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Exam 11: Reporting and Analyzing Stockholders Equity

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Question 41

Multiple Choice

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Nice Corporation issues 30,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $3,300,000 and a credit or credits to

A) Preferred Stock for $3,300,000.
B) Preferred Stock for $3,000,000 and Paid-in Capital in Excess of Par Value-Preferred Stock for $300,000.
C) Preferred Stock for $3,000,000 and Retained Earnings for $300,000.
D) Paid-in Capital from Preferred Stock for $3,300,000.

E) B) and D)
F) B) and C)

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Question 42

Multiple Choice

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Looper, Inc. has 30,000 shares of 6%, ₤100 par value, noncumulative preference shares and 50,000 ordinary shares with a ₤1 par value outstanding at December 31, 2014. There were no dividends declared in 2013. The board of directors declares and pays a ₤250,000 dividend in 2014. What is the amount of dividends received by the common shareholders in 2014?

A) ₤0
B) ₤180,000
C) ₤250,000
D) ₤70,000

E) None of the above
F) A) and C)

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Question 43

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The number of common shares outstanding can never be greater than the number of shares issued.

Herman Corporation had net income of $120,000 and paid dividends of $24,000 to common stockholders and $20,000 to preferred stockholders in 2014. Herman Corporation's common stockholders' equity at the beginning and end of 2014 was $450,000 and $550,000, respectively. Herman Corporation's payout ratio for 2014 is

Treasury Stock is a(n)

Miles Co. had these transactions during the current period. Instructions Prepare the journal entries for the preceding transactions.

The date on which a cash dividend becomes a binding legal obligation is on the

YZ Company has $20,000 of dividends in arrears. Based on this information, which of the following statements is false?

(Ethics) Mark Remington, the president and CEO of Earth Systems, Inc., a waste management firm, was recently hospitalized, suffering from exhaustion and a heart ailment. Immediately prior to his hospitalization, Earth Systems had experienced a sharp decline in its stock price, and trading activity became almost nonexistent. The primary reason for this was concern expressed in the media over a new untested waste management system implemented by the company. Mr. Remington had been unwilling to submit the procedure to testing before implementation, but he reluctantly agreed to limited tests after the system was operational. No problems have been identified by the tests to date. The other members of management called a meeting to determine what they should do. Terry Jackson, the marketing manager, suggested that the company purchase a large number of shares of treasury stock. In that way, investors might notice that activity had picked up, and might decide to buy some more shares. This plan would use up most of the company's available cash, so that there will be no money available for a cash dividend. Earth Systems has paid cash dividends every quarter for over ten years. Required: 1. Is Mr. Jackson's suggestion ethical? Explain. 2. Is it ethical to discontinue the cash dividend? Explain.

Logan Corporation issues 40,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reported

Which of the following is not a right or preference associated with preferred stock?

A corporation records a dividend-related liability

On January 1, 2014, Mather Corporation had Retained Earnings of $625,000. During the year, Mather had the following selected transactions: 1. Declared stock dividends of $40,000 2. Declared cash dividends of $50,000 3. A 2 for 1 stock split involving the issue of 200,000 shares of $5 par value common stock for 100,000 shares of $10 par value common stock 4. Suffered a net loss of $80,000 Instructions Prepare a Retained Earnings Statement for the year.

The number of shares of issued stock equals

Which of the following statements is not true about a 2-for-1 stock split?

Retained earnings are occasionally restricted

On January 1, Hamblin Corporation had 90,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The stock was distributed on March 30. The entry to record the transaction of March 30 would include a

A stock split results in a transfer at market value from retained earnings to paid-in capital.

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 5,000 shares of preferred stock for land with an asking price of $625,000 and a market value of $550,000, which of the following would be the best journal entry for Retro to record?