106) The following information is provided for Slickers, Inc. for year 2019:
• Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding
• Common stock, $100 par value, 2,000 shares issued and outstanding
• Dividends in arrears for 2017 and 2018
• Total dividends declared and paid during 2019 totaled $25,000
How much of the dividend was paid to the common stockholders during 2019 assuming the
preferred stock is noncumulative?
A) $3,500.
B) $7,000.
C) $21,500.
D) $14,500.
107) The following information is provided for Slickers, Inc. for year 2019:
• Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding
• Common stock, $100 par value, 2,000 shares issued and outstanding
• Dividends in arrears for 2017 and 2018
• Total dividends declared and paid during 2019 totaled $25,000
How much of the dividend is paid to the common stockholders during 2019 assuming the
preferred stock is cumulative?
A) $3,500.
B) $7,000.
C) $22,500.
D) $14,500.
108) Which of the following is a correct statement about cumulative and noncumulative
preferred stock?
A) They both receive dividends in arrears.
B) Cumulative stock’s undeclared dividends accumulate each year until paid while
noncumulative stock’s right to receive dividends is forfeited in any year that dividends are not
declared.
C) Cumulative preferred stock is guaranteed to receive its dividends.
D) Cumulative preferred stock’s right to receive dividends is forfeited in any year that dividends
are not declared while noncumulative stock’s undeclared dividends accumulate each year until
paid.
109) What would be the title for the common stock account on a balance sheet prepared using
International Financial Reporting Standards (IFRS)?
A) Common shares.
B) Premium shares.
C) Share capital.
D) Capital premium.
110) Which of the following statements is not correct?
A) Issuance of common stock creates a financing activities cash inflow.
B) Payment of a common stock cash dividend creates an operating activities cash outflow.
C) Purchase of treasury stock creates a financing activities cash outflow.
D) Issuance of preferred stock creates a financing activities cash inflow.
111) Which of the following statements is not correct?
A) Cash flow from financing activities increases when treasury shares are resold.
B) Cash dividends decrease cash flow from financing activities.
C) Cash flow from investing activities decreases when treasury shares are purchased.
D) Issuance of new shares of stock increases cash flow from financing activities.
112) Which of the following is not a primary advantage of a general partnership relative to a
corporation?
A) The ease of formation.
B) The limited liability for the owners.
C) The business is not taxed separate from the partners.
D) The complete control of the business given to the partners.
113) Bob Jones is a sole proprietor who began his business in 2019 with $20,000 cash. During
the year 2019, he earned revenues of $180,000, incurred expenses of $75,000, and withdrew
$120,000. Which of the following is true for the sole proprietorship?
A) The net income is $120,000.
B) The drawing account will be closed with a credit of $100,000.
C) The owner’s equity at the end of 2019 is $125,000.
D) The capital account balance at the end of year 2019 is $5,000.
114) Which of the following is true about a sole proprietorship?
A) The capital account is used to record only the investments of the owner.
B) The drawing account records distribution of assets to the proprietor.
C) A sole proprietorship is a separate legal entity from the owner.
D) A sole proprietorship is subject to a business income tax.
115) Which of the following statements is true about a partnership?
A) One capital and one drawing account is used for each partnership.
B) A separate capital account is used to record each partner’s investment and that partner’s
designated share of the earnings.
C) Partnerships are subject to separate business income taxes.
D) The drawing account is closed to retained earnings at the end of the period.
116) Which of the following statements is true about partnership accounting?
A) A particular partner’s capital account is debited when a withdrawal takes place by that partner.
B) Through the closing entry process for a partnership, a positive net income results in an
increase in overall partner capital.
C) The total of the drawing account balances are subtracted to arrive at the net income to allocate
to the partners.
D) The partner’s drawing account is closed to retained earnings at the end of the period.
117) The charter of Delta Corporation specified a maximum of 25,000 shares of common stock.
At the current date, 5,000 shares remain unissued, and 2,000 of the issued shares have been
repurchased and are still held by Delta.
Calculate the number of shares that are:
A. Authorized
B. Issued
C. Held in the treasury
D. Outstanding
118) On December 31, 2019, Brave Corporation reported the following on its balance sheet:
Cash
$22,000
Treasury stock ($8 per share, at cost)
(16,000)
Retained earnings
130,000
Common stock, par $5; (authorized
100,000 shares)
400,000
Additional paid-in capital
?
Total contributed capital
540,000
Prepare the stockholders’ equity section of the balance sheet.
Common stock, par $5 authorized 100,000 shares, issued 80,000
shares, outstanding 78,000 shares
Additional paid-in capital
Total contributed capital
Retained earnings
Total contributed capital and retained earnings
Less: Treasury stock 2,000 shares
Total stockholders’ equity
119) Constance Corporation reported a $750,000 balance in its common stock account at the end
of 2019. The company held 50,000 shares of treasury stock and had 700,000 shares of common
stock outstanding.
Calculate the par value per share of the company’s common stock.
120) Three dates that are significant for cash dividends are described in each part below.
Part A: Name each of the described dates.
Description
1.
Date on which the board of directors approves the dividend.
2.
Date on which a list of stockholder names is prepared.
3.
Date on which the dividend checks are written.
Part B: Prepare the journal entry for each date. Assume a $25,000 cash dividend.
Journal Entry
1.
2.
3.
Description
Name of the Date
1.
Date on which the board of directors approves the
dividend.
Declaration date
2.
Date on which a list of stockholder names is
prepared.
Date of record
3.
Date on which the dividend checks are written.
Date of payment
1.
Date on which the board of
directors approves the dividend.
Retained earnings
Dividends payable
2.
Date on which a list of
stockholder names is prepared.
No entry
3.
Date on which the dividend
checks are written.
Dividends payable
Cash
71
121) At the end of 2019, Washington Corporation reported a $40,000 balance in its common
stock account (par value $1 per share). The treasury stock account balance was $720 (cost $6 per
share). During 2019, the company declared and paid a cash dividend of $1.50 per share.
Calculate the total amount of the 2019 cash dividend.
122) Survivor Company was formed on January 1, 2019 by selling and issuing 20,000 shares of
common stock at $15 per share. On December 1, 2019, the company declared a cash dividend of
$10,000, which will be paid in cash on January 15, 2020.
A. Prepare the journal entry to record the sale and issuance of the common stock on January 1,
2019 under each of the following independent assumptions:
1. The common stock has a par value of $10 per share.
2. The common stock was no-par with a stated value of $5 per share.
3. The common stock was no-par and had no stated value.
B. Prepare the journal entry to record the dividend declaration on December 1, 2019.
C. Prepare the journal entry to record payment of the dividend on January 15, 2020.
123) The following information is available for Bradford Bikes for the years 2020 and 2019:
2020
2019
Market price of common stock
$53.00
$41.50
Earnings per share
$2.45
$2.07
Dividends per share
$0.85
$0.63
A. Calculate the dividend yield ratio for both 2020 and 2019.
B. Interpret the yield ratio in terms of whether it is high or low, or whether it indicates a steady
dividend policy, and whether Bradford Bikes appears to be growing or to be stagnant.
124) The following information is available for Italiano Ices for the years 2020 and 2019:
2020
2019
Market price of common
stock
$38.30
$44.00
Earnings per share
$2.00
$1.77
Dividends per share
$1.00
$0.88
A. Calculate the dividend yield for both 2020 and 2019.
B. What caused the change in the dividend yield ratio from 2019 to 2020?
C. Comment on the payout of dividends relative to the net income earned over the two years.
What does your choice indicate about the company’s strategy with regard to paying dividends?
125) The board of directors of Atlantic Corp. does is deciding whether to declare and pay a cash
dividend or to declare and distribute a stock dividend.
Complete the following chart to show the overall effect on each financial statement item for a
cash dividend and a stock dividend. Enter the letter “I” if the effect of the dividend is to increase
the financial statement item, a letter “D” if the effect of the dividend is to decrease the financial
statement item, or a letter “N” if there is no overall effect. (Hint: Think of the journal entries that
would be prepared for a cash dividend and a stock dividend. The overall effect is the net effect
from declaration to final payment or distribution.)
Item on Financial
Statement
Cash
Dividend
Stock
Dividend
Assets
Liabilities
Capital stock issued
Retained earnings
Total stockholders’
equity
Item on Financial
Statement
Cash
Dividend
Stock
Dividend
Assets
Liabilities
Capital stock issued
Retained earnings
equity
76
126) Tractor Corporation was just formed. The following accounts with code letters are given
below.
Indicate the appropriate journal entry for each transaction by entering the code letters and the
correct amounts (do not use dollar signs). The transactions, including the example, are not
interrelated unless otherwise stated.
A.
Cash
F.
Accounts payable
B.
Remaining assets
G.
Bonds payable
C.
Retained earnings
H.
Additional paid-in capital
D.
Common stock, par $20
I.
Treasury stock
E.
Dividends payable
J.
No entry to record
(Enter 0 for zero, in the amount column)
Transaction Debits Credits
Code
Amount
Code
Amount
Ex.
Paid an account payable of $200.
F
200
A
200
1.
Issued 5,000 shares of common
stock at $26 per share.
2.
Issued a 10% stock dividend when
the stock was selling at $30 per
share.
3.
Declared a cash dividend of $1 per
share on the shares outstanding.
4.
Paid the cash dividend of $1 per
share declared earlier (in 3 above).
5.
Purchased 100 shares of treasury
stock at $27 per share.
6.
Issued a 2-for-1 stock split when the
market price was $30 per share.