Ch. 15 Stockholders' Equity

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, 2014. There were no dividends declared in 2012. The board of directors declares and pays a $45,000 dividend in 2013 and in 2014. What is the amount of dividends received by the common stockholders in 2014?

$15,000

In every corporation the one class of stock that represents the basic ownership interest is called

Common Stock

The residual interest in a corporation belongs to

Common stockholders

Treasury stock is classified on the balance sheet as an asset.

False

Treasury stock sold for less than its cost decreases net income.

False

Preferred stock has no voting rights.

True

Redeemable preferred stock should be classified as a liability on the balance sheet.

True

Durango Inc. had net income for 2014 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 2014?

$430,000

The total stockholders' equity of Schoenthaler Corporation is

$5,650,000

Before declaring a cash dividend, management must consider the

Availability of funds.

Which of the following statements related to dividends is incorrect?

Dividends must be paid in the period declared.

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

Additional paid-in capital is not affected by the issuance of:

No-par stock

Which of the following type of stock will not increase Additional Paid-in Capital when issued?

No-par value stock

Cash dividends are paid on the basis of the number of shares

Outstanding

Jackson Corporation issued a 100% stock dividend of its common stock which had a par value of $.01, and a market value of $123 before the dividend and $62 after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

Par value

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

a footnote.

The most common type of preferred stock is:

cumulative preferred stock.