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Exam 11: Reporting and Interpreting Stockholders Equity

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Question 31

True/False

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A stock split results in the reduction of the par or stated value per share and a proportionate increase in the number of shares outstanding.

A) True
B) False

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Question 32

Multiple Choice

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Which of the following journal entries is correct when common stock is initially issued for cash at a price in excess of the stock's stated value?

A)
B)
C)
D)

E) All of the above
F) B) and D)

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Question 33

Multiple Choice

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Katie Company had 40,000 shares of $2 par value common stock outstanding prior to a 40% common stock dividend declaration and distribution. The market value of the common stock on the declaration date was $10. Which of the following statements incorrectly describes the effect of recording the common stock dividend?

The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for three prior years (2014­­-2016) • Total dividends declared and paid in 2017 were $50,000. How much of the 2017 dividend payment was paid to the common stockholders assuming the preferred stock is cumulative?

The two primary sources of equity shown in a balance sheet are:

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?

When a company acquires treasury stock, assets and stockholders' equity both decrease.

Which of the following statements incorrectly describes earnings per share (EPS) ?

On January 1, 2016, the accounts of Mac Corporation showed the following: During 2016, the following transactions occurred which affected stockholders' equity (in the order given): A.Issued a 100% stock dividend when the market price was at $5 per share. B.Purchased treasury stock, 1,000 shares, at a total cost of $8,000. C.Declared and paid cash dividends, $15,000. D.Net income for 2016, $25,000.

Net income increases when treasury stock is resold for an amount in excess of the amount paid when the common stock was repurchased.

Which of the following does not correctly describe preferred stock?

Shares which a corporation has the ability to issue, as documented in its charter in the state where incorporated, are outstanding shares of stock.

A company's assets and stockholders' equity both decrease when a cash dividend is declared by the company's board of directors.

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 was $9 on the declaration date. Which of the following correctly describes the effect of accounting for the declaration and distribution of the stock dividend?

Which of the following statements correctly describes a treasury stock transaction?

On October 1, 2015, Adoll Company acquired 1,000 shares of its $1 par value stock for $44 per share and held these shares in treasury. On March 1, 2017, Adoll resold all the treasury shares for $40 per share. Which of the following entries would be recorded when Adoll Company resells the shares of treasury stock?

Wedge Corporation has the following capital stock outstanding: $1 par value common stock, 250,000 shares. 8% preferred stock, par $100, 5,000 shares, cumulative, with 2 years in arrears. Cash dividends of $150,000 were declared and paid near the end of the current year. Required: A.Calculate the dividends paid to the preferred stockholders. B.Calculate the dividends paid to the common stockholders.

The following information is provided for Slickers, Inc. for year 2016: • 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 2014 and 2015 • Total dividends declared and paid during 2016 totaled $25,000 How much of the dividend was paid to the preferred stockholders during 2016 assuming the preferred stock is cumulative?

Date on which the board of directors approves the dividend.

Which of the following statements is correct?