ch. 15

A stock split reduces retained earnings.

False

Large stock dividends are valued at the market price per share of stock at the date of declaration.

False

Preferred shares are generally voting and pay a fixed dividend.

False

Retained earnings are amounts invested by the equity holders of the company.

False

Backdoor Inc. had​ 200,000 shares of​ $5 par common stock outstanding. The company declared a stock dividend of​ 100,000 shares when the market price was​ $25. By how much did additional​ paid-in capital increase when the dividend was distributed to the​ shareholders?

0

​Illusions, Inc. reacquired 17,000 shares of its common stock for $16 per share on June 1. On July 1 they sold 5,000 treasury shares for $23 per share. On August 1 they sold 6,000 treasury shares for $12 per share. Assuming no prior balance in the Additional Paid−in Capital from Treasury Stock Transactions​ account, what is the ending balance in this account following these​ transactions?

11,000 credit balance

On January​ 1, Year​ 1, Black Dog Corp. began operations and issued​ 30,000 shares of​ $5 par common stock for​ $9 per share. On June​ 30, the company bought back​ 10,000 shares for​ $8 per share.​ Then, on September​ 15, the company resold​ 5,000 shares for​ $12 per share. What amount of total additional​ paid-in capital should Black Dog report on its December​ 31, Year 1 balance sheet if Black Dog uses the cost method to account for its treasury​ stock?

140,000

Price Co. reported net income of​ $18,000 for the current year. It had unrealized losses on available−for−sale debt securities of​ $1,700 after​ tax, and a foreign currency translation loss of​ $1,000 after tax. What is comprehensive income for the current​ year?

15,300

Mozart​ & Company paid cash dividends totaling $170,000 in 2016 and $75,000 in 2017. In​ 2018, the company will pay cash dividends of $810,000. There were no dividends in arrears as of January​ 1, 2016. There are​ 25,000 shares of common stock outstanding and​ 100,000 shares of 6​ percent, $50 par cumulative preferred stock outstanding. What is the amount of cash dividends payable to common stockholders in​ 2018?

155,000

​Hawks, Inc. has​ 79,000 shares​ authorized, 50,000 shares​ issued, and​ 13,000 shares of treasury stock.​ ________ shares are​ outstanding, and​ ________ shares are unissued.

27,000 ; 29,000

Classic Cars Corp. has​ 50,000 shares of​ $10 par common stock and​ 20,000 shares of​ $15 par fully participating​ 10% cumulative preferred stock. If the company declares cash dividends of​ $100,000 during the current year and there are no dividends in​ arrears, what will be the total dividend payment to preferred​ shareholders?

37,500

Boone​ Corporation's outstanding capital stock on December 15 consisted of the​ following: bullet• ​30,000 shares of​ 5% cumulative preferred​ stock, par value​ $10 per​ share, fully participating as to dividends. No dividends were in arrears. bullet• ​200,000 shares of common​ stock, par value​ $1 per share. On December​ 15, Boone declared dividends of​ $100,000. What was the amount of dividends payable to​ Boone's common​ stockholders?

40,000

Betta Corp. has 70,000 shares of​ $3 par common stock and 25,000 shares of $17 par​ 7% cumulative preferred stock. The company declares cash dividends of $80,000 during the current year and there are $9,000 dividends in arrears. What will be the total dividend payment to common​ stockholders?

41,250

Backdoor Inc. had​ 200,000 shares of​ $5 par common stock outstanding. The company declared a stock dividend of​ 30,000 shares when the market price was​ $25. By how much did additional​ paid-in capital increase when the dividend was​ declared?

600,000

Caesar Company issued 2 comma 4002,400 shares of its $3 par value common stock for $12 per share. They will record​ ________ in the common stock account at par value and​ ________ as additional paidminus−in capital in excess of parminus−common.

7,200;21,600

On January​ 1, 2016, Warhol Company issued 2,500 shares of​ 10%, $150 par​ value, cumulative preferred stock for $475,000. No preferred dividends were declared in 2016 and 2017. On December​ 30, 2018, the Board declared $9,000 in dividends. How much of the dividend is allocated to preferred and common​ shareholders?

9,000 preferred 0 common

Danio Fisheries issued 490 comma 000490,000 shares of $3 par value stock. On August​ 1, Danio Fisheries implements a two−for−one stock split. After the stock​ split, the total number of shares outstanding is​ ________ and the total par value is​ ________.

980,000 ; 1,470,000

____ preferred shares are shares for which the issuing entity has the right to buy back the shares at a specified price and future date.

Callable

S​ & C Company issues 2,000 shares of common stock with a $4 par value. The issue price of the stock is $16 per share. What is the journal entry required to record the issuance of the​ shares?

Cash 32,000 Common Stock -$4 par 8,000 Addl. Paid−in Capital in Excess of- Common 24,000

​Monet's Minions, Inc. reacquired 16,000 shares of its​ $1 par common stock for $11 per share on August 1. On October 31 they sold 8,000 treasury shares for $6 per share. Assuming a zero balance in the Additional Paid−in Capital from Treasury Stock Transactions​ account, what is the necessary journal entry for the October​ transaction?

Cash 48,000 Retained Earnings 40,000 Treasury Stock 88,000

On January​ 1, 2018,​ TNT, Inc. issued​ 1,500 shares of​ $80 par​ value, convertible preferred shares for​ $200,000. Each preferred share is convertible into one share of​ $10 par common stock. What is the necessary journal entry to record this​ transaction?

Cash ​200,000 Convertible Preferred Stock ​$80 Par ​120,000 Addl. Paid−in Capital in Excess of Pa Preferred ​80,000

On September​ 1, Year​ 1, Royal​ Corp., a newly formed​ company, had the following stock issued and​ outstanding: bullet• Common​ stock, no​ par, $1 stated​ value, 5,000 shares originally issued for​ $15 per share. bullet• Preferred​ stock, $10 par​ value, 1,500 shares originally issued for​ $25 per share. ​Royal's September​ 1, Year​ 1, statement of​ stockholders' equity should​ report:

Common Stock: 5,000 Preferred Stock: 15,000 Additional: 92,500

___ preferred stock shares allow the shareholder to convert his shares to common shares at a predetermined rate or exchange ratio.

Convertible

On January​ 1, 2018,​ TNT, Inc. issued​ 2,100 shares of​ $50 par​ value, convertible preferred shares for​ $200,000. Each preferred share is convertible into one share of​ $10 par common stock. On August​ 1, 2018, all preferred shareholders converted their shares into common stock. What is the necessary journal entry to record the August 1st​ transaction?

Convertible Preferred Stock ​105,000 Addl. Paid−in Capital in Excess of Par-Preferred ​95,000 Common Stock ​21,00 Add. Paid−in Capital in Excess of Par—Common ​179,000

The most popular method of accounting for treasury stock is the​ ________ method

Cost

Stockholders' equity is also called

Net Asset

____ preferred shares contain a provision requiring that preferred shareholders share ratably in distributions with common shareholders.

Participating

At its date of​ incorporation, McCarty Company issued​ 100,000 shares of its​ $10 par common stock at​ $11 per share. During the current​ year, McCarty acquired​ 30,000 shares of its common stock at a price of​ $16 per share and accounted for them using the cost method.​ Subsequently, these shares were reissued at a price of​ $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on the following​ accounts?

Retained Earning: Decrease Additional- Paid in Cap: No effect

Pollyanna​ & Partners reacquired​ 40,000 shares of its​ $1 par common stock for​ $25 per share. What is the journal entry needed to record this​ transaction?

Treasury Stock ​1,000,000 Cash ​1,000,000

Other comprehensive income includes income items that bypass the income statement.

True

The number of outstanding shares of common stock may be reduced by shares held in the treasury.

True

When treasury shares are​ retired, the number of shares issued is reduced.

True

On August​ 1, 2018, Omega Co. declared and issued a 30 percent common stock dividend. Prior to​ this, Omega Co. had​ 50,000 outstanding shares of​ $2 par value common stock. The market value of Omega​ Co.'s stock was​ $18 per share at the time the dividend was issued. As a result of this stock​ dividend, Omega​ Co.'s total​ stockholders' equity​

did not change

Purrfect Paws Company issues​ 1,000 shares of​ $50 par preferred stock for​ $250,000. The company is not required to buy back the preferred stock.​ However, the preferred stock includes a redemption feature that gives the holder the option to redeem the shares for cash at specified dates. This would be classified as​ ________ under U.S. GAAP and​ ________ under IFRS.

equity ; debt

Which of the following is NOT a part of Other Comprehensive​ Income?

gains on the sale of equipment

Sheldon, Inc. declared a stock dividend of​ 100,000 shares on a date when the​ company's common stock was selling for​ $19 per share. Prior to this​ date, Sheldon had​ 100,000 outstanding shares of​ $1 par value common stock. As a result of this stock​ dividend, Sheldon's common stock will​ ________, the additional paidminus−in capital will​ ________, and the retained earnings will​ ________.

increase​ $100,000; not​ change; decrease​ $100,000