Chapter 15: Stockholders Equity

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

C)To share proportionately in all management decisions

The residual interest in a corporation belongs to A)management. B)the board of directors. C)the common stockholders. D)the preferred stockholders.

C)the common stockholders.

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 Stock500,000 Retained Earnings 2,000,000 Paid-in Capital from Treasury Stock 150,000 The total stockholders' equity of Schoenthaler Corporation is

Total stockholders' equity is (Common Stock, $1,100,000 + Paid-in Capital in Excess of Par - Common Stock, $400,000 + Preferred Stock, $1,500,000 + Paid-in Capital in Excess of Par-Preferred Stock, $500,000 + Retained Earnings, $2,000,000 + Paid-in Capital from Treasury Stock, $150,000) = $5,650,000.

Costs of issuing stock such as underwriting costs, accounting and legal fees, and printing costs should be recorded as a deferred charge and charged to expense over a period not greater than 25 years. True False

False

All of the following are features of preferred stock except: A)callable at the corporation's option. B)voting rights. C)preference as to dividends. D)convertible into common stock.

B)voting rights.

Which of the following statements related to dividends is incorrect? A)Before declaring a dividend, management must consider availability of funds to pay the dividend. B)Distributions to owners must be in compliance with the state laws. C) Dividends must be declared by the Board of Directors. D) Dividends must be paid in the period declared.

D) Dividends must be paid in the period declared.

Common stock dividends distributable is reported on the balance sheet as: A) a current liability. B)a reduction of total stockholders' equity. C)an addition to additional paid-in capital. D)an addition to common stock.

D)an addition to common stock.

Blowing Rock Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 30,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $45,000 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?

The annual preferred dividend is ($100 par value x 5% = $5 per share X 5,000 shares) = $25,000. The $45,000 dividend payment in 2016 consists of $25,000 annual preferred dividend from 2015 and $20,000 of the $25,000 of the 2016 annual preferred dividend and would leave $5,000 in arrears. In 2017, the preferred shareholders would get $30,000, ($5,000 in arrears + $25,000 annual preferred dividend for 2017), and the common shareholders would get $15,000 = ($45,000 total declared/paid dividend - $30,000 for the 2017 annual preferred dividend).