ch 11 adaptive practice

Aucoin Enterprises has the following amounts related to stockholders equity: Common Stock, $3 par (400,000 shares authorized, 250,000 shares issued, and 200,000 shares outstanding): $750,000 8% Preferred Stock, $150 par, cumulative (10,000 shares authorized and issued): $1,500,000 Total additional paid-in capital: $2,300,000 If the ending retained earnings balance is $4,000,000 and total stockholders' equity is $8,350,000, what amount will Aucoin report for treasury stock?

Before considering treasury stock, total stockholders' equity is $8,550,000 (par value of common and preferred stock, total additional paid in capital, and retained earnings). Subtracting the total stockholders' equity amount from this total yields $200,000 in treasury stock.

Which of the following would be placed under the Capital Stock section of the balance sheet? Select all that apply.

preferred stock at par & common stock at par

Contractual loan restrictions may occasionally cause _________ to be restricted.

retained earnings

Brehm Holdings recently reported a return on common stockholders' equity of 11.47%. What was the company's preferred dividends if net income was $550,000 during the year, beginning common stockholders' equity was $3,852,000, and ending common stockholders' equity was $3,974,000?

$101,178.90 Average common stockholders' equity is $3,913,000 {($3,852,000 + 3,974,000) ÷ 2)}. Multiplying this amount by 11.47% yields a numerator (net income less preferred dividends) of $448821.10. Subtracting this figure from net income yields $101,178.90 of preferred dividends

DeHaven Enterprises has 12,000 shares authorized and issued of 9%, $75 par preferred stock. What is net income during a year when beginning common stockholders' equity is $4,218,000 and ending common stockholders' equity is $4,597,000 if the return on common stockholders' equity is 14%?

$698,050 Preferred dividends are $81,000 (12,000 x $75 x 9%). Multiplying average common stockholders' equity of $4,407,500 {($4,218,000 + $4,597,000) ÷ 2)} by 14% yields a numerator (Net Income - Preferred Dividends) of $617,050. Adding the preferred dividends to this amount gives a net income of $698,050.

Complete Corporation has total stockholders' equity of $5,750,000. Given the following information, what is the company's total additional paid-in capital? Common Stock, $1 par (300,000 shares authorized, 200,000 shares issued and outstanding). Preferred Stock, 6%, $50 par (10,000 shares authorized, issued, and outstanding). Retained Earnings (ending balance): $4,100,000

$950,000 The total par value of common and preferred shares outstanding is $700,000 {(200,000 x $1) + (10,000 x $50)}. Adding this amount to the ending retained earnings balance yields $4,800,000 in equity before considering any additional paid-in capital, ($5,750,000 - 4,800,000 = $950,000.

What is the return on common stockholders' equity based on the following: Beginning Common Stockholders' Equity: $2,000,000 Ending Common Stockholders' Equity: $2,200,000 Net Income: $362,500 Preferred Stock throughout the year: 8%, $50 par (10,000 shares authorized and outstanding).

15.4% Return on stockholders' equity is calculated by dividing net income less preferred dividends by average common stockholders' equity. Total beginning stockholders equity is $2,000,000 while ending stockholders equity is $2,200,000. This results in average common stockholders' equity of $2,100,000. Dividing $322,500 (Net Income less Preferred Dividends) by this figure yields a 15.4% return on common stockholders' equity.

Determine total stockholders' equity given the following information: Common Stock, $5 par (500,000 shares authorized, 450,000 shares issued, and 425,000 shares outstanding) Additional Paid-in Capital - Common Stock $1,125,000 Treasury Stock (at cost): $125,000 Retained Earnings: $1,948,000

5,198,000 Total stockholders' equity is comprised of the par value of issued shares (450,000 x $5 = $2,250,000), and additional paid-in capital, and retained earnings. Treasury stock reduces the amount of total stockholders' equity.

Which of the following companies has the LOWEST return on common stockholders' equity? A a company with a net income of $36 million, preferred dividends of $0, and average common stockholders' equity of $204 million B a company with a net income of $42 million, preferred dividends of $500,000, and average common stockholders' equity of $318 million C a company with a net income of $7 million, preferred dividends of $150,000, and average common stockholders' equity of $83 million D a company with a net income of $13 million, preferred dividends of $180,000, and average common stockholders' equity of $65 million

C Return on common stockholders' equity is calculated as (net income minus preferred dividends) divided by average common stockholders' equity. Therefore, the return on common stockholders' equity for the four companies is: ($42 million - $500,000)/$318 million = 13.1% ($36 million - $0)/$204 million = 17.6% ($7 million - $150,000)/$83 million = 8.3% ($13 million - $180,000)/$65 million = 19.7% Therefore, the company with the lowest return on stockholders' equity is the company with a net income of $7 million.

Which of the following companies has the highest return on common stockholders' equity? A a company with a net income of $45 million, preferred dividends of $3 million, and average common stockholders' equity of $547 million B a company with a net income of $31 million, preferred dividends of $830,000, and average common stockholders' equity of $412 million C a company with a net income of $17 million, preferred dividends of $950,000, and average common stockholders' equity of $90 million D a company with a net income of $22 million, preferred dividends of $0, and average common stockholders' equity of $280 million

C Return on common stockholders' equity is calculated as (net income minus preferred dividends) divided by average common stockholders' equity. Therefore, the return on common stockholders' equity for the four companies is: ($45 million - $3 million)/$547 million = 7.7% ($22 million - $0)/$280 million = 7.9% ($31 million - $830,000)/$412 million = 7.3% ($17 million - $950,000)/$90 million = 17.8% Therefore, the company with the highest return on stockholders' equity is the company with a net income of $17 million

Which of the following companies has the LOWEST payout ratio? A : a company with $97 million cash dividends declared on common stock and a net income of $376 million B : a company with $28 million cash dividends declared on common stock and a net income of $142 million C : a company with $18 million cash dividends declared on common stock and a net income of $94 million D : a company with $49 million cash dividends declared on common stock and a net income of $203 million

C The payout ratio is calculated as cash dividends declared on common stock divided by net income. Therefore, the payout ratio for each company is: $18/$94 = 19.1% $28/$142 = 19.7% $97/$376 = 25.8% $49/$203 = 24.1% Therefore, the company that declared $18 million in cash dividends with a net income of $94 million has the lowest payout ratio.

Which of the following statements is true? A : The payout ratio is computed by dividing total cash dividends paid on common stock by paid-in capital. B : The payout ratio is computed by dividing total cash dividends paid on common stock by net assets. C : The payout ratio is computed by dividing total cash dividends declared on common stock by net income. D : The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

C. The payout ratio is computed by dividing total cash dividends declared on common stock by net income.

Which of the following companies has the highest payout ratio? A : a company with $68 million cash dividends declared on common stock and a net income of $205 million B : a company with $43 million cash dividends declared on common stock and a net income of $164 million C : a company with $29 million cash dividends declared on common stock and a net income of $95 million D : a company with $37 million cash dividends declared on common stock and a net income of $102 million

D The payout ratio is calculated as cash dividends declared on common stock divided by net income. Therefore, the payout ratio for each company is: $37/$102 = 36.3% $43/$164 = 26.2% $29/$95 = 30.5% $68/$205 = 33.2% Therefore, the company that declared $37 million in cash dividends with a net income of $102 million has the highest payout ratio.

What is the return on common stockholders' equity based on the following: Beginning Common Stockholders' Equity: $10,317,000 Ending Common Stockholders' Equity: $10,662,000 Net Income: $1,429,000Preferred Stock throughout the year: 6%, $75 par (8,000 shares authorized, issued, and outstanding).

Return on stockholders' equity is calculated by dividing net income less preferred dividends by average common stockholders' equity. Total beginning stockholders equity is $10,317,000 while ending stockholders equity is $10,662,000. This results in average common stockholders' equity of $10,489,500. Dividing $1,393,000 (Net Income less Preferred Dividends) by this figure yields a 13.3% return on common stockholders' equity

Romine Industries has total stockholders' equity of $4,982,000. Given the following information, what is the company's total additional paid-in capital? Common Stock, $3 par (400,000 shares authorized, 358,000 shares issued and outstanding). Preferred Stock, 4%, $100 par (5,000 shares authorized, issued, and outstanding). Retained Earnings (ending balance): $2,619,000

The total par value of common and preferred shares outstanding is $1,574,000 {(358,000 x $3) + (5,000 x $100)}. Adding this amount to the ending retained earnings balance yields $4,193,000 in equity before considering any additional paid-in capital, $4,982,000 - 4,193,000 = $789,000

Treasury stock and a retained earnings deficit will have what effect on stockholders' equity?

They will reduce stockholders' equity.

Boring Corporation has one class of $2 par common stock. The company has authorized 600,000 shares, issued 500,000 shares, and currently has 480,000 shares outstanding. Additional paid-in capital totals $2,500,000. What amount will Boring report as total paid-in capital?

Total paid-in capital consists of the par value of stock issued plus any additional paid in capital {(500,000 x $2) + $2,500,000)} = $3,500,000.

Two classifications appearing in the paid-in capital section of the balance sheet are capital stock and

additional pain-in capital

Downtrodden Corporation has been experiencing consistent net losses for the past five years. How does the company report the resulting deficit?

as a deduction in the stockholders' equity section of the balance sheet

How does a corporation recognize a deficit in retained earnings?

as a deduction in the stockholders' equity section of the balance sheet