Accounting II Exam I

design corporation has 400000 shares of $10 par value common stock issued and outstanding when the market price is $25 per share. by what amount will total equity increase when the company declares a 2:1 stock split?

0

On their books, Boston Enterprises has $3.4 billion in paid-in capital and $1.8 billion in retained earnings. What is the maximum amount that Boston Enterprises could consider paying in dividends to stockholders, assuming they have the cash on hand?

1.8 billion

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 3852000 and ending common stockholders' equity was 3974000?

101178.90 return on common stockholders' equity (net income - preferred dividends)/average common stockholders' equity. avg comm stock eq (3852000 + 3974000/2) = 3913000 preferred dividends -(11.47% x 3913000-550000) = 101178.90

what is the return on common stockholders' equity based on the following beginning common stockholders' equity 2000000 ending common stockholders equity 2200000 net income 362500 preferred 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. 2000000+2260000/2 = 2130000 322500/213000

kerry industries has 20000 oustanding 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 350000 in dividends. how much of this amount will be distributed to common stockholders?

158000 20,000 x 40 x .08 =64000 dividends 2 years in arrears 64000 + 64000 = 128000 350000-128000-64000 =158000

selected information from the most recent financial statements for Hat Trick Manufacturing 12/31/22 retained earnings 575000 2022 dividends declared 100000 12/31/22 paid in capital 1025000 authorized shares of common stock 500000 ($1 par value) what is total stockholders' equity for Hat Trick Manufacturing?

1600000 retained earnings + paid in capital

taft industries has 250000 shares of common stock outstanding before a stock split occurred and 500,000 shares outstanding after the stock split. the stock split was

2-for-1

a ___________does not require a formal journal entry on a corporation's books

2-for-1 stock split

determine stockholders' equity given the following information common stock, $5 par (500000 shares authorized, 450000 shares issued, and 425000 shares outstanding) additional paid in capital- common stock 1125000 treasure stock (at cost) 125000 retained earnings 1948000

5198000 stock holders equity = par value of issued shares (450,000 x 5= 2250000) + additional paid in capital (1125000) + retained earnings (1948000) - treasury stock (125000)

pine valley lumber issues 15000 shares of 9%, $45 par value preferred stock with a cumulative dividend feature for $65 cash per share. what is the minimum annual dividend the holders of this stock can collectively expect to receive?

60750 15000 x 45 x .09

DeHaven Enterprises has 12000 shares authorized and issued at 9%, $75 par preferred stock. What is net income during a year when beginning common stockholders' equity is $4218000 and ending common stockholders' equity is $4597000 if the return on common stockholders' equity is 14%?

698050 preferred dividends 81000(12,000 x 75 x 9%). average common stockholders' equity 4407500 (4218000+4597000/2) 4407500 X .14 =617050 6170505+ 81000= 698050

romaine industries has total stockholders' equity of 4982000. given the following information, what is the company's total additional paid in capital? common stock, $3 par (400,000 shares authorized, 358000 shares issued and oustanding) preferred stock, 4%, $100 par (5000 shares authorized, issued, and outstanding) retained earnings (ending balance): 2619000

789000 addl paid in cap: total stockholders equity - preferred stock at par value- common stock at par value - retained earnings pre stock at par 5000 x 100 common stock at par 358000 x 3 4982000-500000-1074000-2619000

A-Team Corporation issued 1000 shares of $5 par value stock for land. The stock is actively traded at $9 per share. The land should be recorded at

9000

Acer Corporation recently distributed stock dividends. What is a likely reason for this decision?

Acer Corporation wishes to appease common stockholders, and sufficient cash is not available to pay cash dividends.

journalize the entry for uptown corporation when it issues 20000 shares of $10, 4% preferred stock for $18 per share

DR cash 360000 CR preferred stock 200000 CR paid in capital in excess of par- preferred stock 160000

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

DR land 120000 CR Common stock 100000 CR paid in capital excess of stated value-common stock

a company purchased 5000 shares of $6 par value common stock for $9 per share. journalize this entry

DR treasury stock 45000 CR cash 45000

which of the following is a likely reason for a stock split?

a company wishes to lower the market price of its stock to increase marketability

which of the following companies has the LOWEST payout ratio? a company with 18 million cash dividends declared on common stock and a net income of 94 million a company with 49 million cash dividends declared on common stock and a net income of 203 million a company with 28 million cash dividends declared on common stock and a net income of 142 million a company with 97 million cash dividends declared on common stock a net income of 376 million

a company with 18 million cash dividends declared on common stock and a net income of 94 million

in what way is a corporation different from a sole proprietorship or partnership?

a corporation is subject to more federal and state government regulations

the board of directors of testa incorporated has decided that they would like to declare a 400000 cash dividend at some point in the near future. the company currently has retained earnings of 2419000 and a cash balance of 827000. they also have a current liabilities totaling 436000. what is missing in order for testa to be able to pay a cash dividend?

a healthy cash reserve

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?

achieving capital gains on the stock purchases

Paid-in capital is the

amount paid in to the corporation by stockholders in exchange for shares of ownership

Joe Jones is 30% stockholder in ABC Corporation. Although he owns more stock than any other stockholder owns, he may purchase and sell inventory only if he is designated as __________for ABC.

an agent

how does a corporation recognize a deficit in retained earnings?

as a deduction in the stockholders' equity section of the balance sheet

Which of the following is indicated in the corporation's charter?

authorized stock

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

if the paid in capital in excess of par value increases in the accounting records, it means that

capital stock is issued at an amount greater than par value

although some laws concerning cash dividends vary by state, which provision is followed by all states

cash dividends may be paid out of retained earnings

when common stock has no par or stated value and is issued for cash, ___________is debited and _____________is credited

cash, common

contractual loan restrictions

cause occasional restrictions of retained earnings

claire and david hold stock in two different companies, but both recently received additional shares of common stock rather than a cash dividend. after receiving the additional stock, the par value of claire's stock decreased by 67%, but the par value of david's stock remained the same. what is the difference between claire and david?

claire received a stock split, and david received a stock dividend

Hadley Corporation issued 200000 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 1000000

which accounts are ultimately affected by a small stock dividend

common stock, paid in capital excess of par-common stock, and retained earnings

which feature of preferred stock gives the preferred stockholders the right to receive current-year dividends and unpair prior-year dividends before common stockholders receive any dividends?

cumulative dividend feature

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

A corporation purchases 3000 shares of its own $5 par common stock for $8 per share, recording it at cost. What will be the effect on total stockholders' equity?

decrease of 24000

a company may purchase treasury stock to

decrease the number of outstanding shares

when sufficient cash is not available to pay dividends, what may corporations do to appease common stockholders?

distribute stock dividends

in exchange for ______ preferred stockholders often relinquish _________

dividend preference; voting rights

what is a characteristic of preferred stock?

dividend priority over common stock

when preferred stock is cumulative, preferred dividends not declare in a given period are called

dividends in arrears

when preferred stock is cumulative, preferred dividends not declared in a given period are called

dividends in arrears

one of the major disadvantages of a corporation is

government regulations

Bookshelf Industries recently adopted the corporate form of business. How do the stockholders manage the corporation?

indirectly through the board of directors

Closeknit Corporation has a limited number of stockholders. As a privately held corporation, Closeknit is exempt from

issuing reports to the SEC

What does par value mean?

it is the value assigned per share in the corporate charter

Authorized stock represents the/an ________ number of shares of common stock a corporation may sell.

largest

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

legal capital 300000 total paid in capital 450000

A corporation

may sue and be sued

when does a cash dividend become a legal binding obligation to a company?

on the declaration date

in addition to cash, the issuance of common stock effects

only the paid in capital accounts

the difference between the number of shares issued and the number of treasury shares is the number of

outstanding shares

the additional paid-in capital appears under the ______ subsection in the balance sheet under stockholders' equity

paid in capital

Which two items comprise the major components of stockholders' equity on the corporate balance sheet

paid-in capital and retained earnings

if common stock is issued for an amount greater than par value, the amount above the par value is credited to

paid-in capital in excess of par value

owners of _________ stock are granted preference to corporate assets in case of liquidation

preferred

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

preferred and common stock at par

Which of the following entities offers its shares for sale to the general public?

publicly held corporation

if a company becomes aware of a group of hostile shareholders, what may its next course of action be?

purchase treasury stock from hostile shareholders

a reduction in stockholder's equity on the balance sheet would result from

purchasing treasury stock

the board of directors of pilgrim company authorizes a 100000 restriction of retained earnings for a future plant expansion. this action will

reduce the amount of retained earnings available for dividend declarations

journalize the entry to record the issuance of 50000 shares of $1 par value common stock for $200000

DR cash 200000 CR common stock 50000 CR paid in capital in excess of par-common stock 150000

a net loss

decreases retained earnings

how does a company determine which stockholders are entitled to a dividend

the investors who hold stock on the record date will receive a dividend

which of the following is true about corporations the life of a corporation is state in its charter. the life must be limited to a specific number of years the transfer of stock is entirely at the discretion of the stockholder. it does not require the approval of either the corporation or other stockholders stockholders' act can bind the corporation even though the stockholders have not been appointed as agents of the corporation if a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation

the transfer of stock is entirely at the discretion of the stockholder. it does not require the approval of either the corporation or other stockholders

candela company has retained earnings of 500000, common stock of 400000, and total common stockholders' equity of 1200000. it has 200000 shares of $2 par value common stock outstanding which is currently selling for $5 per share. if candela company declares 2-for-1 stock split on its common stock, which of the following will occur?

there will be no effect on total common stockholders' equity

which amounts will reduce stockholders' equity?

treasury stock and a retained earnings deficit

which of the following statements is true? treasury stock is stock purchased by a corporation and held as an investment by its treasurer treasury stock is a corporation's own stock that has been reaquired and held for future use treasury stock is corporate stock issued by the treasurer of a company treasury stock is stock issued by the us treasury department

treasury stock is a corporation's own stock that has been reacquired and held for future use

Which of the following statements is true? treasury stock is stock purchased by a corporation and held as an investment by its treasurer. treasury stock is corporate stock issued by the treasurer of a company treasury stock is stock issued by the U.S. Treasury Department. Treasury Stock is a corporation's own stock that has been reacquired and held for future use.

treasury stock is a corporation's own stock that has been reaquired and held for future use

at what point are preferred dividends considered a liability

when a dividend is declared by the board of directors