ACCT 205 Chapter 11

San Antonio Corporation purchased 300 shares of its own $20 par value common stock for $15,000. Later, these shares are sold for $16,000 cash. The journal entry to record the sale includes а:

$ 1,000 credit to Paid-in Capital from Treasury Stock

Alicia Company has 40,000 shares of $320 par value, 5% cumulative preferred stock and 140,000 shares of $80 par value common stock. Alicia declares and pays cash dividends amounting to $900,000. If no arrearage on the preferred stock exists, how much in dividends per share (use two decimal places) is paid to the common stockholders?

$ 1.86

Austin Corporation purchased 300 shares of its own $60 par value common stock for $45,000. Later, these shares are sold for $48,000 cash. The journal entry to record the sale includes a:

$ 3,000 credit to Paid-in Capital from Treasury Stock

Kimball, Inc., has outstanding 10,000 shares of $75 par value, 6% nonparticipating, cumulative preferred stock and 16,000 shares of $15 par value common stock. If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $255,000, then the total amounts distributed to preferred and common stockholders, respectively, are:

$135,000 and $120,000

Corporations pay an income tax only on that portion of their earnings that is distributed to stockholders as dividends.

False

Preferred stockholders compose the basic, residual ownership class in a corporation.

False

Property or services received in exchange for capital stock should be recorded at the par or stated value of the shares issued,

False

Stockholders' equity represents the current market value of a company.

False

The Stock Dividend Distributable account should be classified on the balance sheet as a current liability.

False

The par value of a stock represents the market value of the stock on the date it is first issued.

False

Treasury stock is classified as a long-term investment in the balance sheet.

False

When a "large" stock dividend is paid out, retained earnings are reduced by the market value of the dividend.

False

If a company issues 10,000 shares of $8 par value common stock at a market price of $120 per share, which of the following is the correct balance sheet entry?

Increase cash by $1,200,000 and increase Paid-In Capital by $1,200,000

If a company issues 10,000 shares of $6 par value common stock at a market price of $90 per share, which of the following is the correct balance sheet entry?

Increase cash by $900,000 and increase Paid-in Capital by $900,000

The preemptive right refers to the right of common stockholders to:

Maintain their proportionate interests in the corporation when additional shares are issued

In what section of the stockholders' equity portion of the balance sheet can preferred stock, common stock, and additional paid-in capital (APIC) be found?

Paid-in Capital

The excess of the sales price of treasury stock over its cost should be credited to:

Paid-in Capital from Treasury Stock

Which of the following rights allows a shareholder of a corporation to maintain hiş or her proportionate interest in the corporation?

Preemptive right

Which one of the following selections is a not component of Paid-in Capital?

Retained earnings

Which of the following rights do common stockholders typically not have?

Right to receive dividends at a predetermined rate

A statement of stockholders' equity includes an analysis of the Retained Earnings account for the accounting period.

True

Cash dividends become an obligation of the corporation on the date they are declared by the board of directors.

True

Cash dividends reduce both cash and retained earnings by the amount of the dividends paid.

True

For a corporation, the shares of outstanding stock plus the shares of treasury stock equals the shares of issued stock.

True

There are never any income statement effects recognized when a purchase or sale of stock or payment of dividends occurs.

True

The primary reason for a stock split is to reduce the market price of the stock.

True.

A re-issuance of treasury stock has the potential to yield a gain or loss on the income statement.

False

Cash dividends are paid to those stockholders who own the shares of stock on the dividend payment date.

False

Companies must report 'gains and losses' on transactions relating to purchases and sales of their own stock on the income statement as other income or expense.

False

loanna Corporation was organized on January 1, 2019, with an authorization of 2,000,000 shares of $30 par value common stock. During 2019, loanna had the following common stock transactions: Jan, 4: Issued 100,000 shares @ $36 per share. Apг. 8: Issued 200,000 shares @ $42 per share. June 9: Issued 60,000 shares @ $60 per share. July 29: Purchased 40,000 shares (treasury) @ $60 per share. Dec. 31: Sold 40,000 shares held in treasury @ $72 per share. loanna had no other transactions affecting paid-in capital. At December 31, 2019, what is the total amount of paid-in capital?

$16,080,000

Altgeld, Inc., has outstanding 10,000 shares of $150 par value, 7% nonparticipating, cumulative preferred stock and 10,000 shares of $30 par value common stock. If the dividend on preferred stock is one year in arrears, and the total cash dividend declared this year is $216,000, then the total amounts distributed to preferred and common stockholders, respectively, are:

$210,000 and $ 6,000

Circe Corporation was organized on January 1, 2019, with an authorization of 2,000,000 shares of $10 par value common stock. During 2019, Circe had the following common stock transactions: Jan. 4: Issued 100,000 shares @ $12 per share. Apг. 8: Issued 200,000 shares @ $14 per share. June 9: Issued 60,000 shares @ $20 per share. July 29: Purchased 40,000 shares (treasury) @ $20 per share. Dec. 31: Sold 40,000 shares held in treasury @ $24 per share. Circe had no other transactions affecting Paid-in Сapital. At December 31, 2019, what is the total amount of Paid-in Capital?

$5,360,000

Which of the following statements is correct?

A corporation's issued stock may exceed its outstanding stock.

Which best describes par value for stock?

An arbitrary amount set by the company for each share of stock

A company's profit declines when dividends are paid because a company must recognize an expense for the amount of the dividend.

False

Bandit, Inc. issued, for $57 per share, 5,000 shares of $30 par value common stock. The journal entry to record this transaction is:

Cash 285,000 Common Stock 150,000 Paid-in Capital in Excess of Par Value 135,000

Necessities, Inc. issued 750 shares of no-par common stock, with no stated value, for $60 cash per share. The journal entry to record this transaction is:

Cash 45,000 Common Stock 45,000

Kailey, Inc. issued 20,000 shares of no-par common stock, stated value $20, at $32 cash per share. The journal entry to record this transaction is:

Cash 640,000 Common Stock 400,000 Paid-in Capital in Excess of Stated Value 240,000

When only one class of stock is issued by a corporation, it should be termed:

Common stock

Oma Company plans to issue a large stock dividend. In accounting for this transaction, what effects occur to the contributed capital section of stockholders' equity?

Common stock increases by the number of dividend shares x par value per share, and retained earnings decreases for the same amount

In October 2019, Illini Corporation distributed profits to its preferred shareholders before its common shareholders. What is the name of the preference that allows this?

Dividend preference