If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital? |
The legal capital is the par value per share ($3) times the number of shares issued (1,000) or $3,000. |
Which of these statements is false? =Ownership of common stock gives the owner a voting right. |
Legal capital is intended to protect stockholders. |
Ernest, an individual, receives $100 from Vernon Corp. in dividends and is in the 28% tax bracket. Vernon Corp. already paid corporate taxes on the $100 at a 20% tax rate. How much in personal taxes will Ernest need to pay? |
$28 |
Which of the following represents the amount per share of stock that must be retained in the business for the protection of corporate creditors? =Market value |
Legal capital |
DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance =Credit to Common Stock for $15,000 |
Credit to Common stock = 3,000 × $5 = $15,000 |
Wynola, Inc. issued 1,000 shares of common stock at $10 per share. If the stock has a par value of $4 per share, which of the following will be part of the journal entry to record the issuance? =Credit to Paid-in Capital in Excess of Par Value for $10,000 |
Credit to Common Stock for $4,000 |
For what reason might a company acquire treasury stock? =To increase profit |
To reissue the shares to officers and employees under bonus and stock compensation plans |
Which one of the following decreases when a corporation purchases treasury stock? =Outstanding shares |
Outstanding shares |
What method is normally used to account for treasury stock? =Legal value method |
Cost method |
If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders’ equity be reduced? |
$12,000 |
A corporation sold 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $12.00 per share. Which of the following will be debited to record the repurchase of the 100 shares? |
Treasury Stock for $1,200 |
A corporation has cumulative preferred stock on which it pays dividends of $20,000 per year. The dividends are in arrears for two years. If the corporation plans to distribute $90,000 as dividends in the current year, how much will the common stockholders receive? |
Preferred dividends in arrears for two years ($20,000 × 2) $40,000 Preferred for current year 20,000 Total to preferred stockholders $60,000 Total dividends available (90,000) Amount available to common stockholders $30,000 |
Which one of the following statements is incorrect? =When preferred stock is noncumulative, any dividend passed in a year is lost forever. |
Dividends may be paid on common stock while dividends are in arrears on preferred stock. |
Which one of the following is not a right of preferred stockholders? =Priority in relation to dividends |
Priority voting rights |
Which of the following is a feature associated only with preferred stock? a. Dividend preference |
d. All of the above |
M-Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2012. No dividends were declared in 2010 or 2011. If M-Bot wants to pay $375,000 of dividends in 2012, how much will common stockholders receive? |
Before the common stockholders receive any dividends, the preferred dividends should first be distributed for the two years in arrears and the current year. Total dividend = 10,000 × 8% × $100 = $80,000 Preferred dividends in arrears for two years ($80,000 × 2) $ 160,000 Preferred for current year 80,000 Total to preferred stockholders 240,000 Total dividends available (375,000) Amount available to common stockholders $ 135,000 |
Which statement about stock dividends is true? =A stock dividend decreases total stockholders’ equity. |
A stock dividend has no effect on total stockholders’ equity. |
Raptor Inc. has retained earnings of $500,000 and total stockholders’ equity of $2,000,000. It has 100,000 shares of $8 par value common stock outstanding, which is currently selling for $30 per share. What will occur is Raptor declares a 10% stock dividend on its common stock? |
Retained earnings will decrease by $300,000 and total paid-in capital will increase by $300,000 |
A cumulative dividend feature means that preferred stockholders must be paid only current-year dividends before common stockholders receive dividends. (True or False) |
False |
Which of the following will increase the paid-in capital section of the balance sheet? =Treasury stock acquisition |
Stock dividend |
How are dividends in arrears reported in the financial statements? |
In a footnote |
Dehesa, Inc. has 8,000 shares of 5%, $50 par, cumulative preferred stock and 50,000 shares of $3 par common stock outstanding. No dividends were declared last year, However, the board of directors has just declared a $50,000 dividend this year to be paid in 10 days. What amount of the total dividend will be paid to common stockholders? |
Total dividend = 8,000 × 5% × $50 = $20,000 Preferred dividends in arrears for one year $ 20,000 Preferred for current year 20,000 Total to preferred stockholders 40,000 Total dividends available (50,000) Amount available to common stockholders $ 10,000 |
Ramona, Inc. has 2,000 shares of 5%, $100 par, cumulative preferred stock and 80,000 shares of $4 par common stock outstanding. Last year the board of directors declared and paid an $8,000 dividend. This year the dividend declared and paid was $15,000. What amount of this dividend will be paid to the preferred stockholders? |
Total dividend = 2,000 × 5% × $100 = $10,000 Preferred dividends in arrears for prior year ($10,000 – $8,000) $ 2,000 Preferred for current year 10,000 Total to preferred stockholders $12,000 |
Vista, Inc. has 300,000 shares of common stock outstanding. A 30% stock dividend was declared and issued. How many shares are outstanding after the stock dividend? |
300,000 + (300,000 × 30%) = 390,000 shares |
A corporation is authorized to sell 1,000,000 shares of common stock. Today there are 400,000 shares outstanding, and the board of directors declares a 10% stock dividend. How many shares will be issued as a stock dividend? |
400,000 shares outstanding × 10% = 40,000 new shares to be issued |
If a corporation has incurred a net loss, which account will it affect? =Credited to Retained Earnings in a closing entry |
Debited to Retained Earnings in a closing entry |
Which one of the following is not true concerning a retained earnings restriction? =It makes a portion of the balance of retained earnings unavailable for dividends. |
It is reported as a loss on the income statement. |
Which one of the following is not part of ‘stock’ in the balance sheet? =Non-voting Class B preferred stock, stated value |
Paid-in capital in excess of par value-common stock |
How is common stock listed in the stockholders’ equity section of the balance sheet? =As part of paid-in capital |
As part of paid-in capital |
A corporation shows the following account balances: Retained earnings $300,000 How much is total stockholders’ equity? |
$300,000 – $10,000 + $55,000 + $200,000 = $545,000 |
In the stockholders’ equity section of the balance sheet, from what is the cost of treasury stock deducted? |
Total paid-in capital and retained earnings |
Consider the following data for a corporation: What is the payout ratio? |
$20,000/$800,000 = 2.5% |
Consider the following data for a corporation: What is the return on common stockholders’ equity? |
($800,000 – $50,000)/$4,000,000 = 18.75%. |
Which of the following does not increase the return on stockholders’ equity?
=An increase in the return on assets ratio |
An increase in the company’s stock price |
Rynadune Inc. reported net income of $186,000 during 2012 and paid dividends of $26,000 on common stock. It also paid dividends on its 10,000 shares of 6%, $100 par value, noncumulative preferred stock. Common stockholders’ equity was $1,200,000 on January 1, 2012, and $1,600,000 on December 31, 2012. How much is the company’s return on common stockholders’ equity for 2012? |
[$186,000 – (10,000 shares × $100/share × 6%)] ÷ [($1,200,000 + $1,600,000) ÷ 2] = 9%. |
If everything else is held constant, what will cause earnings per share to increase? =The issuance of new shares common stock |
The purchase of treasury stock |
When a stock dividend is declared, which of the following accounts is debited? =Common Stock |
Stock Dividends |
Accounting Ch 11
Share This
Unfinished tasks keep piling up?
Let us complete them for you. Quickly and professionally.
Check Price