79) Preferred shares that are participating may:
A) Vote for the board of directors.
B) Be exchanged for common stock.
C) Receive extra cash during corporate liquidation.
D) Receive additional dividends beyond the stated amount.
80) When a property dividend is declared, the reduction in retained earnings is for:
A) The book value of the property on the date of declaration.
B) The book value of the property on the date of distribution.
C) The fair value of the property on the date of distribution.
D) The fair value of the property on the date of declaration.
81) When a property dividend is declared, the property to be distributed should be revalued to
fair value as of the:
A) Record date.
B) Date of distribution.
C) Date of declaration.
D) Announcement date.
82) At the beginning of 2016, Emily Corporation issued 10,000 shares of $100 par, 5%,
cumulative, preferred stock for $110 per share. No dividends have been paid to preferred or
common shareholders. What amount of dividends will a preferred shareholder owning 100
shares receive in 2018 if Emily pays $1,000,000 in dividends?
A) $500.
B) $1,500.
C) $1,650.
D) $10,000.
83) Pug Corporation has 10,000 shares of $10 par common stock outstanding and 20,000 shares
of $100 par, 6% noncumulative, nonparticipating preferred stock outstanding. Dividends have
not been paid for the past two years. This year, a $150,000 dividend will be paid. What are the
dividends per share for preferred and common, respectively?
A) $7.50; $0.
B) $6; $3.
C) $6; $1.50.
D) None of these answer choices are correct.
84) Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000
shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends
have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are
the dividends per share payable to preferred and common, respectively?
A) $6; $12.
B) $18; $6.
C) $6; $6.
D) None of these answer choices are correct.
85) On January 1, 2018, the board of directors of Goby Inc. declared a $540,000 dividend. The
following data is from the balance sheet of Goby on that date:
Common stock
$
500,000
Paid-in capital—excess of par
$
300,000
Retained earnings
$
400,000
Paid-in capital—share repurchase
$
50,000
How much is the liquidating dividend?
A) $140,000.
B) $240,000.
C) $290,000.
D) None of these answer choices are correct.
Total dividend
$
540,000
Retained earnings
400,000
Liquidating dividends
$
140,000
86) ABC declared a property dividend. The dividend consisted of 10,000 common shares of its
investment in XYZ Company. The shares had originally been purchased at $4 per share and had
a $1 par. The value of the shares on the declaration date is $7 per share. What is the first entry
that should be recorded related to this dividend?
A)
Retained earnings
70,000
Property dividends payable
70,000
B)
Retained earnings
70,000
Property dividends payable
40,000
Gain
30,000
C)
Investment in XYZ
30,000
Retained earnings
30,000
D)
Investment in XYZ
30,000
Gain on investment
30,000
Investment in XYZ [10,000 × ($7 – $4)]
30,000
Gain on appreciation of investment
30,000
87) The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1
par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000
shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend
declaration?
A)
Retained earnings
9,000
Dividends payable
9,000
B)
Retained earnings
9,000
Cash
9,000
C)
Retained earnings
10,000
Dividends payable
10,000
D)
Retained earnings
10,000
Cash
10,000
Retained earnings [(20,000 – 5,000) × $.60]
Dividends payable
88) Lucid Company declared a property dividend of 20,000 shares of $1 par Polk Company
common stock. The Polk stock was purchased for $5 per share. The fair value of Polk’s stock
was $10 per share on the declaration date and $11 per share on the distribution date. What is the
amount of the dividend?
A) $100,000.
B) $200,000.
C) $220,000.
D) $300,000.
89) The declaration and issuance of a stock dividend on shares of common stock:
A) Has no effect on assets, liabilities, or total shareholders’ equity.
B) Decreases total shareholders’ equity and increases common stock.
C) Decreases assets and decreases total shareholders’ equity.
D) Does not change retained earnings or paid-in capital.
90) Stock splits are issued primarily to:
A) Increase the number of outstanding shares.
B) Increase the number of authorized shares.
C) Increase legal capital.
D) Induce a decline in market value per share.
91) A small stock dividend is defined as one that is:
A) Less than or equal to 40%.
B) Less than 40%.
C) Less than or equal to 10%.
D) Less than 25%.
92) When a company issues a stock dividend, which of the following would be affected?
A) Earnings per share.
B) Total assets.
C) Total liabilities.
D) Total shareholders’ equity.
93) R Co. has outstanding 100 million shares, $1 par common stock, selling for $8 per share.
After a 1 for 4 reverse stock split:
A) R would have 25 million shares, $4 par per share.
B) The market price per share would be about $2.
C) Fractional shares would be issued.
D) Retained earnings would be reduced.
94) F Co. declares a 5% stock dividend. If the market price at declaration is $12 per share, a
shareholder with 110 shares likely would receive:
A) Five additional shares.
B) Fractional share rights for 5½ shares.
C) Five additional shares and $6 in cash.
D) Five additional shares and a fractional share right for 2½ shares.
95) Which of the terms or phrases listed below is more associated with financial statements
prepared in accordance with U.S. GAAP than with International Financial Reporting Standards
(IFRS)?
A) Accumulated other comprehensive income.
B) Investment revaluation reserve.
C) Share premium.
D) Preference shares.
96) Heidi Aurora Imports applies International Financial Reporting Standards (IFRS) in
preparing its financial statements. The company issued shares of the company’s Class B stock.
Heidi Aurora Imports should report the stock in the company’s statement of financial position:
A) Among liabilities if the shares are mandatorily redeemable or redeemable at the option of the
shareholder.
B) As equity unless the shares are mandatorily redeemable.
C) As equity unless the shares are redeemable at the option of the issuer.
D) Among liabilities unless the shares are mandatorily redeemable.
97) Mandatorily redeemable preferred stock (preference shares) is reported as debt, with the
dividends reported in the income statement as interest expense, using:
A) U.S. GAAP.
B) IFRS.
C) Both U.S. GAAP and IFRS.
D) Neither U.S. GAAP nor IFRS.
98) Revenue and expense items and components of other comprehensive income can be
reported in a single statement of comprehensive income using:
A) U.S. GAAP.
B) IFRS.
C) Both U.S. GAAP and IFRS.
D) Neither U.S. GAAP nor IFRS.
99) Which of the following statements is true with regard to preferred stock (preference shares)?
A) Most preferred stock (preference shares) is reported under U.S. GAAP as debt.
B) Most preferred stock (preference shares) is reported under IFRS as equity.
C) Under U.S. GAAP, mandatorily redeemable preferred stock is reported as equity.
D) Under IFRS, preferred stock dividends are reported in the income statement as interest
expense.
100) Under IFRS, components of other comprehensive income:
A) Can be reported as part of a single statement of comprehensive income.
B) Are not permitted to be reported.
C) Must be reported in a separate statement of comprehensive income.
D) Can be reported as part of a statement of shareholders’ equity.
101) What is the effect of the declaration and subsequent issuance of a 10% stock dividend on
each of the following?
Retained earnings
Paid-in capital
a.
decrease
increase
b.
no effect
increase
c.
increase
decrease
d.
no effect
no effect
A) Option A
B) Option B
C) Option C
D) Option D
102) What is the effect of a stock split (not effected in the form of a stock dividend) on each of
the following?
Retained earnings
Total Paid-in capital
a.
no effect
increase
b.
no effect
no effect
c.
increase
decrease
d.
decrease
increase
A) Option A
B) Option B
C) Option C
D) Option D
103) What is the usual effect of a stock split (effected in the form of a stock dividend) on each of
the following?
Retained earnings
Total paid-in capital
a.
no effect
no effect
b.
increase
decrease
c.
no effect
increase
d.
increase
increase
A) Option A
B) Option B
C) Option C
D) Option D
104) Renaldo Cross Company views share buybacks as treasury stock. Renaldo repurchased
shares and then later sold the shares at more than their acquisition price. What is the effect of the
sale of the treasury stock on each of the following?
Retained earnings
Total paid-in capital
a.
no effect
increase
b.
no effect
no effect
c.
increase
no effect
d.
increase
increase
A) Option A
B) Option B
C) Option C
D) Option D
105) Dempsey Company retires shares that it buys back. In its first share repurchase transaction,
Dempsey purchased stock for more than the price at which the stock was originally issued. What
is the effect of the purchase of the stock on each of the following?
Total paid-in capital
Retained earnings
a.
no effect
no effect
b.
decrease
no effect
c.
decrease
decrease
d.
no effect
decrease
A) Option A
B) Option B
C) Option C
D) Option D
106) Gabriel Company views share buybacks as treasury stock. In its first treasury stock
transaction, Gabriel purchased treasury stock for more than the price at which the stock was
originally issued. What is the effect of the purchase of the treasury stock on each of the
following?
Total paid-in capital
Retained earnings
a.
decrease
decrease
b.
decrease
no effect
c.
no effect
decrease
d.
no effect
no effect
A) Option A
B) Option B
C) Option C
D) Option D
107) The balance sheet of FIFA Cup Company included the following shareholders’ equity
section at December 31, 2018:
($ in
millions)
Common stock ($1 par, authorized 200 million shares, issued and
outstanding 180 million shares)
$
180
Paid-in capital—excess of par
1,080
Retained earnings
560
Total shareholders’ equity
$
1,820
On January 5, 2019, FIFA purchased and retired 2 million shares for $9 million. Immediately
after retirement of the shares, the balances in the paid-in capital—excess of par and retained
earnings accounts are:
Paid-in capital—excess of par
Retained earnings
a.
$
1,068
$
556
b.
$
1,064
$
560
c.
$
1,080
$
560
d.
$
1,080
$
542
A) Option A
B) Option B
C) Option C
D) Option D
108) The balance sheet of Messi Services included the following shareholders’ equity section at
December 31, 2018:
($ in
millions)
Common stock ($1 par, authorized 200 million shares, issued and
outstanding 180 million shares)
$
180
Paid-in capital—excess of par
1,080
Retained earnings
560
Total shareholders’ equity
$
1,820
On January 5, 2019, Holmes purchased 2 million treasury shares for $9 million. Immediately
after the purchase of the shares, the balances in the paid-in capital- excess of par and retained
earnings accounts are:
Paid-in capital—excess of par
Retained earnings
a.
$
1,068
$
556
b.
$
1,064
$
560
c.
$
1,080
$
560
d.
$
1,080
$
544
A) Option A
B) Option B
C) Option C
D) Option D
109) Tim Howard Gloves issued 4.75% bonds with a face amount of $24 million, together with
4 million shares of its $1 par common stock, for a combined cash amount of $44 million. The
fair value of Howard’s stock cannot be determined. The bonds would have sold for $18 million if
issued separately. For this transaction, Howard should record paid-in capital—excess of par in
the amount of:
A) $26 million
B) $22 million
C) $18 million
D) $16 million
110) Treasury stock transactions might cause:
A) A decrease in the balance of retained earnings.
B) An increase in the balance of retained earnings.
C) An increase or a decrease in the par amount per share.
D) An increase or a decrease in the amount of net income.
111) Mike Bradley & Company, a family-owned corporation, declared and distributed a
property dividend from its overstocked inventory instead of declaring its usual cash dividend.
The inventory’s book value exceeded its fair value. The excess is:
A) Reported as a direct reduction of shareholders’ equity.
B) Reported as other comprehensive income.
C) Reported as a loss.
D) Not reported.
112) The shareholders’ equity section of Time Company’s comparative balance sheets for the
years ended December 31, 2018 and 2017, reported the following data:
($ in millions)
2018
2017
Common stock, $1 par per share
$
612
$
600
Paid-in capital—excess of par
348
300
Retained earnings
628
600
During 2018, Time declared and paid cash dividends of $90 million. The company also declared
and issued a stock dividend. No other changes occurred in shares outstanding during 2018. What
was Time’s net income for 2018?
A) $28 million
B) $118 million
C) $130 million
D) $178 million
113) The corporate charter of Alpaca Co. authorized the issuance of 10 million, $1 par common
shares. During 2018, its first year of operations, Alpaca had the following transactions:
January
1
sold 8 million shares at $15 per share
June
3
retired 2 million shares at $18 per share
December
28
sold 2 million shares at $20 per share
What amount should Alpaca report as additional paid-in capital‒ excess of par, in its December
31, 2018, balance sheet?
A) $122 million
B) $116 million
C) $112 million
D) $74 million
114) The corporate charter of Llama Co. authorized the issuance of 10 million, $1 par common
shares. During 2018, its first year of operations, Llama had the following transactions:
January
1
sold 8 million shares at $15 per share
June
3
purchased 2 million shares of treasury stock at $18 per share
December
28
sold the 2 million shares of treasury stock at $20 per share
What amount should Llama report as additional paid-in capital in its December 31, 2018,
balance sheet?
A) $122 million
B) $116 million
C) $112 million
D) $74 million
115) Which of the following terms or phrases is more associated with financial statements
prepared in accordance with U.S. GAAP than those prepared in accordance with International
Financial Reporting Standards?
A) Ordinary shares.
B) Asset revaluation reserve.
C) Share premium.
D) Accumulated other comprehensive income.