stock holder's equity

George Corporation owned 15,000 shares of Harper Corporation's $5 par value common stock. These shares were purchased in 2008 for $225,000. On October 4, 2012, George declared a property dividend of one share of Harper for every twenty shares of George held by a stockholder. On that date, when the market price of Harper was $34 per share, there were 280,000 shares of George outstanding. What NET reduction in retained earnings would result from this property dividend? $952,000 $210,000 $476,000 $225,000

$476,000 280,000 George shares / 20 = 14,000 shares of Harper issued, times $34 current market price equals $476,000.

Fletcher, Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 25,000 shares of $1 par value common stock outstanding at December 31, 2009 and 2010. There were no dividends declared in 2009. The board of directors declares and pays a $45,000 dividend in 2010. What is dividends in arrears at the end of 2010? $0 $25,000 $5,000 $20,000

$5,000 Annual preferred dividend (5,000 X 5% X $100) = $25,000 in arrears at end of 2009 so total dividends owed at 12/31/201 are $25,000 + $25,000 = $50,000 less $45,000 payment leaves $5,000 in arrears.

Which of the following are requirements of the declaration of a cash dividend? Declaration by the Board. All of these. Sufficient retained earnings. Sufficient cash.

All of these. All of the options are requirements of a declaration of dividends.

Watauga 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, 2012. There were no dividends declared in 2010. The board of directors declares and pays a $45,000 dividend in 2011 and in 2012. What is the amount of dividends received by the common stockholders in 2012? $0 $45,000 $15,000 $25,000

$15,000 Correct! The annual preferred dividend is ($5 X 5,000) = $25,000. The $45,000 dividend payment in 2011 would leave $5,000 in arrears. In 2012, the preferred shareholders would get $30,000 and the common shareholders would get $15,000.

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

Japan and Germany. The German and Japanese systems have relied more on debt financing, interlocking stock ownership, banker/directors, and worker/shareholder rights than the U.S and British systems.

Presented below is information related to Rosbottom Corporation: Common Stock, $1 par $14,350,000 Paid-in Capital in Excess of Par—Common Stock 6,520,000 Preferred 8 1/2% Stock, $50 par 2,230,000 Paid-in Capital in Excess of Par—Preferred Stock 2,400,000 Retained Earnings 9,543,000 Treasury Common Stock (at cost) 695,000 The total stockholders' equity of Rosbottom Corporation is $34,348,000. $35,043,000. $35,738,000. $24,805,000.

$34,348,000. Correct! $14,350,000 + $6,520,000 + $2,230,000 + $2,400,000 + $9,543,000 - $695,000 = $34,348,000.

All of the following decrease Retained Earnings except: Stock dividends. Cash dividends. Stock splits. Property dividends.

Stock splits. Only stock splits do not decrease Retained Earnings.

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

availability of funds. The availability of funds must be considered.

DeLorian, Inc. had net income for 2012 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 2012 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 2012? $430,000. $645,000. $530,000. $482,500.

$430,000. ($2,120,000 net income - $400,000 P/S dividends) X 25% equals $430,000 in common stock dividends.

Stockholders' equity is generally classified into two major categories: appropriated capital and retained earnings. retained earnings and unappropriated capital. retained earnings and contributed capital. contributed capital and appropriated capital.

retained earnings and contributed capital. Stockholders' equity is generally classified into retained earnings and contributed capital.

Lockhart Company issues 10,000 shares of its $1 par value common stock having a market value of $50 per share and 3,000 shares of its $15 par value preferred stock having a market value of $100 per share for a lump sum of $750,000. The proceeds allocated to the common stock is $500,000. $705,000. $450,000. $468,750.

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

On January 1, 2012, McComb Corporation had 110,000 shares of its $5 par value common stock outstanding. On December 3, 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 29, 2012. What was the impact of the 10% stock dividend on the balance of the retained earnings account? No effect $88,000 decrease $50,000 decrease $80,000 decrease

$88,000 decrease The amount transferred from retained earnings in a small stock dividend is based on the fair value of the stock: (110,000 X .10) = 11,000 shares X $8 = $88,000.

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

a preference as to dividends assures the payment of dividends. A preference as to dividends merely assures that the corporation must pay the stated dividend rate or amount applicable to the preferred stock before paying any dividends on the common stock.

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

an addition to common stock. Common stock dividends distributable are reported as an addition to common stock in the balance sheet.

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

common shares outstanding. The book value per share is computed by dividing common stockholders' equity by common shares outstanding.

Vaaler Inc., has 4,000 shares of 9%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2012, and December 31, 2011. The board of directors declared and paid a $25,000 dividend in 2011. In 2012, $74,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2012? $47,000 $11,000 $74,000 $36,000

$47,000 The annual preferred dividend is ($9 X 4,000) =$36,000 so dividends in arrears at 12/31/2011 would be $11,000. 2012 preferred dividends would be $11,000 + $36,000 = $47,000.

Presented below is information related to Chambers Corporation: The total stockholders' equity of Chambers Corporation is $7,700,000. $7,200,000. $2,100,000. $5,100,000.

$7,200,000. Add everything, exclude Treasury Stock. Total stockholders' equity is ($2,100,000 + $350,000 + $1,700,000 + $950,000 + $2,350,000 - $250,000) = $7,200,000.

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 in Excess of Par. Paid-in Capital from Treasury Stock. Retained Earnings.

Paid-in Capital from Treasury Stock. Under the cost method, the excess goes to Paid-in Capital from Treasury Stock.

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

Redeemable Redeemable preferred stock is more like debt than the other choices.

Which of the following dividends do not reduce total stockholders' equity? All of the options reduce total stockholders' equity. Cash dividends. Liquidating dividends. Stock dividends.

Stock dividends. All of the options reduce total stockholders' equity except stock dividends.

In every corporation the one class of stock that represents the basic ownership interest is called preferred stock. common stock. owners' stock. cumulative stock.

common stock. The basic ownership of a corporation is represented by common stock.

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

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

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

cumulative preferred stock. Cumulative preferred stock is the most common type of preferred stock.

On March 19, 2012, Yukon Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Yukon had 392,000 shares of $.50 par value common stock issued and outstanding. The fair value of Yukon's common stock was $36.75 per share on March 19, 2012. As a result of this stock dividend, the company's total stockholders' equity decreased by $23,520. did not change. increased by $1,728,720. decreased by $864,360.

did not change. As a result of this stock dividend, Yukon's total stockholders' equity did not change.

When a property dividend is declared, Retained Earnings is reduced by the book value of the property. fair value of the property. carrying value of the property. cost of the property.

fair value of the property. Retained earnings is reduced by the fair value of the property in a property dividend.

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

no-par stock. The issuance of no-par stock has no effect on additional paid-in capital.

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

Dividends must be paid in the period declared. The payment of a dividend does not have to be in the same period as it was declared.

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

Dividends must be paid in the period declared. The payment of a dividend does not have to be in the same period as it was declared.

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

May decrease but not increase retained earnings. Treasury stock transactions by a corporation may decrease but not increase retained earnings.

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

May decrease but not increase retained earnings. Treasury stock transaction may decrease but not increase retained earnings.

Bertram Corporation was organized in January 2012 with authorized capital of $1 par value common stock. On February 1, 2012, shares were issued at par for cash. On March 1, 2012, the corporation's attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $45,000. Additional paid-in capital would increase on February 1, 2012 March 1, 2012 Yes No No Yes Yes Yes No

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 (45,000 / 9,000 shares) = $5, 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. Par value stock. No-par value stock. Stated value stock.

No-par value stock. No-par value stock does not increase Additional Paid-in Capital because there is no excess over and above a par or stated value to be recorded.

Gardner Corporation issued a 100% stock dividend of its common stock which had a par value of $1, and a market value of $44 before the dividend and $22 after the dividend. At what amount should retained earnings be capitalized for the additional shares issued? Par value Market value on the declaration date Market value on the payment 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 increases the number of shares outstanding and decreases the par value per share? Small stock dividend. Treasury stock. Large stock dividend. Stock split.

Stock split. A stock split increases the number of shares outstanding and decrease the par value per share.

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

To share proportionately in all management decisions. All of the options are rights of common stockholders except to share in all management decisions.

On September 14, 2012, Battle Company reacquired 24,000 shares of its $1 par value common stock for $20 per share. Battle uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit Treasury Stock for $24,000. 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 $480,000. Treasury Stock is debited for the cost of the stock: 24,000 X $20 = $480,000.

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

a claim against a portion of the total assets of an enterprise Total stockholders' equity represents a claim against a portion of the total assets of an enterprise.

At the date of declaration of a large common stock dividend, the entry should include a debit to Retained Earnings. a credit to Cash. a credit to Common Stock Dividend Payable. a credit to Paid-in Capital in Excess of Par.

a debit to Retained Earnings. At the date of declaration of a large common stock dividend, the entry should include a debit to Retained Earnings.

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as an increase in current liabilities. an increase in current liabilities for the current portion and long-term liabilities for the long-term portion. a footnote. an increase in stockholders' equity.

a footnote. Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as a footnote.

Stock issued in noncash transactions should be recorded at the par value of the stock issued. fair market value of the stock issued OR fair market value of the property received whichever is more readily determinable. fair market value of the property received. fair market value of the stock issued.

fair market value of the stock issued OR fair market value of the property received whichever is more readily determinable. The transaction should be recorded at the fair market value of the stock issued or the fair market value of the property received, whichever is more readily determinable.

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

net income less preferred dividends by average common stockholders' equity. Return on common stock equity is computed by dividing net income less preferred dividends by average common stockholders' equity.Return on common stock equity is computed by dividing net income less preferred dividends by average common stockholders' equity.

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

outstanding. Dividends are paid on issued shares less treasury shares which equals outstanding shares.

The residual interest in a corporation belongs to the common stockholders. the preferred stockholders. the Board of Directors. Management.

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

Characteristics of the corporate form of organization include all of the following except: formality of profit distribution. variety of ownership interests. capital stock or share system. unlimited liability of stockholders.

unlimited liability of stockholders. Limited liability - not unlimited liability - is a characteristic of the corporate form.

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

voting. All of the options are features of preferred stock except that preferred stock is always nonvoting.