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Exam 11: Reporting and Analyzing Equity

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Question 71

Multiple Choice

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Alto Company issued 7% preferred stock with a $100 par value. This means that:

A) Preferred shareholders have a guaranteed dividend.
B) The amount of the potential dividend is $7 per year per preferred share.
C) Preferred shareholders are entitled to 7% of the annual income.
D) The market price per share will approximate $100 per share.
E) Only 7% of the total paid-in capital can be preferred stock.

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

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Question 72

Multiple Choice

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Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

A) Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value, Common Stock $286,000.
B) Debit Cash for $312,000; credit Common Stock $312,000.
C) Debit Common Stock $26,000; debit Paid-in Capital in Excess of Par Value, Common Stock $286,000; credit Cash $312,000.
D) Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000.
E) Debit Common Stock $26,000; credit Cash $26,000.

F) B) and C)
G) A) and D)

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Question 73

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Stockholders' equity consists of paid-in capital and retained earnings.

Rhoads Corporation is authorized to issue 250,000 shares of $50 par, 10%, noncumulative, nonparticipating preferred stock and 5,000,000 shares of no-par common stock. Prepare journal entries to record the following selected transactions that occurred during this year:

The number of shares that a corporation's charter allows it to sell is referred to as:

A corporation had stockholders' equity on January 1 as follows: Common Stock, $1 par value, 1,500,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,100,000; Retained Earnings, $2,300,000. Prepare journal entries to record the following transactions:

Given the following information about a corporation's current year activities, compute the retained earnings for the current year.

A company reported the following stockholders' equity on January 1 of the current year: Prepare journal entries for the following selected transactions related to this company's stock during the current year:

The dividend yield is computed by dividing:

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:

On January 10, Mood Corporation purchased 15,000 shares of its own common stock at $17.50 per share. On August 4, a total of 2,000 treasury shares were sold at $19.00 per share. These are the only treasury stock transactions ever made by the corporation. Prepare the journal entries required on January 10 and August 4.

Eastline Corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record this dividend is:

___________________________ are corrections of material errors in prior period financial statements reported in the Statement of Retained Earnings.

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

What is a stock split? How is a stock split different from a stock dividend?

In the current year, Jacksonville Company has discovered a material prior-period error in its calculation of income. The company had incorrectly debited an asset costing $120,000 to an expense account. The related income tax expense was $42,000. If beginning Retained Earnings in the current period is $3,703,000, net income is $1,011,000 and dividends declared are $267,000, ending Retained Earnings equals:

Explain stock options and their effect on the company.

A stock dividend does not reduce a corporation's assets or its stockholders' equity.

Companies report the cost of stock options in the:

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the dividend declaration is: