and liability balances at the end of 2009 and
2010:
During 2010, cash dividends of $50,000 were declared and paid, and common stock was
issued for $100,000. How much was the 2010 net income?
Chapter 11 – Reporting and Interpreting Owners’ Equity
53. On December 15, 2009, the board of directors of Cross Corporation declared a cash
dividend, payable on January 8, 2010 of $.80 per share on the 2,000,000 common shares
outstanding. On December 15, 2009, Cross Corporation should
54. The declaration and payment of a cash dividend
Chapter 11 – Reporting and Interpreting Owners’ Equity
55. Which of the following correctly describes the affect of declaring and distributing a
common stock dividend?
56. A stock dividend
Chapter 11 – Reporting and Interpreting Owners’ Equity
57. DORA Company declared and distributed a 10% stock dividend on 20,000 shares of
issued and outstanding $5 par value common stock. The market price per share on the
declaration date was $9 and was $10 on the distribution date. Which of the following
correctly describes the accounting for the declaration and distribution of the stock dividend?
58. Chicago Clock Corporation issued a 3-for-2 stock split of its common stock, which had a
par value of $100 before the split. What dollar amount of retained earnings should be
transferred to the common stock account?
Chapter 11 – Reporting and Interpreting Owners’ Equity
59. Which of the following statements is false?
60. A company has 4 million common shares authorized, 2.5 million shares issued and
100,000 treasury shares. The par value is $1 per share and the market price is $30 when the
company declares a 4-for-1 stock split. Which of the following is correct?
Chapter 11 – Reporting and Interpreting Owners’ Equity
61. A company declares a 40% stock dividend when there were 4 million common shares
outstanding with a $1 par value. The current market price is $20 per common share. Which of
the following will be the effect of the stock dividend?
62. Davidson Company has 10,000,000 common shares issued and 500,000 shares of treasury
stock. The stock’s par value is $2 per share and its current market price is $25 per share.
Which of the following is correct when a 15% stock dividend is declared and distributed?
Chapter 11 – Reporting and Interpreting Owners’ Equity
63. Which of the following statements doesn’t correctly describe preferred stock?
64. What is the correct entry for the sale of 1,000 shares of $10 par value preferred stock for
$50,000 cash?
Chapter 11 – Reporting and Interpreting Owners’ Equity
65. Which of the following doesn’t correctly describe preferred stock?
66. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will
be paid to the common stockholders assuming the preferred stock is cumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
67. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will
be paid to the preferred stockholders assuming the preferred stock is cumulative?
68. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will
be paid to the preferred stockholders assuming the preferred stock is noncumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
69. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will
be paid to the common stockholders assuming the preferred stock is noncumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
70. Slickers, Inc. had the following capital structure during 2010:
Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for 2008 and 2009.
Common stock, $100 par value, 2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000. How much of the
dividend is paid to the preferred stockholders during 2010 assuming the preferred stock is
cumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
71. Slickers, Inc. had the following capital structure during 2010:
Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for 2008 and 2009.
Common stock, $100 par value, 2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000. How much of the
dividend is paid to the preferred stockholders during 2010 assuming the preferred stock is
noncumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
72. Slickers, Inc. had the following capital structure during 2010:
Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for 2008 and 2009.
Common stock, $100 par value, 2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000. How much of the
dividend is paid to the common stockholders during 2010 assuming the preferred stock is
noncumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
73. Slickers, Inc. had the following capital structure during 2010:
Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding with dividends in
arrears for 2008 and 2009.
Common stock, $100 par value, 2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000. How much of the
dividend is paid to the common stockholders during 2010 assuming the preferred stock is
cumulative?
Chapter 11 – Reporting and Interpreting Owners’ Equity
74. Which of the following is a correct statement about cumulative and noncumulative
preferred stock?
Chapter 11 – Reporting and Interpreting Owners’ Equity
75. Cornhusker Corporation plans to raise $10 million cash on January 1, 2010, by issuing
either bonds payable (8% interest rate) or cumulative preferred stock (8% dividend rate). How
would the annual interest amount on the bonds or annual preferred dividend amount (if paid)
affect the net income for the year ended December 31, 2010?
76. CBA Company reported total stockholders’ equity of $85,000 on its balance sheet dated
December 31, 2010. During the year ended December 31, 2011, CBA reported net income of
$10,000, declared and paid a cash dividend of $2,000, and issued additional common stock
for $20,000. What is total stockholders’ equity as of December 31, 2011?
Chapter 11 – Reporting and Interpreting Owners’ Equity
77. A company reported total stockholders’ equity of $170,000 on its balance sheet dated
December 31, 2010. During the year ended December 31, 2011, the company reported net
income of $20,000, declared and paid a cash dividend of $4,000, declared and distributed a
10% stock dividend with a $5,000 total market value, and issued additional common stock for
$40,000. What is total stockholders’ equity as of December 31, 2011?
Chapter 11 – Reporting and Interpreting Owners’ Equity
78. A company reported total stockholders’ equity of $340,000 on its balance sheet dated
December 31, 2010. During the year ended December 31, 2011, the company reported net
income of $40,000, declared and paid a cash dividend of $8,000, declared and distributed a
10% stock dividend with a $10,000 total market value, purchased treasury stock costing
$12,000, and issued additional common stock for $60,000. What is total stockholders’ equity
as of December 31, 2011?
Chapter 11 – Reporting and Interpreting Owners’ Equity
79. A company reported total stockholders’ equity of $540,000 on its balance sheet dated
December 31, 2010. During the year ended December 31, 2011, the company reported net
income of $60,000, declared and paid a cash dividend of $18,000, declared and distributed a
10% stock dividend with a $15,000 total market value, sold treasury stock costing $12,000 for
$15,000, and issued additional common stock for $70,000. What is total stockholders’ equity
as of December 31, 2011?