ACG2021 - CH 11
What is the total stockholders' equity based on the following account balances? Common Stock has a $1,800,000 balance. Paid-In Capital in Excess of Par has a $120,000. Retained Earnings has a $570,000 credit balance. Treasury Stock has a $60,000. $2,490,000. $2,550,000. $2,190,000. $2,430,000. $1,680,000.
$2,430,000. Stockholders' equity: Paid-in capital: Common stock, $1,800,000 Paid-In Capital in Excess of Par, $120,000 Retained earnings, $570,000 Total paid in capital and retained earnings, $2,490,000 Less: Treasury stock, $60,000 Total stockholders' equity, $2,430,000
A corporation issued 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $15.00 per share. Which of the following will be recorded when the repurchase of the shares is journalized? Treasury Stock will be debited $200. Common Stock will be credited for $200. Treasury Stock will be credited for $200. Treasury Stock will be debited for $1,500. Treasury Stock will be credited for $1,500.
Treasury Stock will be debited for $1,500. The journal entry to record the acquisition of a company's own stock (i.e., treasury stock) will increase the treasury stock account (i.e., a contra stockholders' equity account) and it will also decrease the cash account for the total cost to acquire. The cost of the treasury stock: 100 shares x $15/share = $1,500. Debit the Treasury Stock account to increase it.
Treasury stock is a corporation's own stock, which has been reacquired and held for future use. corporate stock issued by the treasurer of a company. corporate stock that has been issued to the corporation's managers. stock issued by the U.S. Treasury Department. stock purchased by a corporation and held as an investment and listed as an asset.
a corporation's own stock, which has been reacquired and held for future use. Treasury stock is a corporation's own stock, which has been reacquired and held for future use. Treasury stock is reported in the stockholders' equity section of the balance sheet as a contra equity; it is not an asset. Corporations can hold treasury stock indefinitely, and they can reissue treasury stock at any time. Corporations pay dividends on outstanding shares of stock; they do not pay dividends on treasury stock. Treasury shares do not have voting rights, liquidation rights (e.g., residual claims), or preemptive rights,
A corporation's December 31, 2021 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 30,000 shares authorized; 15,000 shares issued $ 300,000 Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding 19,500,000 Paid-in capital in excess of par value - preferred stock 60,000 Paid-in capital in excess of par value - common stock 27,000,000 Retained earnings 7,650,000 Treasury stock (30,000 shares) 630,000 The corporation declared and paid a $75,000 cash dividend on December 15, 2021. If the company's dividends in arrears prior to that date were $27,000, the corporation's common stockholders would receive $24,000 $27,000 $33,000 $57,000 $0
$24,000 Dividends to preferred stockholders include dividends in arrears plus the current year's dividend. Dividends in arrears = $27,000. Current year dividend to preferred stockholders = 15,000 x $20 x 8% = $24,000 Total paid to preferred stockholders = $27,000 + 24,000 = $51,000 Total paid to common stockholders = $75,000 - 51,000 = $24,000
When a corporation started, it issued 40,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. Last year, it declared and paid dividends of $4,000. This year, it declared and paid dividends of $12,000. How much of this year's dividend was distributed to preferred shareholders? $8,000 $6,000 $10,000 $2,400 $12,000
$6,000 Dividend to preferred shareholders = 10,000 x $10 x 6% =$6,000
A partial list of a corporation's accounts shows the following account balances: Retained earnings, $400,000 Treasury stock—common, $20,000 Paid-in capital in excess of par value—common, $55,000 Treasury stock—preferred, $30,000 Common stock, $200,000 Preferred stock, $180,000 Paid-in capital in excess of par value—preferred, $60,000 How much is total stockholders' equity? $885,000 $805,000 $895,000 $845,000 $945,000
$845,000 Total stockholders' equity = Retained earnings - treasury stock--common + paid-in capital in excess of par value--common - treasury stock--preferred + common stock + preferred stock + paid-in capital in excess of par value--preferred Total stockholders' equity = $400,000 - $20,000 + $55,000 - $30,000 + $200,000 + $180,000 + $60,000 = $845,000
Consider the following data for a corporation: Net income, $715,000 Preferred stock dividends, $50,000 Market price per share of stock, $25 Average common stockholders' equity, $3,000,000 Cash dividends declared on common stock, $30,000 What is the payout ratio? 4.2% 10% 250% 40% 2.5%
4.2% Payout ratio is cash dividends declared to common stockholders divided by net income. Payout ratio = $30,000/$715,000 = 4.2%
The following data is available for a certain corporation at December 31: Common stock, par $3 (authorized 250,000 shares) $300,000 Treasury stock (at cost $12 per share) $1,200 Based on the data, how many shares of common stock are outstanding? 250,000 249,900 99,900 99,990 100,000
99,900 The common stock account records the par value of common stock that has been issued. Given the common stock account's total is $300,000 and common stock has a $3 par value per share the company the company must have 100,000 shares of common stock issued (i.e., $300,000/$3 per share = 100,000 shares). This company has treasury stock. Treasury stock is a corporation's own stock that has been reacquired. With $1,200 of treasury stock recorded on the company's books and a $12 cost per share the company must have 100 shares of its own common stock being held as treasury stock. The number of outstanding shares equals the number of issued shares minus the number of shares reacquired (i.e., treasury shares). This company has 100,000 shares outstanding (i.e., 100,000 - 100 = 99,900).
A corporation issued 10,000 of $3 par value common stock for $7 per share. Which of the following will be part of the journal entry to record the issuance? None of these A debit of $70,000 to Common Stock A debit of $40,000 to Common Stock A credit of $50,000 to Common Stock A credit of $30,000 to Common Stock
A credit of $30,000 to Common Stock The journal entry will increase the cash account for the total issue price, increase the common stock account for the par value per share times the number of shares issued, and increase paid-in capital in excess of par value for the excess received above par value. Debit to Cash = 10,000 x $7 = $70,000 Credit to Common stock = 10,000 x $3 = $30,000 Credit to Paid-in capital in excess of par value = 10,000 x ($7 - $3) = $40,000
Which of the following does not affect retained earnings? Dividends Stock dividends Net income Net loss Additional investments by stockholders
Additional investments by stockholders Retained earnings is increased by revenues and it is decreased by expenses and dividends. In other words, retained earnings is increased by net income (i.e., net income = revenue exceeds expenses) and decreased by net losses. Additional investments by stockholders have no impact on retained earnings. Retained earnings are increased by net income, decreased by a net loss, and decreased by dividends.
Which of the following is not true of a corporation? Corporate losses must be paid personally by the corporation's shareholders. Corporations may enter into binding legal contracts in its own name. Corporations may buy, own, and sell property. Corporations may sue and be sued. Corporations pay federal income taxes as a separate entity.
Corporate losses must be paid personally by the corporation's shareholders. As an entity that is separate from its owners—the stockholders—a corporation may enter binding legal contracts' It can also can buy, own, and sell property in its name. Likewise, corporations can sue and be sued. Corporations must also file annual income tax returns and pay taxes to the federal government.
A corporation declared a cash dividend of $1.75 per share on 20,000 shares of common stock on January 15. The dividend is to be paid one month later on February 15 to stockholders of record on January 31. Which of the following summarizes the effects of the journal entry recorded on the date of declaration on January 15? No journal entry is recorded when dividends are declared. It decreases liabilities and decreases assets. It decreases stockholders' equity and decreases assets. It increases stockholders' equity and increases liabilities. It decreases stockholders' equity and increases liabilities.
It decreases stockholders' equity and increases liabilities. Three dates are relevant to dividends: (i) the date of declaration, (ii) the date of record, and (iii) the date of payment. The dividend becomes a liability to the corporation on the date of declaration. The company journalizes the following on the date of declaration: It debits the Cash Dividend account (i.e., it decreases stockholders' equity) for the amount of the dividend, and it credits Dividends Payable (i.e., it increases liabilities) for the same amount. Nothing is journalized on the date of record. On the date of payment, the company journalizes the payment and reduction in the payable as follows: it debits Dividends Payable (i.e., it reduces liabilities) and credits Cash (i.e., it reduces assets) for the amount of the dividend paid.
Which of the following is considered an advantage of the corporate form of organization? None of these Limited liability of stockholders. Taxation. Government regulations. All of these
Limited liability of stockholders. Limited liability of stockholders is a major advantage, not a disadvantage of corporations. The liability of stockholders is normally limited to their investment. In contrast, owners of proprietorships and partnerships are personally liable for their companies' debts.
Which one of the following is not a right of preferred stockholders? Priority to the assets in the event of liquidation Priority in relation to dividends Priority voting rights Preferred stockholders have all of these rights None of these are rights of preferred stockholders
Priority voting rights Preferred stockholders usually have no voting rights and never have priority voting rights. Preferred stockholders normally have a priority in relation to dividends. Preferred stockholders normally have a priority to assets in the event of liquidation.
If a corporation's stock is not traded on a stock exchange, the corporation is referred to as a closely held corporation which is another name for an S corporation. a privately held corporation. a chartered corporation. a mutual corporation. a publicly held corporation
a privately held corporation. Corporations are either publicly held or privately held. A corporation with stock sold on a stock exchange is a publicly held corporation (and may have thousands of stockholders). In contrast, stock of a privately held corporation is not sold on a stock exchange; its stock is not offered for sale to the general public (and they usually have only a few stockholders).
Those most responsible for hiring the Chief Executive Officer is (are) the management. board of directors. employees. stockholders. controller.
board of directors. Stockholders legally own the corporation, but they do not manage its operations directly. Rather, the shareholders elect a board of directors, and the board of directors chooses a chief executive office who performs daily management functions to operate the corporation.
Corporations have several officers who manage the corporation. The officer who has overall responsibility for managing the business is the chief executive officer. treasurer. controller. All of these None of these
chief executive officer. The chief executive officer (CEO) has overall responsibility for managing the business. Other officers help the chief executive officer operate the corporation. One such officer is the controller. The controller is the chief accounting officer. The controller maintains the corporation's accounting records, systems of internal controls, and prepares its financial statements, tax returns, and internal reports. In contrast, the treasurer has custody of the corporation's funds and maintains the company's cash position.
A corporation issues 25,000 shares of $50 par value preferred stock for cash at $125 per share. The entry to record the transaction will include a credit to Preferred Stock for $3,125,000. credit to Retained Earnings for $3,125,000. credit to Preferred Stock for $1,250,000 and a credit to Paid-in Capital in Excess of Par Value for $1,875,000. credit to Preferred Stock for $1,875,000 and a credit to Retained Earnings for $1,250,000. credit to Preferred Stock for $2,000,000 and a credit to Paid-in Capital in Excess of Par Value for $1,125,000.
credit to Preferred Stock for $1,250,000 and a credit to Paid-in Capital in Excess of Par Value for $1,875,000. When a company issues preferred stock, it debits the cash it receives from the stockholder, it credits preferred stock for the par value of the stock issued. and it credits paid-in capital in excess of par value--preferred stock for any amount received in excess of par value. Debit cash for $3,125,000 (i.e., 25,000 shares x $125 per share). Credit preferred stock for $1,250,000 (i.e., 25,000 shares x $50 per share). Credit paid-in capital in excess of par--preferred stock for $1,875,000 (i.e., 25,000 shares x $75 per share).
Woodland Company declared a cash dividend of $2.00 per share on 50,000 shares of common stock on July 15. The dividend is to be paid one month later on August 15 to stockholders of record on July 31. The correct entry to be recorded on the date of declaration of July 15 will include a debit to the Dividends account and a credit to the Dividends Payable account. No journal entry is required. debit to the Dividends account and a credit to the Cash account. debit to the Retained Earnings account and a credit to the Dividends Payable account. debit to the Dividends Payable account and a credit to the Cash account.
debit to the Dividends account and a credit to the Dividends Payable account. Three dates are relevant to dividends: (i) the date of declaration, (ii) the date of record, and (iii) the date of payment. The dividend becomes a liability to the corporation on the date of declaration. The company journalizes the following on the date of declaration: It debits the Dividends account and it credits Dividends Payable account. Nothing is journalized on the date of record. On the date of payment, the company journalizes the payment and reduction in the payable as follows: it debits Dividends Payable and credits Cash.
The return on common stockholders' equity equals net income divided by average common stockholders' equity. net income less preferred dividends divided by average common stockholders' equity. net income less preferred dividends divided by ending common stockholders' equity. net income divided by ending common stockholders' equity. sales divided by ending common stockholders' equity.
net income less preferred dividends divided by average common stockholders' equity. Return on common stockholders' equity = net income less preferred dividends divided by average common stockholders' equity.
