113.
On September 1, 2015, Maryland Corporation’s common stock was selling at a market
price of $200 per share. On that date, Maryland announced a 3 for 2 stock split. At what
price would you expect the stock to trade immediately after the split goes into effect?
114.
On September 1, 2015, Miami Corporation’s common stock was selling at a market price of
$300 per share. On that date, Miami announced a 2 for 1 stock split. At what price would
you expect the stock to trade immediately after the split goes into effect?
115.
On September 1, 2015, Miami Corporation’s common stock was selling at a market price of
$25 per share. On that date, Miami announced a 1 for 4 stock split. At what price would
you expect the stock to trade immediately after the split goes into effect?
116.
Treasury stock:
117.
The purchase of treasury stock for cash will:
118.
Treasury stock should most often be recorded:
119.
Treasury stock represents:
120.
Stock that had been issued by a corporation, and later reacquired, is classified as:
121.
The purchase of treasury stock for cash will have which effect upon the following items?
122.
Which of the following does
not
appear in a corporate income statement?
123.
When treasury stock is reissued at a price above cost:
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124.
The following two items are disclosed in the stockholders’ equity section of Riverside
Corporation’s December 31, 2015, balance sheet:
If the company had reacquired 700 shares of treasury stock in February of 2015, then for
what amount was the other treasury stock sold for during 2015?
On April 1, 2015, Jetter Corporation reacquired 2,000 shares of its own $10 par stock for
$120,000 cash. On October 15, 2015, 600 of the treasury shares were reissued at a price of
$65 per share.
125.
Refer to the information above. The reacquisition of the 2,000 shares on April 1, 2015,
causes:
126.
Refer to the information above. The journal entry to record the reissuance of the 600
shares of stock on October 15 includes a:
127.
Refer to the information above. Assuming there are no further transactions involving
treasury stock in 2015, the financial statements of Jetter Corporation for 2015 will show:
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128.
On April 16, 2015, Rodriguez Corporation reacquired 12,000 shares of its own $10 par
stock for $660,000 cash. On November 4, 2016, 1,000 of the treasury shares were reissued
at a price of $65 per share. The journal entry to record the reissuance of the 1,000 shares
of stock on November 4 includes a:
Essay Questions
129.
Accounting terminology
Listed below are nine technical accounting terms introduced in this chapter:
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided beside each statement, indicate the accounting term described, or
answer “None” if the statement does not correctly describe any of the terms.
_____ (a) The type of stock whose owners have little say in management of the
corporation and whose annual dividend is limited to a preset amount.
_____ (b) Distribution of cash or other company assets to the owners of a corporation.
_____ (c) An investment banking firm that guarantees an issuing corporation a specific
price for a stock issue and then makes a profit by selling the shares to the investing public
at a higher price.
_____ (d) Shares of a corporation’s stock that have been issued and then reacquired, but
not cancelled.
_____ (e) An element of stockholders‘ equity arising from the profitable operations of a
business.
_____ (f) The type of stock most likely to increase dramatically in value if the issuing
corporation is extremely successful.
_____ (g) Amounts invested in a corporation by its stockholders.
130.
Stockholders’ equity section of a balance sheet
Shown below are selected account balances from the accounting records of Hyde
Corporation at December 31, 2015:
Complete the stockholders’ equity section using the data provided above:
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131.
Interpreting the stockholders’ equity section
The stockholders’ equity section of the balance sheet of Benson Corporation (with certain
details omitted) appears below:
Answer the following questions based on the stockholders’ equity section given above.
(a) What is the total amount of legal capital?
(b) What is the total amount of dividends paid annually to the preferred stockholders?
(c) What is the average issue price of a share of common stock?
(d) The balance in retained earnings at the beginning of the current year was $575,000,
and there were no dividends in arrears. Net income for the current year was $360,000.
What is the amount of the dividends declared on each share of common stock during the
current year?
(a) $1,325,000
(b) $42,000
(c) $40 per share
(d) $6.12 per share
Feedback:
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132.
Interpreting stockholders’ equity section
The stockholders’ equity section of the balance sheet of Powell Corporation (with certain
details omitted) appears below:
Answer the following questions based on the stockholders’ equity section given above:
(a) What is the total amount of legal capital?
(b) What is the total amount of dividends paid annually to the preferred stockholders?
(c) What is the average issue price of a share of common stock?
(d) The balance in retained earnings at the beginning of the current year was $1,351,500,
and there were no dividends in arrears. Net income for the current year was $700,000.
What is the amount of the dividends declared on each share of common stock during the
current year?
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133.
Prepare a stockholders’ equity section
When Haven Corporation was incorporated in 2013, authorization was obtained to issue
200,000 shares of $5 par value common stock and 6,000 shares of 8% cumulative
preferred stock. The preferred stock has a par value of $100. All the preferred stock was
issued at $107 per share, and 110,000 shares of the common stock were sold for $9 per
share. The operations of the company resulted in a net loss of $19,000 in 2013 and net
income of $125,000 in 2014. In 2015, net income was $352,000, and the cash position was
sufficient to allow the board of directors to declare a cash dividend of $1 per share to the
common shareholders, as well as satisfy all preferred stock dividend requirements.
Complete in good form the stockholders’ equity section of Haven Corporation’s balance
sheet at December 31, 2015. (Hint: First determine the total amount of dividends declared
in 2015.)
