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Exam 11: Corporate Reporting and Analysis

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Question 91

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A corporation received its charter and began business this year.The company is authorized to issue 500,000 shares of $100 par,6%,noncumulative,nonparticipating preferred stock,and 1,000,000 shares of no-par common stock.The following selected transactions occurred during this year: $\begin{array} { | l | l | } \hline \text { Mar. } & \\5 & \text { Issued } 250 \text { shares of preferred stock for } \$ 102 \text { cash per share. } \\\hline & \text { Exchanged } 750 \text { shares of common stock for } \$ 12,000 \text { in legal } \\{ \text { July } 15 } & \text { services incurred in the organization of the company. } \\\hline\end{array}$ Prepare journal entries to record these transactions.

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Question 92

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The declaration of cash dividends increases retained earnings.

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B) False

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Question 93

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Wiggins Company has 1,000 shares of $10 par preferred stock,which were issued at par.It also has 25,000 shares of common stock outstanding,and its total stockholders' equity equals $500,000.The book value per common share is:

A company reported net income of $836,000 for the current year.The year-end market price per common share was $12 and there were 475,000 weighted-average shares of common stock outstanding.Calculate the company's price-earnings ratio.

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:

Retained earnings:

A corporation is a legal entity separate from its owners.

Organization expenses of a corporation often include legal fees and promoter fees.

The Discount on Common Stock account reflects:

For each of the following independent transactions a through d,prepare the necessary journal entry: (a)Declared a $0.40 per share cash dividend on 300,000 shares of preferred stock outstanding. (b)Declared and distributed an 8% stock dividend on 800,000 shares of $5 par value common stock outstanding.Market price per common share on this date was $25. (c)Declared and distributed a 2-for-1 stock split on 400,000 shares of $10 par value common stock outstanding. (d)Declared and distributed a 35% stock dividend on 700,000 common shares of $1 par value common stock outstanding.Market price per common share on this date was $20.

A company has 2,000,000 common shares authorized,400,000 common shares issued,and 15,000 common shares in treasury stock at the current year-end.It paid $0.96 per share cash dividends during the year.The year-end market price of the stock is $15.Calculate (1)the total dividends paid and (2)the dividend yield.

Boron Company is authorized to issue 50,000 shares of $50 par value,8%,cumulative,fully participating preferred stock,and 750,000 shares of $5 par value common stock.Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations: $\begin{array}{|l|l|l}\hline &\text { Exchanged } 2,200 \text { shares of preferred stock for a building with a market } \\ \text { May } 5 &\text { value of } \$ 135,000 \\\hline \text { July } 20 & \text { Sold } 1,550 \text { shares of preferred stock for } \$ 50 \text { cash per share. } \\\hline \text { Dec. } 20 & \text { Sold } 1,000 \text { shares of preferred stock at } \$ 52 \text { cash per share. }\\\hline \end{array}$

A debit balance in retained earnings is referred to as an accumulated deficit.

If a company resells treasury stock below the acquisition cost,a loss from the sale of treasury stock is recorded.

The main limitation in using book value per share for stock valuation models is the potential difference between recorded value and market value for both assets and liabilities.

A corporation may be authorized to issue both common and preferred stock.

On July 1,a corporation issued 15,000 shares of no-par common stock with a stated value of $3 per share in exchange for a tract of land having a market value of $215,000.Prepare the general journal entry to record this transaction.

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 5,000 shares of common stock with a $10 par value.During the first three years of operation,the corporation declared and paid the following total cash dividends. $\begin{array} { c c r } & \text { Dividend Declared } \\\text { year 1 } & \$ 2,000 \\\text { year 2 } & \$ 6,000 \\\text { year 3 } & \$ 32,000\end{array}$ The total amount of dividends paid to preferred and common shareholders over the three-year period is:

A company's stock is selling for $35.70 per share at year-end.This current year it paid shareholders a $1.43 per share cash dividend,reported earnings per share of $11.00,and had 750,000 common shares outstanding at year-end.Calculate the company's dividend yield.