Chapter 11: Interactive Presentation

The basic earnings per share formula is:

(net income minus preferred dividends) divided by weighted-average common shares outstanding.

On February 20, services valued at $60,000 relating to the organization of a corporation were performed in exchange for 1,000 shares of its $25 par value common stock. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Organization expenses - $60,000 (debit) Common stock, $25 par value - $25,000 (credit) Paid in capital in excess of par value - $35,000 (credit)

The dividend yield is:

annual cash dividends per share divided by market value per share.

If the dividend rate on preferred stock is lower than the rate the corporation earns on its assets, the effect of issuing preferred stock is to

increase the rate earned by common shareholders.

The price-earnings ratio is:

market value per share divided by earnings per share.

Farmer's, Inc., has 1,000 shares of $100 par value preferred stock outstanding, 50,000 shares of common stock outstanding, and its total stockholders' equity equals $5,000,000. The preferred stock does not have a call provision and the company has $50,000 of cumulative dividends in arrears. The book value per preferred share is _____.

$150

Buffet Company was organized in January 2018 and has 1,000 shares of $200 par value, 10 percent, noncumulative preferred stock outstanding and 3,000 shares of $1 par value common stock outstanding. Dividends declared and paid each year are $10,000 in 2018, $15,000 in 2019, and $75,000 in 2020. During 2020, the dividends that must be paid to the preferred and common stockholders, respectively, total _____.

$20,000 and $55,000

Cameron Company had 10,000 shares of common stock authorized and 9,500 shares issued and outstanding at the beginning of the year. There were no stock transactions during the year. During the year, the company reported net income of $30,000. Cameron Company has no preferred stock authorized. The company's basic earnings per share (rounded to two decimal points) is _____.

$3.16

Anderson Corporation had a credit balance of $43,000 in its Retained Earnings account on December 31, 2018. Net income of $6,000 was reported on its income statement for the year ended December 31, 2019. Dividends in the amount of $5,625 were declared on December 31, 2018; the dividends are payable to the company's stockholders on February 1, 2019. The balance in its Retained Earnings account on December 31, 2019 equals _____.

$43,375

___________ stock refers to issued stock that is currently held by stockholders.

Outstanding

The following information is available for Payton Incorporated. At the end of the year, the market price of its common stock is $550 per share. Earnings per share totaled $100 and dividends per share in the amount of $15 were paid during the year. The dividend yield is _____.

2.7%

The following information is available for Payton Incorporated. At the end of the year, the market price of its common stock is $550 per share. Earnings per share totaled $100 and dividends per share in the amount of $15 were paid during the year. The company's price-earnings ratio is _____.

5.50

On January 2, Carlton, Inc., issued 100 shares of $10 par value common stock for cash of $10 per share. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Cash - $1,000 (debit) Common stock, $10 par value - $1,000 (credit)

The three dates related to a cash dividend include all of the following:

Date of declaration Date of record Date of payment

On January 15, Pinkney, Inc., issued 10,000 shares of $10 par value common stock in exchange for land and a building. Five years ago, the stockholder purchased the land for $40,000 and constructed the building at a cost of $90,000. At the time of the stock issuance, the land and the building had fair market values of $45,000 and $95,000, respectively. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Land - $45,000 (debit) Building - $95,000 (debit) Common stock, $10 par value - $100,000 (credit) Paid in capital in excess of par value - $40,000 (credit)

Preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock. This feature is called:

Participating

All of the following are advantages of a corporation except:

government regulation

Unlike a stock dividend, a stock split _____.

reduces the par value of the stock

Book value per common share is:

stockholders' equity applicable to common shares divided by number of common shares outstanding.

On Sept. 1, Paddington, Inc., issued 1,000 shares of $10 stated value common stock for cash of $10 per share. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Cash - $10,000 (debit) Common stock, $10 stated value - $10,000 (credit)

On July 1, Hanson Corporation issued 10 shares of $100 par value preferred stock for cash of $1,000 per share. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Cash - $10,000 (debit) Preferred stock - $1,000 (credit) Paid in capital in excess of par value - $9,000

Prior to June 1, Sandler Company had no treasury stock transactions. Then, on June 1, the company paid $5,000 to purchase 100 shares of its common stock on the open market. On July 1, the company sold 50 of these shares at $52 per share. Then, on August 1, the company sold the remaining 50 shares at $46 per share. Complete the journal entry for the sale of the treasury stock on July 1 by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Cash - $2,600 (debit) Treasury stock - $2,500 (credit) Paid-in capital, treasury stock - $100 (credit)

Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018, the company's board of directors declares a 20 percent stock dividend. This stock dividend will be distributed on January 20, 2019 to the stockholders of record on January 15, 2019. The market price of the company's stock is $10 per share on December 31, 2018. Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Retained earnings - $200,000 (debit) Common stock dividend distributable - $40,000 (credit) Paid in capital in excess in par value - $160,000 (credit)

Hemingway Corporation has 100,000 shares of common stock issued and outstanding. At the meeting of the board of directors on December 1, the board voted to declare a cash dividend of $5 per share to be paid on December 31, to shareholders of record as of December 16. Complete the necessary journal entry on the date of declaration by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Retained earnings - $500,000 (debit) Common dividends payable - $500,000 (credit)

Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018, the company's board of directors declares a 50 percent stock dividend. This stock dividend will be distributed on January 20, 2019 to the stockholders of record on January 15, 2019. The market price of the company's stock is $10 per share on December 31, 2018. Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Retaining earnings - $100,000 (debit) Common stock dividend distributable - $100,000 (credit)

Prior to June 1, Sandler Company had no treasury stock transactions. Then, on June 1, the company paid $5,000 to purchase 100 shares of its common stock on the open market. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Treasury stock - $5,000 (debit) Cash - $5,000 (credit)

All of the following are true about a corporation except:

a corporation issues bond certificates to its owners.

The statement of stockholders' equity _____.

describes changes in each of the major equity subcategories