Chapter 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 $45,000 $25,000 $0

$15,000

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

False

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

False

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. Britain and Japan. Germany and Britain. USA and Britain.

Japan and Germany.

Preferred stock has no voting rights. True False

True

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

True

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

the common stockholders

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. $530,000. $645,000. $482,500.

$430,000.

Presented below is information related to Schoenthaler Corporation: Common Stock , $5 par $1,100,000 Paid-in Capital in Excess of Par - Common Stock 400,000 Preferred 5 ½% Stock, $100 par 1,500,000 Paid-in Capital in Excess of Par—Preferred Stock 500,000 Retained Earnings 2,000,000 Paid-in Capital in Excess of Cost - Treasury Stock 150,000 The total stockholders' equity of Schoenthaler Corporation is $5,650,000. $5,350,000. $5,500,000. $3,650,000.

$5,650,000

Which of the following statements related to dividends is incorrect? Dividends must be paid in the period declared. 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.

Which of the following type of stock will not increase Additional Paid-in Capital when issued? Stated value stock. Par value stock. Preferred stock. No-par value stock

No-par value stock

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? Market value on the payment date There should be no capitalization of retained earnings. Market value on the declaration date Par value

Par value

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

a footnote.

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

availability of funds.

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

common stock

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

cumulative preferred stock

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

no-par stock

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

outstanding.