Acct302 Ch 15

Which of the following statements related to dividends is incorrect? Dividends must be declared by the Board of Directors. Before declaring a dividend, management must consider availability of funds to pay the dividend. Dividends must be paid in the period declared. Distributions to owners must be in compliance with the state laws.

Dividends must be paid in the period declared.

Stock issued in non-cash transactions should be recorded at the: Fair market value of the stock issued. Fair market value of the property received. Par value of the stock issued. Fair market value of the stock issued or the property received, whichever is more readily determinable.

Fair market value of the stock issued or the property received, whichever is more readily determinable.

Which of the following type of stock will not increase Additional Paid-in Capital when issued? No-par with a stated value stock. Preferred stock. No-par value stock. Par value stock.

No-par value stock.

Under the cost method, when treasury stock is sold for more than its cost, the excess is credited to: Retained Earnings. Paid-in Capital from Treasury Stock. Gain on Sale of Treasury Stock. Paid-in Capital in Excess of Par.

Paid-in Capital from Treasury Stock.

Jackson Corporation issued a 100% stock dividend of its common stock, which had a par value of $.01, and a market value of $123 before the dividend and $62 after the dividend. At what amount should retained earnings be capitalized for the additional shares issued? Market value on the payment date. There should be no capitalization of retained earnings. Par value. Market value on the declaration date.

Par value.

Which of the following dividends does not reduce total stockholders' equity? All of these answer choices reduce total stockholders' equity. Liquidating dividends. Cash dividends. Stock dividends.

Stock dividends.

Which of the following increases the number of shares outstanding and decreases the par value per share? Small stock dividend. Stock split. Large stock dividend. Treasury stock.

Stock split.

Baker Co. issued 100,000 shares of common stock in the current year. On October 1, Baker repurchased 20,000 shares of its common stock on the open market for $50.00 per share. At that date, the stock's par value was $1.00 and the average issue price was $40.00 per share. Baker uses the cost method for treasury stock transactions. On December 1, Baker reissued the stock for $60.00 per share. What amount should Baker report as treasury stock gain at December 31? $0 $200,000 $400,000 $980,000

$0

Camden Inc. has 2,000 shares of 5%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. No dividends were paid in 2016. In 2017, $85,000 of dividends are declared and paid. If the preferred stock is nonparticipating, what are the dividends received by the preferred stockholders in 2017? $10,000. $20,000. $65,000. $85,000.

$20,000

McCaffrey Corporation owned 15,000 shares of Harper Corporation's $5 par value common stock. These shares were purchased in 2015 for $326,000. On May 4, 2017, McCaffrey declared a property dividend of one share of Harper for every twenty shares of McCaffrey stock held by a stockholder. On that date, when the market price of Harper was $34 per share, there were 280,000 shares of McCaffrey outstanding. What net reduction in retained earnings would result from this property dividend? $176,000 $304,220 $476,000 $150,000

$304,220

Durango Inc. had net income for 2017 of $2,120,000 and earnings per share on common stock of $5. Included in the net income was $300,000 of bond interest expense related to its long-term debt. The income tax rate for 2017 was 30%. Dividends on preferred stock were $400,000. The payout ratio on common stock was 25%. What were the dividends for common stock in 2017? $430,000. $530,000. $482,500. $645,000.

$430,000.

Duszynski Company issues 20,000 shares of its $.50 par value common stock having a market value of $25 per share and 6,000 shares of its $25 par value preferred stock having a market value of $50 per share for a lump sum of $750,000. The proceeds allocated to the common stock is $468,750. $500,000. $705,000. $450,000.

$468,750.

Hise Inc., has 4,000 shares of 9%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. The board of directors declared and paid a $25,000 dividend in 2016. In 2017, $74,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2017? $11,000 $74,000 $36,000 $47,000

$47,000

Presented below is information related to Schoenthaler Corporation: Common Stock , $5 par$1,100,000Paid-in Capital in Excess of Par - Common Stock400,000Preferred 5 ½% Stock, $100 par1,500,000Paid-in Capital in Excess of Par—Preferred Stock500,000Retained Earnings2,000,000Paid-in Capital from Treasury Stock150,000 The total stockholders' equity of Schoenthaler Corporation is $5,350,000. $3,650,000. $5,500,000. $5,650,000.

$5,650,000.

Presented below is information related to Kaenzig Corporation: Common Stock , $1 par$2,100,000Paid-in Capital in Excess of Par - Common Stock550,000Preferred 8 ½% Stock, $50 par1,700,000Paid-in Capital in Excess of Par—Preferred Stock950,000Retained Earnings2,350,000Treasury Common Stock (at cost)250,000 The total stockholders' equity of Kaenzig Corporation is $7,400,000. $7,900,000. $2,300,000. $5,300,000.

$7,400,000.

On January 1, 2017, Vancleave Corporation had 110,000 shares of its $.001 par value common stock outstanding. On November 27, when the market price of the stock was $8, the corporation declared a 10% stock dividend to be issued to stockholders of record on December 28, 2017. What was the impact of the 10% stock dividend on the balance of the retained earnings account? $77,000 decrease $88,000 decrease No effect $11,000 decrease

$88,000 decrease

Which of the following country systems of finance have relied more heavily on debt financing, interlocking stock ownership, banker/directors, and worker/shareholder rights? Germany and Britain. USA and Britain. Britain and Japan. Japan and Germany.

Japan and Germany.

Which of the following best describes a possible result of treasury stock transactions by a corporation? May increase net income if the cost method is used. May decrease but not increase retained earnings. May decrease but not increase net income. May increase but not decrease retained earnings

May decrease but not increase retained earnings.

Treasury stock was acquired for cash at more than its par value, and then subsequently sold for cash at more than its acquisition price. Assuming that the cost method of accounting for treasury stock transactions is used, what is the effect on additional paid-in capital from treasury stock transactions? Purchase of treasury stockSale of treasury stock No effectNo effect No effectIncrease DecreaseIncrease DecreaseNo effect

No effect Increase

Which of the following features of preferred stock makes the security more like debt than an equity instrument? Voting Participating Redeemable Noncumulative

Redeemable

All of the following decrease Retained Earnings, except: Stock splits. Cash dividends. Stock dividends. Property dividends.

Stock splits.

Which one of the following is not a right of common stockholders? To share proportionately in corporate assets upon liquidation. To share proportionately in any new issues of stock of the same class. To share proportionately in profits and losses. To share proportionately in all management decisions.

To share proportionately in all management decisions.

On September 14, 2017, Gayot Company reacquired 12,000 shares of its $1 par value common stock for $40 per share. Gayot uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit Treasury Stock for $480,000. Common Stock for $480,000. Common Stock for $24,000 and Paid-in Capital in Excess of Par for $456,000. Treasury Stock for $24,000.

Treasury Stock for $480,000.

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? Paid-in capital in excess of par for the purchase price. Treasury stock for the purchase price. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.

Treasury stock for the purchase price.

Total stockholders' equity represents the maximum amount that can be borrowed by the enterprise. a claim to specific assets contributed by the owners. a claim against a portion of the total assets of an enterprise. only the amount of earnings that have been retained in the business.

a claim against a portion of the total assets of an enterprise.

At the date of declaration of a large common stock dividend, the entry should include a credit to Cash. a credit to Common Stock Dividend Payable. a credit to Paid-in Capital in Excess of Par. a debit to Retained Earnings.

a debit to Retained Earnings.

cumulative preferred dividends in arrears should be shown in a corporation's financial statements as an increase in current liabilities for the current portion and long-term liabilities for the long-term portion. an increase in stockholders' equity. a footnote. an increase in current liabilities.

a footnote.

All of the following statements are true regarding preferred stock except: a company often issues preferred stock instead of debt, because of a high debt-to-equity ratio. the dividend preference for preferred stock is expressed as a percentage of the par value. a preference as to dividends assures the payment of dividends. companies usually issue preferred stock with a par value.

a preference as to dividends assures the payment of dividends.

In every corporation the one class of stock that represents the basic ownership interest is called common stock. owners' stock. preferred stock. cumulative stock.

common stock.

The residual interest in a corporation belongs to the preferred stockholders. creditors. common stockholders. management.

common stockholders.

The type of preferred stock that would generate a dividend in arrears is: participating preferred stock. convertible preferred stock. cumulative preferred stock. callable preferred stock.

cumulative preferred stock.

On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Lexington had 302,000 shares of $.001 par value common stock issued and outstanding. The fair value of Lexington's common stock was $16.75 per share on October 31, 2017. As a result of this stock dividend, the company's total stockholders' equity did not change. increased by $302,000. decreased by $5,058,198. decreased by $5,058,500.

did not change.

When a property dividend is declared, Retained Earnings is reduced by the: fair value of the property. carrying value of the property. book value of the property. cost of the property.

fair value of the property.

Cash dividends are paid on the basis of the number of shares outstanding. issued. outstanding less the number of treasury shares. authorized.

outstanding.

The preemptive right of a common stockholder is the right to share proportionately in corporate assets upon liquidation. share proportionately in any new issues of stock of the same class. receive cash dividends before they are distributed to preferred stockholders. exclude preferred stockholders from voting rights.

share proportionately in any new issues of stock of the same class.

All of the following are features of preferred stock except: voting rights. convertible into common stock. preference as to dividends. callable at the corporation's option.

voting rights.

How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions? As an increase in the amount shown for common stock. As an other revenue and gain shown on the income statement. As paid-in capital from treasury stock transactions. As ordinary earnings shown on the income statement.

As paid-in capital from treasury stock transactions.

Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders have the rights to specific assets of the business. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. are entitled to a dividend every year in which the business earns a profit. can negotiate individual contracts on behalf of the enterprise.

bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

In January 2020, Crane Company, a newly formed company, issued 10900 shares of its $8 par common stock for $13 per share. On July 1, 2020, Crane Company reacquired 1090 shares of its outstanding stock for $10 per share. The acquisition of these treasury shares decreased total stockholders' equity. decreased the number of issued shares. did not change total stockholders' equity. increased total stockholders' equity.

decreased total stockholders' equity.

Terpsichore Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. No dividends were paid in 2016. In 2017, $75,000 of dividends are declared and paid. If the preferred stock is nonparticipating, what are the dividends received by the preferred stockholders in 2017? $5,000. $42,500. $65,000. $10,000.

$10,000

Blowing Rock Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 30,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $45,000 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017? $25,000 $15,000 $45,000 $0

$15,000

Before declaring a cash dividend, management must consider the availability of funds. legal capital of the stock. effect on paid-in capital. current market price of the stock.

availability of funds.

Direct costs incurred to sell stock such as underwriting costs should be accounted for as 1. a reduction of additional paid-in capital. 2. an expense of the period in which the stock is issued. 3. an intangible asset. 2 1 or 3 3 1

1

Gulfport Corporation was organized in January 2017 with authorized capital of $.0001 par value common stock. On February 1, 2017, shares were issued at par for cash. On March 1, 2017, the corporation's attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $25,250. Additional paid-in capital would increase on 2/1/20173/1/20171)YesNo2)YesYes3)NoNo4)NoYes 2 3 1 4

4

Which of the following are requirements of the declaration of a cash dividend? Sufficient cash. Sufficient retained earnings. Declaration by the Board. All of these answer choices are requirements of the declaration of a cash dividend.

All of these answer choices are requirements of the declaration of a cash dividend.

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? Issued shares Outstanding shares Unissued shares Authorized shares

Authorized shares

Stockholders' equity is generally classified into two major categories: earned capital and contributed capital. retained earnings and unappropriated capital. contributed capital and appropriated capital. appropriated capital and retained earnings.

earned capital and contributed capital.

The accounting for treasury stock retirements under IFRS may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock. is to charge the excess of the cost of treasury stock over par value to retained earnings. is to allocate the difference between paid-in capital and retained earnings. is to charge the entire amount to paid-in capital.

may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock.

The rate of return on common stock equity is computed by dividing: net income by average common stockholders' equity. net income by ending common stockholders' equity. net income less preferred dividends by ending common stockholders' equity. net income less preferred dividends by average common stockholders' equity.

net income less preferred dividends by average common stockholders' equity.

Additional paid-in capital is not affected by the issuance of: no-par stock. preferred stock. no par with a stated value stock. par value stock.

no-par stock.

"Gains" on sales of treasury stock (using the cost method) should be credited to capital stock. other income. paid-in capital from treasury stock. retained earnings.

paid-in capital from treasury stock.

Stock that has a fixed per-share amount printed on each stock certificate is called uniform value stock. par value stock. fixed value stock. stated value stock.

par value stock.

Stockholders' equity is generally classified into two major categories: retained earnings and unappropriated capital. retained earnings and contributed capital. contributed capital and appropriated capital. appropriated capital and retained earnings.

retained earnings and contributed capital.

Characteristics of the corporate form of organization include all of the following except: variety of ownership interests. unlimited liability of stockholders. capital stock or share system. facility for attracting and accumulating large amounts of capital.

unlimited liability of stockholders.