A432 - Ch. 15 - SHE

Hernandez Company has 560,000 shares of $10 par value common stock outstanding. During the year, Hernandez declared a 10% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

$1,988,000. (560,000 ×.10 × $30 = $1,680,000 $1,680,000 + (560,000 × 1.10 × $.50) = $1,988,000.)

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year. Assuming that $126,000 will be distributed as a dividend in the current year, how much will the preferred stockholders receive?

$126,000. (120,000 × $5 × .08 × 3 = $144,000 > $126,000.)

Horton Co. was organized on January 2, 2014, with 500,000 authorized shares of $10 par value common stock. During 2014, Horton had the following capital transactions: January 5-issued 375,000 shares at $14 per share. July 27-purchased 25,000 shares at $11 per share. November 25-sold 18,000 shares of treasury stock at $13 per share. Horton used the cost method to record the purchase of the treasury shares. What would be the balance in the Paid-in Capital from Treasury Stock account at December 31, 2014?

$36,000. (18,000 × $2 = $36,000.)

On June 30, 2014, when Ermler Co.'s stock was selling at $65 per share, its capital accounts were as follows: Capital stock (par value $50; 50,000 shares issued) $2,500,000 Premium on capital stock 600,000 Retained earnings 4,200,000 If a 100% stock dividend were declared and distributed, capital stock would be

$5,000,000. ((50,000 × $50) + $2,500,000 = $5,000,000.)

On January 1, 2014, Dodd, Inc., declared a 15% stock dividend on its common stock when the fair value of the common stock was $30 per share. Stockholders' equity before the stock dividend was declared consisted of: Common stock, $10 par value, authorized 200,000 shares; issued and outstanding 120,000 shares $1,200,000 Additional paid-in capital on common stock 150,000 Retained earnings 700,000 Total stockholders' equity $2,050,000 What was the effect on Dodd's retained earnings as a result of the above transaction?

$540,000 decrease (120,000 × .15 × $30 = $540,000.)

The stockholders' equity section of Gunkel Corporation as of December 31, 2014, was as follows: Common stock, par value $2; authorized 20,000 shares; issued and outstanding 10,000 shares $20,000 Paid-in capital in excess of par 30,000 Retained earnings 95,000 $145,000 On March 1, 2015, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2015, the fair value of the stock was $6 per share. For the two months ended February 28, 2015, Gunkel sustained a net loss of $15,000. What amount should Gunkel report as retained earnings as of March 1, 2015?

$71,000 ($95,000 - $15,000 - (1,500 × $6) = $71,000.)

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $530,000. How much of the proceeds would be allocated to the common stock?

240909 ((10,000 × $25) + (15,000 × $20) = $550,000; ($250,000 ÷ $550,000) × $530,000 = $240,909)

A corporation declared a dividend, a portion of which was liquidating. How would this distribution affect each of the following?

APIC Decrease, Retained Earnings Decrease

At December 31, 2014 and 2015, Plank Corp. had outstanding 4,000 shares of $100 par value 8% cumulative preferred stock and 20,000 shares of $10 par value common stock. At December 31, 2014, dividends in arrears on the preferred stock were $16,000. Cash dividends declared in 2015 totaled $60,000. What amounts were payable on each class of stock?

Preferred Stock 48,000, Common Stock 12,000 (($400,000 × .08) + $16,000 = $48,000 $60,000 - $48,000 = $12,000.)

In 2014, Hobbs Corp. acquired 12,000 shares of its own $1 par value common stock at $18 per share. In 2015, Hobbs issued 8,000 of these shares at $25 per share. Hobbs uses the cost method to account for its treasury stock transactions. What accounts and what amounts should Hobbs credit in 2015 to record the issuance of the 8,000 shares?

Treasury Stock 144,000; APIC 56,000

Gannon Company acquired 10,000 shares of its own common stock at $20 per share on February 5, 2014, and sold 5,000 of these shares at $27 per share on August 9, 2015. The fair value of Gannon's common stock was $24 per share at December 31, 2014, and $25 per share at December 31, 2015. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2015 to record the sale of 5,000 shares?

Treasury Stock for $100,000 and Paid-in Capital from Treasury Stock for $35,000. (5,000 × $20 = $100,000;5,000 × $7 = $35,000.)

On September 1, 2014, Valdez Company reacquired 20,000 shares of its $10 par value common stock for $15 per share. Valdez uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit

Treasury Stock for $300,000 (20,000 × $15 = $300,000)

When a corporation sells stock to investors, the transaction will increase _________ but not ____________.

contributed capital, earned capital

In January 2014, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2014, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares

decreased SHE

Stockholders' equity is generally classified into two major categories:

earned capital and contributed capital.

Treasury shares are shares

issued but not outstanding.

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

outstanding

Which dividends do not reduce stockholders' equity?

stock dividends

A feature common to both stock splits and stock dividends is

that there is no effect on total stockholders' equity.

Dividends are not paid on

treasury common stock