Quiz 6 (Shareholder's Equity and Share-based Comp)
JKL Corporation has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2016. There were no dividends declared in 2014. The board of directors declared and paid a $45,000 dividend both in 2015 and in 2016. What is the amount of dividends received by the preferred and common shareholders in 2015? (Assume 5,000 preferred shares were outstanding in 2014 and 2015) a) $45,000 to preferred; $0 to common b) $25,000 to preferred; $20,000 to common c) $0 to preferred; $45,000 to common d) $30,000 to preferred; $15,000 to common
a
On June 1, 2016, MNO Company declared and issued a 15% common stock dividend. Prior to this dividend, MNO had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of MNO 's common stock was $20 per share on May 1, 2010. As a result of this stock dividend, MNO's total stockholders' equity a) did not change. b) increased by $200,000. c) decreased by $10,000. d) decreased by $200,000.
a
Preferred stock that is "cumulative" a) requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders. b) limits the amount of cumulative dividends to the par value of the preferred stock. c) enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends. d) means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock.
a
GHI Company repurchased 8,000 shares of its own common stock at $35 per share and booked them to treasury stock. Three months later GHI sold 4,000 of the previously repurchased shares at $39 per share. GHI uses the cost method to record treasury stock transactions. To record the resale of the 4,000 treasury shares, GHI should credit a) Treasury Stock for $140,000 and Retained Earnings for $16,000. b) Treasury Stock for $156,000. c) Treasury Stock for $140,000 and APIC - Treasury Stock for $16,000. d) Cash for $156,000.
c
JKL Corporation has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2016. There were no dividends declared in 2014. The board of directors declared and paid a $45,000 dividend both in 2015 and in 2016. What is the amount of dividends received by the preferred and common shareholders in 2016? (Assume 5,000 preferred shares were outstanding in 2014 and 2015) a) $0 to preferred; $45,000 to common b)$25,000 to preferred; $20,000 to common c) $30,000 to preferred; $15,000 to common d) $45,000 to preferred; $0 to common
c
On January 1, 2016, ABC Company repurchased and retired 1,000 shares of its $5 par value common stock for $42 per share. The shares were originally issued for $45 per share. As a result of this transaction, a) total shareholders' equity did not change. b) total shareholders' equity increased. c) total shareholders' equity decreased. d) ABC recognized a gain on the retirement of shares.
c
On January 1, 2016, PQR Company granted 6,000 stock options to key employees. Each stock option allowed the employee to purchase one share of PQR's $5 par value common stock at $20 per share. The options became exercisable on December 31, 2017, after the employee completed two years of service. The options were exercised on January 10, 2018. The market prices of PQR's stock were as follows: January 1, 2016, $30; December 31, 2017, $50; and January 10, 2018, $45. An option pricing model estimated the value of the options at $8 each on the grant date. For the year ended December 31, 2016, PQR should recognize compensation expense of: a) $60,000. b) $0. c) $24,000. d) $48,000.
c
The compensation expense associated with executive stock option plans is recognized on the income statement: a) When the options are exercised. b) At the grant date. c) Evenly over the vesting period. d) At the end of the vesting period.
c
DEF Company repurchased 120,000 shares of its $1 par value common stock for $15 per share. The shares were originally issued for $12 per share. If DEF treats the reacquired shares as treasury shares, the journal entry to record the reacquisition of the stock should debit a) Common Stock for $120,000 and APIC - Common stock for $1,320,000. b) Common Stock for $120,000 and APIC - Common stock for $1,680,000. c) Treasury Stock for $1,440,000. d) Treasury Stock for $1,800,000.
d
Which of the following accurately describes the effects of a 2-for-1 stock split? a) No effect on par value and a decrease in retained earnings b) No effect on par value or retained earnings c) A decrease in par value and retained earnings d) A decrease in par value and no effect on retained earnings
d