Ch. 15 WQ

The statement of changes in equity has columns for each of the following except: Unrealized holding gain/ loss Retained earnings Comprehensive income Share capital

Comprehensive income

Which of the following statements related to dividends is incorrect? Dividends must be paid in the period declared. Distributions to owners must be in compliance with the state laws. Dividends must comply with stock contracts as to preferences and participation. Dividends must be declared by the Board of Directors.

Dividends must be paid in the period declared.

Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders can negotiate individual contracts on behalf of the enterprise. are entitled to a dividend every year in which the business earns a profit. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. have the rights to specific assets of the business.

bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

Which of the following country systems of finance have relied more heavily on debt financing, interlocking stock ownership, banker/directors, and worker/shareholder rights? USA and Britain. Britain and Japan. Japan and Germany. Germany and Britain.

Japan and Germany.

Which of the following best describes a possible result of treasury stock transactions by a corporation? May decrease but not increase net income. May increase but not decrease retained earnings. May decrease but not increase retained earnings. May increase net income if the cost method is used.

May decrease but not increase retained earnings.

Gulfport Corporation was organized in January 2014 with authorized capital of $.0001 par value common stock. On February 1, 2012, shares were issued at par for cash. On March 1, 2014, the corporation's attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $25,250. Additional paid-in capital would increase on 2/1/2014 3/1/2014 No No No Yes Yes No Yes Yes

No Yes The first issuance of stock is sold at par so no additional paid-in capital is recorded. The attorney accepted the stock at ($25,250 / 5,000 shares) = $5.05, a value greater than par so additional paid-in capital is recorded.

Which of the following type of stock will not increase Additional Paid-in Capital when issued? Preferred stock. Stated value stock. Par value stock. No-par value stock.

No-par value stock.

Under the cost method, when treasury stock is sold for more than its cost, the excess is credited to: Gain on Sale of Treasury Stock. Paid-in Capital from Treasury Stock. Paid-in Capital in Excess of Par. Retained Earnings.

Paid-in Capital from Treasury Stock.

Jackson Corporation issued a 100% stock dividend of its common stock which had a par value of $.01, and a market value of $123 before the dividend and $62 after the dividend. At what amount should retained earnings be capitalized for the additional shares issued? Market value on the payment date Par value Market value on the declaration date There should be no capitalization of retained earnings.

Par value Retained earnings is reduced by an amount equal to the number of shares issued times the par value per share.

Which of the following features of preferred stock makes the security more like debt than an equity instrument? Redeemable Noncumulative Participating Voting

Redeemable

Which one of the following is not a right of common stockholders? To share proportionately in any new issues of stock of the same class. To share proportionately in all management decisions. To share proportionately in profits and losses. To share proportionately in corporate assets upon liquidation.

To share proportionately in all management decisions.

On September 1, 2014, Valdez Company reacquired 20,000 shares of its $10 par value common stock for $15 per share. Valdez uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit Treasury Stock for $200,000. Treasury Stock for $300,000. Common Stock for $200,000. Common Stock for $200,000 and Paid-in Capital in Excess of Par for $75,000.

Treasury Stock for $300,000. 20,000 * 15

On September 14, 2014, Gayot Company reacquired 12,000 shares of its $1 par value common stock for $40 per share. Gayot uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit Common Stock for $480,000. Treasury Stock for $480,000. Common Stock for $24,000 and Paid-in Capital in Excess of Par for $456,000. Treasury Stock for $24,000.

Treasury Stock for $480,000. Treasury Stock is debited for the cost of the stock: 12,000 X $40 = $480,000.

Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 12,000 shares of its own common stock at $15 per share. Three months later Long sold 6,000 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 6,000 treasury shares, Long should credit Treasury Stock for $90,000 and Paid-in Capital in Excess of Par for $24,000. Treasury Stock for $90,000 and Paid-in Capital from Treasury Stock for $24,000. Treasury Stock for $60,000 and Paid-in Capital from Treasury Stock for $54,000. Treasury Stock for $114,000.

Treasury Stock for $90,000 and Paid-in Capital from Treasury Stock for $24,000.

The book value per share is based on both common shares and preferred shares outstanding. both common shares and preferred shares issued. common shares outstanding. common shares issued.

common shares outstanding.

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value. Treasury stock for the purchase price. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value. Paid-in capital in excess of par for the purchase price.

Treasury stock for the purchase price.

All of the following statements are true regarding preferred stock except: companies usually issue preferred stock with a par value. a preference as to dividends assures the payment of dividends. a company often issues preferred stock instead of debt, because of a high debt-to-equity ratio. the dividend preference for preferred stock is expressed as a percentage of the par value.

a preference as to dividends assures the payment of dividends.

The residual interest in a corporation belongs to the creditors. preferred stockholders. common stockholders. management.

common stockholders.

Total stockholders' equity represents a claim against a portion of the total assets of a company. only the amount of earnings that have been retained in the business. a claim to specific assets contributed by the owners. the maximum amount that can be borrowed by a company.

a claim against a portion of the total assets of a company.

On December 1, 2014, Abel Corporation exchanged 40,000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of $40 per share, and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Abel's total stockholders' equity will increase by $1,600,000. $2,200,000. $1,800,000. $400,000.

$2,200,000. 40,000 * 55

McCaffrey Corporation owned 15,000 shares of Harper Corporation's $5 par value common stock. These shares were purchased in 2010 for $326,000. On May 4, 2014, McCaffrey declared a property dividend of one share of Harper for every twenty shares of McCaffrey stock held by a stockholder. On that date, when the market price of Harper was $34 per share, there were 280,000 shares of McCaffrey outstanding. What net reduction in retained earnings would result from this property dividend? $304,267 $476,000 $150,000 $176,000

$304,267 280,000 McCaffrey shares / 20 = 14,000 shares of Harper issued, times $34 current market price equals $476,000. Retained earnings is increased by the unrealized gain of $171,733 ($476,000-$304,267) and decreased by the fair value of the shares distributed for a net reduction of $304,267

Durango Inc. had net income for 2014 of $2,120,000 and earnings per share on common stock of $5. Included in the net income was $300,000 of bond interest expense related to its long-term debt. The income tax rate for 2014 was 30%. Dividends on preferred stock were $400,000. The payout ratio on common stock was 25%. What were the dividends on common stock in 2014? $482,500. $645,000. $430,000. $530,000.

$430,000. $2,120,000 net income - $400,000 P/S dividends) X 25%

Duszynski Company issues 20,000 shares of its $.50 par value common stock having a market value of $25 per share and 6,000 shares of its $25 par value preferred stock having a market value of $50 per share for a lump sum of $750,000. The proceeds allocated to the common stock is $705,000 $500,000 $468,750 $450,000

$468,750 $500,000/ $800,000) X $750,000 = $468,750

Presented below is information related to Schoenthaler Corporation: Common Stock , $5 par $1,100,000 Paid-in Capital in Excess of Par - Common Stock 400,000 Preferred 5 ½% Stock, $100 par 1,500,000 Paid-in Capital in Excess of Par— Preferred Stock 500,000 Retained Earnings 2,000,000 Paid-in Capital in Excess of Cost - Treasury Stock 150,000 The total stockholders' equity of Schoenthaler Corporation is $3,650,000. $5,350,000. $5,650,000. $5,500,000.

$5,650,000. $1,100,000 + $400,000 + $1,500,000 + $500,000 + $2,000,000 + $150,000

Presented below is information related to Kaenzig Corporation: Common Stock , $1 par $2,100,000 Paid-in Capital in Excess of Par - Common Stock 550,000 Preferred 8 ½% Stock, $50 par 1,700,000 Paid-in Capital in Excess of Par—Preferred Stock 950,000 Retained Earnings 2,350,000 Treasury Common Stock (at cost) 250,000 The total stockholders' equity of Kaenzig Corporation is $2,300,000. $5,300,000. $7,400,000. $7,900,000.

$7,400,000. 2,100,000 + $550,000 + $1,700,000 + $950,000 + $2,350,000 - $250,000

On January 1, 2014, Vancleave Corporation had 110,000 shares of its $.001 par value common stock outstanding. On November 27, when the market price of the stock was $8, the corporation declared a 10% stock dividend to be issued to stockholders of record on December 28, 2014. What was the impact of the 10% stock dividend on the balance of the retained earnings account? $77,000 decrease No effect $88,000 decrease $11,000 decrease

$88,000 decrease 110,000 X .10 = 11,000 shares X $8 = $88,000

Before declaring a cash dividend, management must consider the legal capital of the stock. effect on paid-in capital. availability of funds. current market price of the stock.

availability of funds.

Presented below is information related to Polaris Corporation: Common Stock, $1 par $10,350,000 Paid-in Capital in Excess of Par—Common Stock 6,520,000 Paid-in Capital in Excess of Cost—Treasury Stock 400,000 Retained Earnings 9,543,000 Treasury Common Stock (at cost) 695,000 The total stockholders' equity of Polaris Corporation is $26,118,000. $27,108,000. $27,508,000. $25,318,000.

26,118,000. $10,350,000 + $6,520,000 + $400,000 + $9,543,000 - $695,000

Common stock dividends distributable are reported on the balance sheet as: An addition to common stock. an addition to additional paid-in capital. a reduction of total stockholders' equity. a current liability.

An addition to common stock.

The most common type of preferred stock is: callable preferred stock. convertible preferred stock. participating preferred stock. cumulative preferred stock.

cumulative preferred stock.

The Revaluation Surplus of IFRS is similar to U.S. GAAP in that it only allows for the increase in valuation. different than U.S. GAAP in that it allows the increase in valuation. similar to U.S. GAAP in that it allows both increases and decreases in valuation. similar to U.S. GAAP in that it only allows for the decrease in valuation.

different than U.S. GAAP in that it allows the increase in valuation.

The accounting for treasury stock retirements under IFRS is to charge the entire amount to paid-in capital. may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock. is to charge the excess of the cost of treasury stock over par value to retained earnings. is to allocate the difference between paid-in capital and retained earnings.

may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock.

The rate of return on common stock equity is computed by dividing: net income by average common stockholders' equity. net income by ending common stockholders' equity. net income less preferred dividends by average common stockholders' equity. net income less preferred dividends by ending common stockholders' equity.

net income less preferred dividends by average common stockholders' equity.

Additional paid-in capital is not affected by the issuance of: no-par stock. stated value stock. par value stock. preferred stock.

no-par stock.

The pre-emptive right enables a stockholder to receive the same amount of dividends on a percentage basis as the preferred stockholders. none of these answers are correct. receive cash dividends before other classes of stock without the pre-emptive right. sell capital stock back to the corporation at the option of the stockholder.

none of these answers are correct.

Cash dividends are paid on the basis of the number of shares issued. outstanding. outstanding less the number of treasury shares. authorized.

outstanding.