114. If a corporation issues cumulative, participating preferred stock, which of the following is true regarding
the rights of the preferred stockholders?
115. When a corporation decides whether to pay a cash dividend, which of the following is an important
consideration?
116. When a corporation declares a cash dividend, which of the following is true?
117. After a corporation declares a cash dividend, what takes place on the date of record?
118. When a corporation pays a previously declared cash dividend, which of the following is true?
119. When a corporation issues a stock dividend, which of the following is true?
120. When a corporation issues a small stock dividend, which of the following is false?
121. A company plans to distribute $134,000 in dividends. It has outstanding 200,000 shares of 7% $10 par
preferred stock (non-cumulative and non-participating) and 60,000 shares of $2 par common stock. How much
will be distributed per share on preferred and common stock?
Preferred stock Common stock
122. The stockholders’ equity section of the balance sheet immediately before a recent stock dividend is
provided below:
Common Stock, $5 par, 100,000 shares issued and outstanding
$ 500,000
Paid-in Capital in Excess of Par—Common Stock
100,000
Retained Earnings
725,000
Total Stockholders’ Equity
$1,325,000
A 10% stock dividend was declared and paid when the market price per share was $12. Immediately after the stock dividend, the components of
stockholders’ equity section were:
Common Stock Paid-in Capital Retained Earnings
123. Lakeshore Industries
This company reported the following information on its recent balance sheet:
Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding
Refer to Lakeshore Industries. What is the effect on the company’s accounting equation of issuing 1,000
additional shares of common stock at $15 per share?
124. Lakeshore Industries
This company reported the following information on its recent balance sheet:
Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding
Refer to Lakeshore Industries. What is the effect of a 10% stock dividend if the market price of the common
stock is $30 per share when the stock dividend is declared?
125. Lakeshore Industries
This company reported the following information on its recent balance sheet:
Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding
Refer to Lakeshore Industries. What is the effect of a 2-for-1 stock split if the market value of the common
stock is $20 per share at the time the stock split is declared?
126. Landmark Company
This company reported the following information in the stockholders’ equity section of its December 31, 2014,
balance sheet:
7% Cumulative, Non-participating Preferred Stock, $100 par, 500
shares authorized, issued, and outstanding, callable at par value
$ 50,000
Common Stock, $12 par, 100,000 shares authorized
600,000
Paid-in Capital in Excess of Par—Common Stock
25,000
Retained Earnings
825,000
Refer to Landmark Company. The company’s total capital stock is:
127. Landmark Company
This company reported the following information in the stockholders’ equity section of its December 31, 2014,
balance sheet:
7% Cumulative, Non-participating Preferred Stock, $100 par, 500
shares authorized, issued, and outstanding, callable at par value
$ 50,000
Common Stock, $12 par, 100,000 shares authorized
600,000
Paid-in Capital in Excess of Par—Common Stock
25,000
Retained Earnings
825,000
Refer to Landmark Company. What is the number of shares of common stock issued and outstanding?
128. Landmark Company
This company reported the following information in the stockholders’ equity section of its December 31, 2014,
balance sheet:
7% Cumulative, Non-participating Preferred Stock, $100 par, 500
shares authorized, issued, and outstanding, callable at par value
$ 50,000
Common Stock, $12 par, 100,000 shares authorized
600,000
Paid-in Capital in Excess of Par—Common Stock
25,000
Retained Earnings
825,000
Refer to Landmark Company. If the company repurchased 500 shares of its common stock for $20 per share, what is the amount of total
stockholders’ equity after this transaction?
129. On June 1, 2014, the board of directors declared a $100,000 cash dividend to be distributed to common
stockholders of record on June 15, 2014. The dividend will be paid on July 1, 2014. The required journal entry
on June 1 includes a:
130. On January 15, 2014, a corporation paid a cash dividend that had been declared prior to the end of its
previous fiscal year. The entry to pay the dividends includes a debit to:
131. On June 1, a board of directors declared a $3 per share cash dividend, payable on June 30 to all common
stockholders of record on June 15. The company has 10,000 shares of common stock authorized, 1,000 shares
issued, and 200 shares in the treasury. The entry to record the dividend declaration increases
132. Which of the following items is included as part of comprehensive income but not as part of net income?
133. The FASB’s concept of comprehensive income
134. The statement of stockholders’ equity shows an $8,000 increase in the common stock account, a $22,000
increase in the paid-in capital in excess of par—common stock account, and a $100,000 increase in retained
earnings. If the common stock has a par value of $3 and dividends of $10,000 were declared and paid during the
year, what is the amount of net income for the year?
135. A corporation reported net income of $60,000, declared and paid cash dividends of $80,000, and issued
3,000 shares of $2 par common stock at $15 per share during the year. What total effects would these
transactions have on the following stockholders’ equity accounts?
Retained Earnings Common Stock
136. What types of accounts are Treasury Stock and Paid-in Capital from Treasury Stock Transactions?
Treasury Stock Paid-in Capital from Treasury Stock Transactions
137. When is a liability for dividends created?
138. What is the primary reason for a stock split?
139. Dividends in arrears are required to be reported in
140. LaFarge North America
The following information relates to this company’s stockholders’ equity accounts:
Common Stock, $7 par, 200,000 shares authorized
$700,000
Paid-in Capital in Excess of Par—Common Stock
160,000
Retained Earnings
??
Treasury Stock, 2,000 shares at cost
15,000
Total Stockholders’ Equity
$975,000
Refer to LaFarge North America. What is the amount of retained earnings?
141. LaFarge North America
The following information relates to this company’s stockholders’ equity accounts:
Common Stock, $7 par, 200,000 shares authorized
$700,000
Paid-in Capital in Excess of Par—Common Stock
160,000
Retained Earnings
??
Treasury Stock, 2,000 shares at cost
15,000
Total Stockholders’ Equity
$975,000
Refer to LaFarge North America. How many shares of common stock are outstanding?
142. Which of the following statements is false regarding the issuance of stock versus bonds to raise capital for
a corporation?
143. Common stock usually has all of the following features EXCEPT:
144. Which of the following preferred stock features authorizes the corporation to redeem shares at a fixed price
on or after a specified date?
145. An addition to employee compensation whereby the corporation provides a right to purchase stock at a set
price is called
146. Which of the following is false regarding stock warrants?
147. When a corporation makes a cash distribution despite having no retained earnings, this is called a
148. Which one of the following is not a reason why a corporation’s ability to pay dividends may be restricted?
149. An appropriation of retained earnings is best described as a(n)
150. Appropriations of retained earnings must be reported
151. Error corrections which involve restatement of prior period income must be reported
152. Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$ 150,000
$ 120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Common stock price
15
14
Preferred stock price
31
26
Purchases of treasury stock
100,000
-0-
Total stockholders’ equity
2,300,000
2,157,000
Common stockholders’ equity
1,780,000
1,637,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
104,000
95,000
Refer to Labor Finders, Inc. The company’s 2015 earnings per share is reported as
153. Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$ 150,000
$ 120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Common stock price
15
14
Preferred stock price
31
26
Purchases of treasury stock
100,000
-0-
Total stockholders’ equity
2,300,000
2,157,000
Common stockholders’ equity
1,780,000
1,637,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
104,000
95,000
Refer to Labor Finders, Inc. The company’s 2015 return on common equity is reported as
154. Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$ 150,000
$ 120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Common stock price
15
14
Preferred stock price
31
26
Purchases of treasury stock
100,000
-0-
Total stockholders’ equity
2,300,000
2,157,000
Common stockholders’ equity
1,780,000
1,637,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
104,000
95,000
Refer to Labor Finders, Inc. The company’s 2015 dividend yield is reported as
155. Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$ 150,000
$ 120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Common stock price
15
14
Preferred stock price
31
26
Purchases of treasury stock
100,000
-0-
Total stockholders’ equity
2,300,000
2,157,000
Common stockholders’ equity
1,780,000
1,637,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
104,000
95,000
Refer to Labor Finders, Inc. The company’s 2015 dividend payout ratio is reported as
156. Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$ 150,000
$ 120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Common stock price
15
14
Preferred stock price
31
26
Purchases of treasury stock
100,000
-0-
Total stockholders’ equity
2,300,000
2,157,000
Common stockholders’ equity
1,780,000
1,637,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
104,000
95,000
Refer to Labor Finders, Inc. The company’s 2015 total payout ratio is reported as
157. Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$ 150,000
$ 120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Common stock price
15
14
Preferred stock price
31
26
Purchases of treasury stock
100,000
-0-
Total stockholders’ equity
2,300,000
2,157,000
Common stockholders’ equity
1,780,000
1,637,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
104,000
95,000
Refer to Labor Finders, Inc. The company’s 2015 stock repurchase payout ratio is reported as
158. La Paz Restaurants
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$110,000
$123,000
Cash dividends paid on common stock
$21,000
$38,000
Year-end market price per share of common stock
$12.00
$13.00
Shares of common stock outstanding
140,000
140,000
Refer to the information presented above for La Paz Restaurants. The 2015 dividend yield ratio is reported as
159. La Paz Restaurants
Selected data from the company’s financial statements are presented below:
2015
2014
Net income
$110,000
$123,000
Cash dividends paid on common stock
$21,000
$38,000
Year-end market price per share of common stock
$12.00
$13.00
Shares of common stock outstanding
140,000
140,000
Refer to the information presented above for La Paz Restaurants. The 2015 dividend payout ratio is reported as
160. Earnings per share is an indication of how much
161. A corporation was incorporated on January 1, 2013. Its corporate charter provided for a maximum of
1,000,000 shares of common stock to be sold in the future of the corporation. In January, 150,000 shares were
sold to the public and an additional 100,000 shares were sold in October. In November, 15,000 of the issued
shares were bought back by the corporation. Complete the table below as of the end of 2013.
Quantities:
Authorized Shares
Issued Shares
Outstanding Shares
Treasury Shares
Quantities:
Authorized Shares
1,000,000
Issued Shares
250,000
Outstanding Shares
235,000
Treasury Shares
15,000
162. A corporation is authorized by its corporate charter to issue 50,000 shares of preferred stock with a 7%
dividend rate and a par value of $10 per share, and 750,000 shares of common stock with a par value of $2 per
share. On January 15, 2014, 2,000 shares of preferred stock was issued for $14 per share along with 10,000
shares of common stock for $2.50 per share.
A)
Record the stock issues described above.
B)
How much total cash was raised through stock issuances?
Cash (2,000 x $14)
28,000
Preferred Stock (2,000 x $10)
Paid-in Capital in Excess of Par—Preferred Stock
8,000
Cash (10,000 x $2.50)
25,000
Common Stock (10,000 x $2)
Paid-in Capital in Excess of Par—Common Stock
5,000
B)
$28,000 from preferred stock + $25,000 from common = $53,000
163. The following information comes from a balance sheet at December 31, 2015:
Common Stock, $1 par, 1,000,000 shares authorized
$ 160,000
Paid-in Capital in Excess of Par—Common Stock
120,000
Total Capital Stock
280,000
Retained Earnings
80,000
Less: Treasury Stock (4,000 common shares at cost)
<40,000>
Total Stockholders’ Equity
$320,000
Answer the following questions:
A)
How many shares of common stock are issued?
B)
How many shares of common stock are outstanding?
C)
Assuming that all shares were sold at the same price, what was the original selling price per share?
D)
If the company declares a 2-for-1 stock split on December 31, 2015, describe the resulting change, if any, in the balances in capital
stock accounts and the par value of the common stock.
164. The following stockholders’ equity information was available at January 1, 2014:
Common Stock, $10 par, 1,000,000 shares authorized, 50,000 shares issued
$500,000
Treasury Stock, 1,000 common shares at cost
80,000
Record the purchase of the treasury stock on November 30, 2013 and the January 10, 2014 sale of 500 shares of treasury stock for $70 per share.
Nov. 30, 2013
Treasury Stock (1,000 x $80)
80,000
Cash
80,000
Jan. 10, 2014
Cash (500 x $70)
35,000
Retained Earnings
5,000
Treasury Stock (500 x $80)
40,000
A)
$160,000 / $1 par = 160,000 shares
160,000 shares issued – 4,000 treasury shares = 156,000 shares
C)
$280,000 contributed capital / 160,000 shares issued = $1.75 per share
165. The following information is available at January 1, 2015:
Common Stock, $1 par, 100,000 shares authorized, 50,000 shares issued
and outstanding
$50,000
During 2015, the following transactions occurred:
June 10
Repurchased 1,000 shares of its outstanding common stock for $10 per share.
July 1
Reissued 500 shares of treasury stock for $11 per share.
September 1
Reissued 500 shares of treasury stock for $8.50 per share.
Record journal entries for each of these 2015 transactions.
166. The following information is available at January 1, 2015:
Common Stock, $1 par, 100,000 shares authorized, issued and outstanding
$100,000
Paid-in Capital in Excess of Par—Common Stock
450,000
On June 10, the company repurchased and retired 1,000 shares of its outstanding common stock for $10 per share. Record this transaction.
June 10
Common Stock (1,000 shares ´ $1 par)
1,000
Paid-in Capital in Excess of Par—Common Stock
9,000
Cash
10,000
June 10
Treasury Stock
10,000
Cash
10,000
July 1
Cash
5,500
Treasury Stock
5,000
Paid-in Capital from Treasury Stock Transactions
Sept. 1
Cash
4,250
Retained Earnings
Treasury Stock
5,000
167. An electric utility issued 3,000 shares of common stock, all of the same class; 2,800 shares are outstanding
and 200 are held in the treasury. On August 15, 2015, the board of directors declared a cash dividend of $2.10
per share, payable on September 15, 2015, to stockholders of record on August 31, 2015.
Prepare the required journal entries for August 15, August 31, and September 15.
168. From 2012 to 2014, Lumber Liquidators had the following capital structure:
8% Preferred Stock, $10 par, 10,000 shares authorized, 5,000 shares issued
and outstanding
$50,000
Common Stock, $2 par, 25,000 shares authorized, 20,000 shares issued and
outstanding
40,000
Paid-in Capital in Excess of Par:
Preferred Stock
60,000
Common Stock
80,000
Total Capital Stock
The board of directors determined the total amount available for dividends in each year from 2012 through 2014 as shown in the following table.
Complete the table to indicate the portion of the dividend allocated to preferred and common stockholders in each year. Assume that the preferred
stock is noncumulative and nonparticipating.
Amount Available
Year
for Dividends
Preferred Dividends
Common Dividends
2012
$8,000
2013
$5,000
2013
$3,000
Amount Available
Year
for Dividends
Preferred Dividends*
Common Dividends
2012
$8,000
$4,000
$4,000
2013
$5,000
$4,000
$1,000
2013
$3,000
$3,000
-0-
Aug. 15
Dividends ($2.10 ´ 2,800)
5,880
Dividends Payable
5,880
Aug. 31
No entry is required on the record date.
Sept. 15
Dividends Payable
5,880
Cash
5,880
169. Information from the stockholders’ equity section of the balance sheet at December 31, 2014, is provided
below:
10% Non-participating Preferred Stock,
$10 par, 2,000 shares authorized,
1,000 shares issued
$ 10,000
Common Stock, $1 par, 10,000 share
authorized, 6,000 shares issued
6,000
Paid-in Capital in Excess of Par:
Preferred Stock
50,000
Common Stock
30,000
Total Contributed Capital
96,000
Retained Earnings
70,000
Less: Treasury Stock (100 common
shares at cost)
<1,300>
Total Stockholders’ Equity
$164,700
This company has been in business for over ten years, but has paid no dividends for the past two years, 2013 and 2014 due to a temporary decline in
business. During the current year, 2015, the company has net income of $30,000 and plans to pay a dividend. Complete the table below indicating the
amount of dividends that each class of stockholder will receive under the following preferred stock dividend assumptions:
Total amount available
Preferred
Common
Dividend preference:
for dividend
dividend
dividend
Cumulative
$4,000
Noncumulative
$4,000
Total amount available
Preferred
Common
Dividend preference:
for dividend
dividend
dividend
Cumulative*
$4,000
$3,000
$1,000
Noncumulative**
$4,000
$1,000
$3,000
*
Stated dividend is (10% ´ $10 par) ´ 1,000 shares outstanding = $1,000 per year
2 years in arrears plus the current dividend = 1,000 ´ 3 = $3,000 to preferred stockholders.
Remaining $1,000 to common stockholders.
$1,000 current year stated dividend only to preferred stockholders.
Remaining $3,000 to common stockholders.
170. The stockholders’ equity section of a balance sheet at December 31, 2015, is as follows:
7% Preferred Stock, $1 par, 10,000 shares
authorized, 3,000 shares issued
$ 3,000
Common Stock, $1 par, 150,000 share authorized,
10,000 shares issued
10,000
Paid-in Capital in Excess of Par:
Preferred Stock
9,000
Common Stock
20,000
Total Capital Stock
42,000
Retained Earnings
150,000
Less: Treasury Stock (1,000 common shares at
cost)
6,000
Total Stockholders’ Equity
$186,000
A)
What was the average issue price of the preferred stock?
B)
What was the average issue price of the common stock?
C)
What will be the retained earnings account balance immediately following a 2-for-1 stock split?
D)
If the company’s board of directors declares a cash dividend consisting of the annual stated dividend rate for preferred stockholders
plus $1 per share for common stockholders, what is the total amount of dividends to be paid and what would be the remaining
balance in the retained earnings account immediately following the declaration of this cash dividend?
($3,000 + 9,000) / 3,000 shares = $4
per share
($10,000 + 20,000) / 10,000 = $3
per share
Retained earnings balance would
D)
Preferred:
(7% ´ $1 par) ´ 3,000 shares = $210 preferred dividend
Common:
(10,000 issued shares – 1,000 treasury shares) ´ $1
= $9,000 common stock cash dividend
Total dividend:
$210 + 9,000 = $9,210.
Retained earnings:
$150,000 – 9,210 = $140,790.
171. The stockholders’ equity accounts at December 31, 2015 are provided below:
Common Stock, $1 par, 20,000 shares authorized, 4,000 shares issued and
outstanding
$4,000
Paid-in Capital in Excess of Par—Common Stock
20,000
Retained Earnings
50,000
The market price of the stock was $8 per share at December 31, 2015.
A)
What journal entry will be required to record the distribution of a 20% stock dividend on December 31, 2015?
B)
What balance will be in the retained earnings account immediately following the stock dividend?
C)
Prepare the stockholders’ equity section of the balance sheet.
A)
Retained Earnings*
6,400
Common Stock**
Paid-in Capital in Excess of Par—Common Stock***
5,600
(4,000 ´ 20%) ´ $1 par = $800
B)
$50,000 – 6,400 = $43,600
C)
issued and outstanding
$ 4,800
Total Capital Stock
Retained Earnings
43,600
Total Stockholders’ Equity