ACC 207 chp 11

Brehm Holdings recently reported a return on common stockholders' equity of 11.47%. What was the company's preferred dividends if net income was $550,000 during the year, beginning common stockholders' equity was $3,852,000, and ending common stockholders' equity was $3,974,000?

$101,178.90: Return on common stockholders' equity is calculated as (net income - preferred dividends) / average common stockholders' equity. First, solve the equation for preferred dividends. Preferred dividends equals negative one times the return on common stockholders' equity x average common stockholders' equity - net income. Next, calculate average common stockholders' equity of $3,913,000 (($3,852,000 + $3,974,000) / 2). Finally, solve for preferred dividends: -(11.47% x $3,913,000 - $550,000) = $101,178.90

Kerry Industries has 20,000 outstanding shares of 8%, $40 par value preferred stock with a cumulative dividend feature. For the past two years, Kerry hasn't declared any dividends. For the current year, however, the firm declares it will be paying a total of $350,000 in dividends. How much of this amount will be distributed to Kerry's common stockholders?

$158,000.00

Trainor Sports recently issued 25,000 shares of its $12 par value common stock for $450,000. Which amounts represent legal capital and total paid-in capital, respectively?

$300,000 and $450,000

DeHaven Enterprises has 12,000 shares authorized and issued of 9%, $75 par preferred stock. What is net income during a year when beginning common stockholders' equity is $4,218,000 and ending common stockholders' equity is $4,597,000 if the return on common stockholders' equity is 14%?

$698,050.00: In this scenario, the preferred dividends are $81,000 (12,000 x $75 x 9%). The average common stockholders' equity is $4,407,500 (($4,218,000+4,597,000)/2). Multiplying the average common stockholders' equity of $4,407,500 by 14% equals $617,050. Adding the preferred dividends to this amount gives a net income of $698,050.

Romine Industries has total stockholders' equity of $4,982,000. Given the following information, what is the company's total additional paid-in capital?Common Stock, $3 par (400,000 shares authorized, 358,000 shares issued and outstanding).Preferred Stock, 4%, $100 par (5,000 shares authorized, issued, and outstanding).Retained Earnings (ending balance): $2,619,000

$789,000: Additional paid-in capital is calculated as total stockholders' equity - preferred stock at par value - common stock at par value - retained earnings. The value of preferred stock at par value is $500,000 ($100/share x 5,000 shares). The value of common stock at par value is $1,074,000 ($3/share x 358,000 shares). Additional paid-in capital is therefore $789,000 ($4,982,000 - $500,000 - $1,074,000 - $2,619,000).

What is the return on common stockholders' equity based on the following:Beginning Common Stockholders' Equity: $2,000,000Ending Common Stockholders' Equity: $2,200,000Net Income: $362,500Preferred Stock throughout the year: 8%, $50 par (10,000 shares authorized and outstanding).

15.10%: Return on Stockholders' Equity = (Net Income - Preferred Dividend) / Average Common Stockholders' Equity. The total beginning stockholders' equity is $2,000,000 while the ending stockholders' equity is $2,260,000. This results in average common stockholders' equity of $2,130,000. Dividing $322,500 (Net Income less Preferred Dividends) by this figure yields a 15.1% return on common stockholders' equity.

Edge Corporation issues 20,000 shares of $5 stated value no par stock in exchange for land with an advertised price of $125,000 when the stock is actively trading for $6 per share. Journalize the entry to recognize the exchange.

In this scenario, it is reasonably easy to determine the fair value of the stock since it is currently trading at $6 per share. Multiplying this figure by the 20,000 shares will result in a value of $120,000 for the land. Common Stock is credited for the stated value of $100,000, and Paid-in Captial in Excess of Stated Value - Common Stock is credited $20,000.

Journalize the entry to record the issuance of 50,000 shares of $1 par value common stock for $200,000.

The par value of the stock is calculated as 50,000 X $1 = $50,000. Therefore, Cash is debited $200,000; Common Stock is credited $50,000 and Paid-in Capital in Excess of Par Common Stock is credited $150,000.

The board of directors of Testa Incorporated has decided that they would like to declare a $400,000 cash dividend at some point in the near future. The company currently has Retained Earnings of $2,419,000 and a Cash balance of $827,000. They also have current liabilities totaling $436,000. What is missing in order for Testa to be able to pay a cash dividend?

a healthy cash reserve. For a company to pay dividends, it must have sufficient retained earnings, an adequate balance in cash, and the board of directors must declare the dividend.

When there is a restriction on retained earnings, it means that

a portion of retained earnings is unavailable for dividends.

An investor is looking to invest in companies that do not pay regular dividends now but instead reinvest their retained earnings back into the company. What is one likely goal of this investor? Select answer from the options below - Correct!

achieving capital gains on the stock purchases

Two classifications appearing in the paid-in capital section of the balance sheet are capital stock and

additional paid-in capital.

Paid-in capital in excess of stated value would appear under the category additional paid-in capital on a(n)

balance sheet.

McIntyre Corporation issued preferred stock for the first time during its most recent fiscal year. What is the proper balance sheet presentation regarding the stock?

before common stock: In this scenario, the preferred stock should be listed before common stock in the stockholders' equity section due to McIntyre's dividend and liquidation preferences.

Contractual loan restrictions

cause occasional restrictions of retained earnings.

Hadley Corporation issued 200,000 shares of $5 par value common stock for $25 per share. During that year, the corporation sustained a net loss of $40,000. The year-end balance sheet would show

common stock of $1,000,000: Hadley Corporation issued 200,000 shares of $5 par value common stock for $25 per share. The year-end balance sheet would show a common stock of $1,000,000 (200,000 X $5). The net loss of $40,000, experienced by the corporation, does not impact the reporting of common stock; however, the net loss would be reported in retained earnings.

Clayworks Corporation issued 300,000 shares of $5 par value common stock for $26 per share. During that year, the corporation sustained a net loss of $80,000. The year-end balance sheet would show

common stock of $1,500,000. When expenses exceed revenues, a net loss results. In contrast to net income, a netloss decreases retained earnings. In closing entries, a company debits a net loss to the Retained Earnings account. It does not debit net losses to paid-in capital accounts.To do so would destroy the distinction between paid-in and earned capital.[300,000(shares) x $5(par value) = $1,500,000 (common stock)]

The allocation of dividends involves paying any ________ before ________ receive the remainder of the dividend.

cumulative preferred dividends in arrears and current year preferred dividends; common stockholders

The additional paid-in capital appears under the ________ subsection in the balance sheet under stockholders' equity.

paid-in capital

What constitutes capital stock in the stockholders' equity section of the balance sheet?

preferred and common stock at par

When companies set their dividend payout, they generally aim for a rate that is

sustainable

Which amounts will reduce stockholders' equity?

treasury stock and a retained earnings deficit