Financial Accounting unit 12

What is the total stockholders' equity based on the following data? common stock $900,000 excess of issue price over par 375,000 retained earnings (deficit) (50,000)

$1,225,000

What is the total stockholders' equity based on the following data? Common Stock $900,000 Excess of Issue Price Over Par—Common Stock 375,000 Retained Earnings 50,000

$1,325,000

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $3 per share dividend is declared?

$105,000

Earnings per share is calculated as

(Net Income -Preferred Dividends)/Average Number of Common Shares Outstanding.

If earnings per share for a company changes from $4.50 to $5.20, what does this indicate about the company's profitability?

A favorable change in the company's profitability is indicated

Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

Cash Dividends Cash Dividends Payable

When no-par stock is issued,

Common Stock is credited for the full amount of the proceeds

When no-par stock is issued,

Common Stock is credited for the full amount of the proceeds.

Which of the following is not characteristic of a corporation?

Corporations have less regulatory costs than other business forms

Which of the following statements concerning taxation is accurate?

Corporations pay federal and state income taxes.

All of the following are normally found in a corporation's Stockholders' Equity section except

Dividends Payable.

If Smart Company issues 1,000 shares of $5 par value common stock for $90,000, the account

Paid-In Capital in Excess of Par will be credited for $85,000.

The purchase and resale of treasury stock is normally recorded using the

cost method.

When treasury stock is purchased, Treasury Stock is

debited for the purchase price of the stock.

Cumulative preferred stockholders have the right to receive

dividends in arrears before common stockholders are paid any dividends.

A restriction/appropriation of retained earnings

does not change the balance of Retained Earnings

One of the main disadvantages of the corporate form is

double taxation

All of the following are conditions for a cash dividend except

formal action by the board of directors. sufficient cash. sufficient retained earnings. **All of these choices are correct

Corporations whose stock is traded in a public market must report earnings per share on their

income statement.

Retained earnings

is the cumulative total of net incomes, minus net losses, and minus dividends.

Treasury stock shares are

issued shares that are held by the treasurer of the corporation.

Cash dividends are paid on __________ stock.

outstanding

The number of shares remaining in the hands of shareholders after some stock has been reacquired is referred to as the shares

outstanding

Retained earnings

over time will have a direct relationship with the amount of cash on hand if the corporation is profitable.

The numerator in the earnings per share calculation

represents only those earnings available to common stockholders.

Under the corporate form of business organization,

stockholders wishing to sell their corporation shares need not get the approval of other stockholders, thus making it easy to transfer ownership rights.

Treasury stock that was purchased for $2,500 is sold for $3,000. As a result of these two transactions combined,

stockholders' equity will be increased by $500.

In the calculation of earnings per share, preferred stock dividends are

subtracted from net income.

An advantage of the corporate form of business entity is

the ease of transfer of ownership.

A statement of stockholders' equity is normally prepared when

there is a change in paid-in capital accounts. there is a purchase of treasury stock. there is a change in stock accounts. **All of these choices are correct.

A corporation may reacquire (purchase) its own stock for the following reasons except

to provide shares for resale to employees. to reissue as bonuses to employees. to support the market price of the stock. None of these choices are correct

The major rights that accompany ownership of a share of common stock include all of the following except the right to

use the assets of the company.

Steak Company acquired a building valued at $170,000 for property tax purposes in exchange for 10,000 shares of its $5 par common stock. The stock is widely traded and selling for $16 per share. At what amount should the building be recorded by Steak Company?

$160,000

A corporation issues 2,000 shares of common stock for $32,000. The stock has a stated value of $12 per share. The journal entry to record the stock issuance would include a credit to Common Stock for

$24,000.

Financial statement data for the year ending December 31 for the Power Company are as follows: Net income $680,000 Preferred dividends $20,000 Average number of common shares outstanding 120,000 shares Compute the earnings per share for the year.

$5.50

What is the total stockholders' equity based on the following account balances? Common Stock $500,000 Paid-In Capital in Excess of Par—C/S 50,000 Retained Earnings 190,000 Treasury Stock 40,000

$700,000

What is the total stockholders' equity based on the following account balances? common stock $100,000 paid-in capital in excess of par 500,000 retained earnings 190,000 treasury stock 40,000

$750,000

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the number of shares outstanding?

50,000

The entry to record the issuance of common stock at a price above par includes a credit to

Paid-In Capital in Excess of Par—Common Stock.

Which of the following statements is not correct with regard to prior period adjustments?

Prior period adjustments are reported as an adjustment to the ending balance of retained earnings in the current period.

Which of the following is not true of a corporation?

The owners are personally liable for corporate actions.

Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share. The journal entry to record the stock dividend would include

a credit to Stock Dividends for $180,000. a debit to Cash for $252,000. a debit to Stock Dividends Distributable for $252,000. **None of these choices are correct.

Aaron Company has 80,000 shares of $10 par common stock outstanding. On May 25, Aaron Company declared a $1.50 cash dividend. The market price of the stock on May 25 was $17 per share. The journal entry to record the cash dividend would include

a debit to cash dividends for $120,000

The number of shares of stock that a corporation can issue as stated in its charter is referred to as

authorized

The column headings on a statement of stockholders' equity best represent

the row designations in the Stockholders' Equity section of the balance sheet.