Intermediate Accounting II - C249 - Ch 15 Quiz
The statement of changes in equity has columns for each of the following except:
Comprehensive income
The most common type of preferred stock is:
Cumulative preferred stock is the most common type of preferred stock.
The rate of return on common stock equity is computed by dividing:
Divide net income less preferred dividends by average common stockholders' equity. (Net Income - Preferred dividends) / average common stockholders' equity
Cash dividends are paid on the basis of the number of shares outstanding less the number of treasury shares. issued. authorized. outstanding.
Dividends are paid on issued shares less treasury shares (or outstanding shares).
Gulfport Corporation was organized in January 2014 with authorized capital of $.0001 par value common stock. On February 1, 2012, shares were issued at par for cash. On March 1, 2014, the corporation's attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $25,250. Additional paid-in capital would increase on
March 1, 2014 . The first issuance of stock is sold at par so no additional paid-in capital is recorded. The attorney accepted the stock at ($25,250 / 5,000 shares) = $5.05, a value greater than par so additional paid-in capital is recorded.
Which of the following best describes a possible result of treasury stock transactions by a corporation? May decrease but not increase net income. May decrease but not increase retained earnings. May increase but not decrease retained earnings. May increase net income if the cost method is used.
May decrease but not increase retained earnings.
Which of the following type of stock will not increase Additional Paid-in Capital when issued? Stated value stock. Par value stock. No-par value stock. Preferred stock.
No-par value stock. No-par value stock does not increase Additional Paid-in Capital because there is no excess over and above a par or stated value to be recorded.
Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. have the rights to specific assets of the business. can negotiate individual contracts on behalf of the enterprise. are entitled to a dividend every year in which the business earns a profit.
bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. Equity shareholders are paid on the basis of earnings of the company and do not get a fixed dividend. They are referred to as 'residual owners'. They receive what is left after all other claims on the company's income and assets have been settled.
Under the cost method, when treasury stock is sold for more than its cost, the excess is credited to:
Paid-in Capital from Treasury Stock.
Which of the following features of preferred stock makes the security more like debt than an equity instrument? Voting Noncumulative Redeemable Participating
Redeemable preferred stock is more like debt than the other choices.
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?
Retained earnings is reduced by an amount equal to the number of shares issued times the par value per share.
Which of the following country systems of finance have relied more heavily on debt financing, interlocking stock ownership, banker/directors, and worker/shareholder rights?
The German & Japanese systems have relied more on debt financing, interlocking stock ownership, banker/directors, and worker/shareholder rights than the U.S and British systems.
Before declaring a cash dividend, management must consider the legal capital of the stock. current market price of the stock. effect on paid-in capital. availability of funds
The availability of funds must be considered.
Which of the following statements related to dividends is incorrect? Dividends must be paid in the period declared. Dividends must comply with stock contracts as to preferences and participation. Distributions to owners must be in compliance with the state laws. Dividends must be declared by the Board of Directors.
The payment of a dividend does not have to be in the same period as it was declared.
Which one of the following is not a right of common stockholders? To share proportionately in any new issues of stock of the same class. To share proportionately in corporate assets upon liquidation. To share proportionately in all management decisions. To share proportionately in profits and losses.
To share proportionately in all management decisions. All of the options are rights of common stockholders except to share in all management decisions
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.
Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 12,000 shares of its own common stock at $15 per share. Three months later Long sold 6,000 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 6,000 treasury shares, Long should credit
Treasury Stock for $90,000 and Paid-in Capital from Treasury Stock for $24,000. Treasury Stock Sold (Sold treasury shares x acquired back cost "15) (6,000 x $15) Paid in Capital from Treasury Stock (sold treasury shares x (sold treasury price - acquired back cost) (6,000 x ($19-$15)
On September 14, 2014, Gayot Company reacquired 12,000 shares of its $1 par value common stock for $40 per share. Gayot uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit
Treasury Stock is debited for the cost of the stock: 12,000 X $40 = $480,000.
The book value per share is based on
common shares outstanding
The residual interest in a corporation belongs to the creditors. common stockholders. preferred stockholders. management.
common stockholders.
When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?
Treasury stock for the purchase price.
The accounting for treasury stock retirements under IFRS requires
a charge for the excess to paid-in capital, depending on the original transaction related to the issuance of the stock.
Total stockholders' equity represents the maximum amount that can be borrowed by a company. a claim against a portion of the total assets of a company. only the amount of earnings that have been retained in the business. a claim to specific assets contributed by the owners.
a claim against a portion of the total assets of a company. Stockholders' (owners') equity represents the cumulative net contributions by stockholders plus retained earnings.
All of the following statements are true regarding preferred stock except: a preference as to dividends assures the payment of dividends. a company often issues preferred stock instead of debt, because of a high debt-to-equity ratio. companies usually issue preferred stock with a par value. the dividend preference for preferred stock is expressed as a percentage of the par value.
a preference as to dividends assures the payment of dividends. A preference as to dividends merely assures that the corporation must pay the stated dividend rate or amount applicable to the preferred stock before paying any dividends on the common stock.
On December 1, 2014, Abel Corporation exchanged 40,000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of $40 per share, and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Abel's total stockholders' equity will increase by
$2,200,000. Treasury Shares X Fair Value
Presented below is information related to Polaris Corporation: Common Stock, $1 par $10,350,000 Paid-in Capital in Excess of Par—Common Stock 6,520,000 Paid-in Capital in Excess of Cost—Treasury Stock 400,000 Retained Earnings 9,543,000 Treasury Common Stock (at cost) 695,000 The total stockholders' equity of Polaris Corporation is
$26,118,000. A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market. It is subtracted from the Stockholders' (owners' ) equity
McCaffrey Corporation owned 15,000 shares of Harper Corporation's $5 par value common stock. These shares were purchased in 2010 for $326,000. On May 4, 2014, McCaffrey declared a property dividend of one share of Harper for every twenty shares of McCaffrey stock held by a stockholder. On that date, when the market price of Harper was $34 per share, there were 280,000 shares of McCaffrey outstanding. What net reduction in retained earnings would result from this property dividend?
$304,267 Fair Value of McCaffrey shares Distributed = 280,000 1 Harper Share per 20 McCaffrey Shares = 280,000/20 = 14,000 shares of Harper Issued 14,000 Market price for Harper shares = $34 Harper Shares issued X Harper shares MP = $476,000 Total Harper Shares Purchase price / Harper Shares Owned = 326,000 / 15,000 = $21.73 Harper Shares Issued X $21.73 = $304,267 Retained earnings is increased by the unrealized gain of $171,733 ($476,000-$304,267) and decreased by the fair value of the shares distributed for a net reduction of $304,267.
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 2014 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. (Net Income - Dividends on preferred Stock) X Payout Ratio (2,120,000 - 400,000) = 1,720,000 1,720,000 X 25% = 430,000
Duszynski Company issues 20,000 shares of its $.50 par value common stock having a market value of $25 per share and 6,000 shares of its $25 par value preferred stock having a market value of $50 per share for a lump sum of $750,000. The proceeds allocated to the common stock is
$468,750 (Common Shares X MV) / ((Common Shares X MV)+(Preferred Shares X MV)) x $750,000 ($500,000/ $800,000) X $750,000 = $468,750.
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 Stockholders' (owners') equity represents the cumulative net contributions by stockholders plus retained earnings.
Presented below is information related to Kaenzig Corporation: Common Stock , $1 par $2,100,000 Paid-in Capital in Excess of Par - Common Stock 550,000 Preferred 8 ½% Stock, $50 par 1,700,000 Paid-in Capital in Excess of Par—Preferred Stock 950,000 Retained Earnings 2,350,000 Treasury Common Stock (at cost) 250,000 The total stockholders' equity of Kaenzig Corporation is
$7,400,000 A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market. It is subtracted from the Stockholders' (owners' ) equity
On January 1, 2014, Vancleave Corporation had 110,000 shares of its $.001 par value common stock outstanding. On November 27, when the market price of the stock was $8, the corporation declared a 10% stock dividend to be issued to stockholders of record on December 28, 2014. What was the impact of the 10% stock dividend on the balance of the retained earnings account?
$88,000 decrease Shares outstanding X % Stock Dividend X Market Price (110,000 X 10%) = 11,000 shares X $8 = $88,000.
Common stock dividends distributable are reported on the balance sheet as:
An addition to common stock.
The Revaluation Surplus of IFRS is
different than U.S. GAAP in that it allows the increase in valuation.
The accounting for treasury stock retirements under IFRS
may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock.
Additional paid-in capital is not affected by the issuance of: no-par stock. par value stock. stated value stock. preferred stock.
no-par stock. The issuance of no-par stock has no effect on additional paid-in capital.
The pre-emptive right enables a stockholder to sell capital stock back to the corporation at the option of the stockholder. receive cash dividends before other classes of stock without the pre-emptive right. none of these answers are correct. receive the same amount of dividends on a percentage basis as the preferred stockholders.
none of these answers are correct. Preemptive rights are a contractual clause giving a shareholder the right to buy additional shares in any future issue of the company's common stock before the shares are available to the general public.