Reporting and analyzing stockholders' equity

Bramble Corp. has 9,500 shares of common stock outstanding. It declares a $2 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend.

Nov 1: Cash dividend debited: 9500*2 Dividend payable credited: 19000 Dec 31: dividend payable debited:19000 Cash Credited: 19000

Which of the following increases when a corporation purchases treasury stock?

Number of treasury shares

Which one of the following decreases when a corporation purchases treasury stock?

Outstanding shares decreases when treasury stock is purchased.

Which of the following is a feature associated only with preferred stock?

Preference to assets in the event of liquidation Dividend preference Cumulative dividends All of the answer choices are correct

If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital?

The legal capital is the par value per share ($3) times the number of shares issued (1,000) or $3,000. This will be equal to the total reported in the stock account.

When stock dividends are declared and issued, total stockholders' equity increases.

false; When stock dividends are declared and issued, total stockholders' equity remains the same.

Which of the following does not affect retained earnings?

Additional investment by stockholders

Which of the following represents the maximum number of shares a corporation can issue? issued shares Authorized shares Treasury shares Outstanding shares

Authorized shares

Dehesa, Inc. has 8,000 shares of 5%, $50 par, cumulative preferred stock and 50,000 shares of $3 par common stock outstanding. No dividends were declared last year, However, the board of directors just declared a $50,000 dividend this year to be paid in 10 days. What amount of the total dividend will be paid to common stockholders?

Before the common stockholders receive any dividends, preferred dividends should first be distributed for the dividends in arrears in the prior year and the current year. Total dividend = 8,000 × 5% × $50 = $20,000/year Preferred dividends in arrears for one year $20,000 Preferred for current year 20,000 Total dividends to preferred stockholders 40,000 Total dividends available (50,000) Dividends available to common stockholders $10,000

On June 1, Teal Mountain Inc. issues 1,900 shares of no-par common stock at a cash price of $9 per share. Journalize the issuance of the shares.

Cash debited : 1900*9 common stock credited: 1900*9

On which date are entries for cash dividends required?

Declaration date and the payment date

The stockholders of a corporation have unlimited liability.

False

Which of the following is a disadvantage of the corporate business form?

Government regulation

Which one of the following is not a right of preferred stockholders? pWhen stock dividends are declared and issued, total stockholders' equity increases. riority in relation to dividends Priority to dividends, assets and voting rights Priority voting rights Priority to the assets in the event of liquidation

Priority voting rights

Harrison, Inc. issued 4,000 shares of common stock at $12 per share. If the stock has a par value of $0.50 per share, which of the following will be part of the journal entry to record the issuance?

The journal entry will increase the cash account for the total issue price, increase the common stock account for the par value per share times the number of shares issued, and increase paid-in capital in excess of par value for the excess received above par value. Debit to Cash = 4,000 × $12 = $48,000 Credit to Common stock = 4,000 × $0.50 = $2,000 Credit to Paid-in capital in excess of par value = 4,000 × ($12 - $0.50) = $46,000

If everything else is held constant, what will cause earnings per share to increase?

The purchase of treasury stock The purchase of treasury stock reduces the number of shares outstanding, which is the denominator of EPS. With a smaller denominator, earnings per share is larger.

Which of the following is not a stockholder's right? The right to participate in management decisions. The right to share in dividends. The preemptive right. The right to vote in the election for the board of directors.

The right to participate in management decisions explanation: A stockholder does not have the right to participate in management decisions simply because he owns stock. A stockholder has the right to maintain the same percentage of ownership as additional stock is issued, vote in the election for the board of directors, and receive dividends appropriate to their percentage of ownership.

For what reason might a company acquire treasury stock?

This is one of the reasons why treasury stock is purchased, but it's not the only reason. -To reissue the shares to officers and employees under bonus and stock compensation plans

Hans Martinez, president of Martinez Corp., believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year, net income was $580,000, and the corporation paid $110,200 in dividends. This year, due to some unusual circumstances, the corporation had income of $1,430,000. Hans expects next year's net income to be about $680,000. What was Martinez Corp.'s payout ratio last year? If it is to maintain the same payout ratio, what amount of dividends would it pay this year?

a) payout ration=dividend\net income :110200/580000 b) dividend pay this year: income*pay out ratio: 1430000*.19=271700

Sunland Company has had 4 years of record earnings. Due to this success, the market price of its 460,000 shares of $4 par value common stock has increased from $12 per share to $52. During this period, paid-in capital remained the same at $5,520,000. Retained earnings increased from $4,140,000 to $27,600,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and (c) par value per share..

a)Stock dividend - retained earnings =24,012,000 2-for-1 stock split - retained earnings=27,600,000 c)Stock dividend - par value per share= $4 2-for-1 stock split - par value per share= $2

On May 10, Bridgeport Corp. issues 1,300 shares of $5 par value common stock for cash at $15 per share. Journalize the issuance of the stock.

debited cash: 1300*15 credited common stock: 1300*5 credited paid-in capital in excess for value -common stock: 1300*(15-5)

Windsor, Inc. issues 8,500 shares of $105 par value preferred stock for cash at $114 per share. Journalize the issuance of the preferred stock.

debited cash: 8500*114 credited preferred stock: 8500*105 credited paid in capital in excess of par value preferred stock: 8500*(114-105)