Ch 11 WileyPlus MC Pt 2

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A corporation 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? $945,000 $845,000 $885,000 $895,000

$845,000 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

Vista, Inc. has 300,000 shares of common stock outstanding. A 30% stock dividend was declared and issued. How many shares are outstanding after the stock dividend? 330,000 300,000 309,000 390,000

390,000 The number of outstanding shares is multiplied by the percentage of the stock dividend to get the total new shares to be issued. The new shares plus the original shares outstanding are then added together.

Which of the following does not affect retained earnings? Dividends Net income Net loss Additional investment by stockholders

Additional investment by stockholders

If a corporation has incurred a net loss, how will it be recorded? Credited to a paid-in capital account in a closing entry Credited to Retained Earnings in a closing entry Debited to Retained Earnings in a closing entry Debited to a paid-in capital account in a closing entry

Debited to Retained Earnings in a closing entry

Which one of the following is not true concerning a retained earnings restriction? It generally is disclosed in the notes to the financial statements. It makes a portion of the balance of retained earnings unavailable for dividends. It is reported as a loss on the income statement. It may arise from legal, contractual, or voluntary causes.

It is reported as a loss on the income statement.

Which one of the following is not part of 'capital stock' in the balance sheet? Paid-in capital in excess of par value-common stock Common stock, stated value Non-voting Class B preferred stock, stated value Convertible Class A preferred stock, stated value

Paid-in capital in excess of par value-common stock The capital stock section of the balance sheet consists of preferred and common stock. Any stock accounts that are in excess of the par or stated value are included in the additional paid-in capital section.

When a stock dividend is declared, which of the following accounts is debited? Paid-in Capital in Excess of Par Value Stock Dividends Common Stock Common Stock Dividends Distributable

Stock Dividends When a stock dividend is declared, there will be a debit to Stock Dividends and a credit to both Common Stock Dividends Distributable and Paid-in Capital in Excess of Par Value.

Ramona, Inc. has 2,000 shares of 5%, $100 par, cumulative preferred stock and 80,000 shares of $4 par common stock outstanding. Last year the board of directors declared and paid an $8,000 dividend. This year the dividend declared and paid was $15,000. What amount of this dividend will be paid to the preferred stockholders? $0 $15,000 $12,000 $10,000

$12,000 Before the common stockholders receive any dividends, the preferred dividends should first be distributed for the prior year and the current year. Total dividend = 2,000 × 5% × $100 = $10,000 Preferred dividends in arrears for prior years ($10,000 - $8,000) $2,000 Preferred dividends for current year 10,000 Total dividends to preferred stockholders (10,000+2,000) = $12,000

In the stockholders' equity section of the balance sheet, from what is the cost of treasury stock deducted? Common stock and paid-in capital Total paid-in capital and retained earnings Retained earnings Total common stock

Total paid-in capital and retained earnings

Dehesa, Inc. has 8,000 shares of 5%, $15 par, cumulative preferred stock and 50,000 shares of $3 par common stock outstanding. No dividends were declared last year. However, the board of directors just declared a $34,000 dividend this year. What amount of the total dividend will be paid to common stockholders? $12,000 $22,000 $28,000 $34,000

$22,000 Before the common stockholders receive any dividends, the preferred dividends should first be distributed for the year in arrears and the current year. Total dividend = 8,000 × 5% × $15 = $6,000 Preferred dividends in arrears for prior year $6,000 Preferred dividends for current year 6,000 Total dividends to preferred stockholders (6,000+6,000) = 12,000 Total dividends available (34,000) Dividends available to common stockholders (34,000-12,000) = $22,000

A corporation shows the following account balances: Retained earnings $300,000 Treasury stock 10,000 Dividends payable 20,000 Paid-in capital in excess of par value 55,000 Common stock 200,000 How much is total stockholders' equity? $565,000 $555,000 $545,000 $525,000

$545,000 Retained earnings - treasury stock + paid-in capital in excess of par value + common stock = total stockholders' equity: $300,000 - $10,000 + $55,000 + $200,000 = $545,000

Raptor Inc. has retained earnings of $500,000 and total stockholders' equity of $2,000,000. It has 100,000 shares of $8 par value common stock outstanding, which is currently selling for $30 per share. What will occur if Raptor declares a 10% stock dividend on its common stock? Net income will decrease by $80,000. Retained earnings will decrease by $80,000 and total stockholders' equity will increase by $80,000. Retained earnings will decrease by $300,000 and total stockholders' equity will increase by $300,000. Retained earnings will decrease by $300,000 and total paid-in capital will increase by $300,000.

Retained earnings will decrease by $300,000 and total paid-in capital will increase by $300,000. A 10% stock dividend will increase the number of shares issued by 10,000 (100,000 × 10%). At a market price of $30 per share, total paid-in capital will increase by $300,000 (10,000 shares × $30/share) and retained earnings will decrease by that same amount.

Dehesa, Inc. has 8,000 shares of 5%, $50 par, cumulative preferred stock and 50,000 shares of $3 par common stock outstanding. No dividends were declared last year, However, the board of directors just declared a $50,000 dividend this year to be paid in 10 days. What amount of the total dividend will be paid to common stockholders? $50,000 $30,000 $15,000 $10,000

$10,000 First, determine current year's and dividends in arrears for preferred stockholders; then, by comparison to cash available for dividends, determine what is available to common stockholders. 8000 x 5% x $50 = 20,000 20,000(Past Year) + 20,000 (Current Year) = 40,000 $50,000 - 40,000 = 10,000

A corporation is authorized to sell 1,000,000 shares of common stock. Today there are 400,000 shares outstanding, and the board of directors declares a 10% stock dividend. How many shares will be issued as a stock dividend? 100,000 40,000 60,000 None of the answer choices are correct.

40,000 This number of outstanding shares is multiplied by the percentage of the stock dividend to get the total new shares to be issued. 400,000 shares outstanding × 10% = 40,000 new shares to be issued.

Which statement about stock dividends is true? Stock dividends reduce a company's cash balance. A stock dividend increases total stockholders' equity for the par value of the stock being distributed. A stock dividend has no effect on total stockholders' equity. A stock dividend decreases total stockholders' equity.

A stock dividend has no effect on total stockholders' equity.

How is common stock listed in the stockholders' equity section of the balance sheet? Before preferred stock After retained earnings As part of paid-in capital Subtracted from treasury stock

As part of paid-in capital Paid-in capital includes all stock accounts and additional paid-in capital accounts.

Weeds Inc. has a balance of $10,000,000 in retained earnings and declares a 4% stock dividend on its 1,000,000 shares of $3 par value common stock. The current market value of the stock is $20 per share. What is the entry to record the transaction when the dividend shares are issued? Stock Dividends 120,000 Common Stock Dividends Distributable 120,000 Stock Dividends 800,000 Common Stock Dividends Distributable 120,000 Paid-in Capital in Excess of Par Value 680,000 Common Stock Dividends Distributable 120,000 Common Stock 120,000 Stock Dividends 800,000 Common Stock 800,000

Common Stock Dividends Distributable 120,000 Common Stock 120,000 The number of shares to be issued is the stock dividend percentage times the number of shares outstanding. When distributed, the Common Stock Dividends Distributable is decreased and the Common Stock account is increased for the number of shares times the par value of the stock. Number of shares to be issued = 4% × 1,000,000 = 40,000 shares Debit to Common Stock Dividends Distributable = 40,000 × $3 = $120,000 Credit to Common Stock = 40,000 × $3 = $120,000

On which date are entries for cash dividends required? Record date and the payment date Declaration date, record date, and payment date Declaration date and the payment date Declaration date and the record date

Declaration date and the payment date

Weeds Inc. has a balance of $10,000,000 in retained earnings and declares a 5% stock dividend on its 1,000,000 shares of $5 par value common stock. The current market value of the stock is $25 per share. What is the entry to record this transaction at the declaration date? Stock Dividends 1,250,000 Common Stock Dividends Distributable 250,000 Paid-in Capital in Excess of Par Value 1,000,000 Stock Dividends 1,250,000 Common Stock 1,250,000 Common Stock Dividends Distributable 250,000 Common Stock 250,000 Stock Dividends 250,000 Common Stock Dividends Distributable 250,000

Stock Dividends 1,250,000 Common Stock Dividends Distributable 250,000 Paid-in Capital in Excess of Par Value 1,000,000 The number of shares to be issued is the stock dividend percentage times the number of shares outstanding. The number of shares to be issued is multiplied by the market price of the stock and debited to Stock Dividends. Common Stock Dividends Distributable is credited for the number of shares times the par value of the stock. Paid-in Capital in Excess of Par Value is credited for the balance. Number of shares to be issued = 5% × 1,000,000 = 50,000 shares Debit to Stock Dividends = 50,000 × $25 = $1,250,000 Credit to Common Stock Dividends Distributable = 50,000 × $5 = $250,000 Credit to Paid-in Capital in Excess of Par Value = 50,000 × ($25 - $5) = $1,000,000

Which of the following will increase the paid-in capital section of the balance sheet? Stock dividend Cash dividend Stock split Treasury stock acquisition

Stock dividend


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