CH 15 Adaptive Assignment- Accounting

JT Engineering owns 320,000 shares of RL Enterprises stock. JT opted to distribute these shares as a dividend to its stockholders on December 31, 2020. Based on this information, what type of dividend was involved in this distribution? A liquidating dividend A stock dividend A property dividend A cash dividend

A property dividend

How should the balance of the Common Stock Dividend Distributable account be reported? As a current liability. As an addition to capital stock. As a deduction from common stock issued. As a contra current asset.

As an addition to capital stock.

The general rule to be applied when stock is issued for services or property other than cash is that the property or services be recorded in which of the following ways? The fair market value of the non cash consideration received The fair market value of the stock issued A value that clearly reflects the intentions of the parties entering into the transaction and provides a relevant basis for recording Either the fair market value of the stock issued or the fair market value of the noncash consideration received, whichever is more clearly determinable

Either the fair market value of the stock issued or the fair market value of the noncash consideration received, whichever is more clearly determinable

On January 1, 2020, Hanson Incorporated had an initial public offering of 10,000 shares of $10 par value common stock. The shares sold for $15 each. Six months later, Hanson reacquired 1,000 shares of its stock for $12 per share. The acquisition of these treasury shares decreased the number of issued shares. increased total stockholders' equity. did not change total stockholders' equity. decreased total stockholders' equity.

decreased total stockholders' equity.

When using the cost method of accounting for treasury stock, a "gain" from the sale of this stock should be reflected as paid-in capital from treasury stock transactions. an increase in the firm's retained earnings. ordinary earnings on the income statement. an increase in the value of the firm's common stock.

paid-in capital from treasury stock transactions.

In 2020, Jensen Trucking reported a net income of $1,060,000, earnings per share on common stock of $5, and dividends on preferred stock of $200,000. If their income tax rate for 2020 was 30% and their payout ratio on common stock was 25%, how much did they pay in cash dividends for common stock in 2020? $265,000. $241,250. $322,500. $215,000.

$215,000.

If Ellis Equipment's stock shares are selling for $600 per share, which of the following would be most likely to attract the greatest number of potential investors? A 6-for-1 stock split A 15% stock dividend A 75% stock dividend A 2-for-1 stock split

A 6-for-1 stock split

When a company declares a liquidating dividend, which of the following must be included in the journal entry to record the declaration? A debit to Preferred Stock A debit to Accumulated Depreciation A debit to Dividends Payable A debit to a paid-in capital account

A debit to a paid-in capital account

Evans Incorporated owns 25,000 shares in Swickard Enterprises. Management at Evans declares a dividend in which Evans' stockholders will receive Swickard stock as a dividend. What type of dividend does this represent? A cash dividend A stock dividend A property dividend A liquidating dividend

A property dividend

Which of the following serves as the basis for cash dividends paid? Number of shares issued Number of shares outstanding Number of shares authorized Number of shares outstanding less the number of treasury shares

Number of shares outstanding

Keene Corporation uses the cost method to account for treasury stock. After a recent transaction, the firm recorded an $18,000 debit to Cash and a $5,000 debit to Paid-in Capital from Treasury Stock. What else should Keene have recorded in relation to this transaction? a $13,000 debit to Treasury Stock a $23,000 debit to Treasury Stock a $23,000 credit to Treasury Stock a $13,000 credit to Treasury Stock

a $23,000 credit to Treasury Stock

When a firm purchases treasury stock, it experiences ____________ in stockholders' equity. both a reduction in assets and a reduction a reduction in assets and an increase an increase in assets and a reduction both an increase in assets and an increase

both a reduction in assets and a reduction

When a company issues a stock dividend, the journal entry affects ________ accounts. only stockholders' equity stockholders' equity and liability stockholders' equity and asset only asset

only stockholders' equity

Coral Company issues 6,000 shares of its $5 par value common stock having a fair value of $25 per share and 9,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $297,000. What are the proceeds allocated to the common stock? $162,000 $118,800 $150,000 $135,000

$135,000

Charlie Corporation purchased 30,000 shares of Bravo Converting for $270,000 in 2016. On October 30, 2020, Charlie declares a property dividend in which one share of Bravo will be distributed for every ten shares of Charlie outstanding. At that time, market price of Bravo is $28 per share. If there are 270,000 shares of Charlie outstanding, how much gain and net reduction in retained earnings Charlie recognize? $0 gain and $243,000 net reduction in retained earnings $0 gain and $756,000 net reduction in retained earnings $513,000 gain and $108,000 net reduction in retained earnings $513,000 gain and $243,000 net reduction in retained earnings

$513,000 gain and $243,000 net reduction in retained earnings

Carlson Heating and Cooling had the following stockholders' equity information: 12/31/2020 12/31/2019 Common stock $75,000$60,0004% preferred stock (cumulative)350,000350,000Retained earnings (includes90,00075,000current year net income)Net income35,00032,000 Carlson's rate of return on common stock equity for 2020 is 21.2%. 14.0%. 31.1%. 23.3%.

21.2%.

Bishop Insulation reported the following information in their 2019 and 2020 financial statements: Common stock dividends for 2020$5,000Net income for 2020$87,000Market price of stock, 12/31/2019$10Market price of stock, 12/31/2020$12Common stockholders' equity 12/31/2019$1,000,000Common stockholders' equity 12/31/2020$1,200,000Outstanding common shares, 12/31/2020$100,000Preferred dividends for 2020$10,000 The payout ratio in 2020 for Bishop Insulation is 13.0%. 6.5%. 17.2%. 5.7%.

6.5%.

Mercury Manufacturing originally issued 125,000 shares of common stock. Now, several years later, the firm has repurchased 30,000 of these shares. Which of the following changes would you expect to observe as a result of this purchase? A long-term decrease in Mercury's earnings per share A short-term increase in Mercury's earnings per share A short-term decrease in Mercury's earnings per share A long-term increase in Mercury's earnings per share

A short-term increase in Mercury's earnings per share

Common stock and additional paid-in capital will be affected in which of the following ways when a company declares and issues a 10% stock dividend? Assume that the fair value of the shares exceeds the par value of the common stock. There will be no effect on both common stock and additional paid-in capital. Common stock will increase but there will be no effect on additional paid-in capital. Common stock and additional paid-in capital will both increase. There will be no effect on common stock but additional paid-in capital will increase.

Common stock and additional paid-in capital will both increase.

Frumble Incorporated uses the cost method to account for treasury stock. On July 1, the firm purchased several thousand shares of treasury stock for $35,000. Later, on August 15, the firm sold these same shares for a total of $50,000. How should Frumble record the August transaction in its books? Frumble should debit Cash for $50,000, credit Treasury Stock for $35,000, and credit Paid-in Capital from Treasury Stock for $15,000. Frumble should debit Treasury Stock for $35,000 and credit Paid-in Capital from Treasury Stock for $15,000. Frumble should credit Cash for $50,000, debit Treasury Stock for $35,000, and debit Paid-in Capital from Treasury Stock for $15,000. Frumble should credit Treasury Stock for $35,000 and debit Paid-in Capital from Treasury Stock for $15,000.

Frumble should debit Cash for $50,000, credit Treasury Stock for $35,000, and credit Paid-in Capital from Treasury Stock for $15,000.

On January 1, 2020, Beacon Manufacturing spent $50,000 to purchase several thousand shares of its own stock. At that time, Beacon debited its Treasury Stock account for the full amount of the purchase price. Several months later, Beacon sold these shares for $38,000. How should Beacon record the $12,000 difference between the shares' cost and their sales price? It should record a deduction to the Paid-in Capital from Treasury Stock account to the point that any previous credits to that account are eliminated, then deduct any additional excess of cost over selling price from Retained Earnings. It should record a deduction to the Retained Earnings account. It should record a deduction to the Net Income account. It should record a deduction to the Retained Earnings account to the point that any previous credits to that account are eliminated, then deduct any additional excess of cost over selling price from Paid-in Capital from Treasury Stock.

It should record a deduction to the Paid-in Capital from Treasury Stock account to the point that any previous credits to that account are eliminated, then deduct any additional excess of cost over selling price from Retained Earnings.

Of the firms described below, which is most likely concerned about the threat of a takeover attempt? Lincoln Inc. opts to sell 50,000 of its treasury shares, bringing its total number of outstanding shares to 900,000 and its total number of treasury shares to 100,000. Madison Inc. opts to sell 100,000 of its treasury shares, bringing its total number of outstanding shares to 950,000 and its total number of treasury shares to 50,000. Jefferson Inc. opts to purchase 300,000 of its 1 million outstanding shares, bringing its total number of treasury shares to 350,000. Wilson Inc. opts to purchase 150,000 of its 1 million outstanding shares, bringing its total number of treasury shares to 175,000.

Jefferson Inc. opts to purchase 300,000 of its 1 million outstanding shares, bringing its total number of treasury shares to 350,000.

Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means which of the following about shareholders? They can negotiate individual contracts on behalf of the enterprise. They bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. They have the rights to specific assets of the business. They are entitled to a dividend every year in which the business earns a profit.

They bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

A company increased their shares of stock from 20,000 to 34,000 with no change in the par value of the stock. What is the most likely cause of this? They issued a small stock dividend. They issued a reverse stock split. They issued a large stock dividend. They issued Treasury Stock.

They issued a large stock dividend.

On February 5, 2019, Gordon Manufacturing acquired 20,000 shares of its own common stock for $25 per share. On August 9, 2020, Gordon sold 10,000 of these shares for $31 each. The fair value of Gordon's common stock was $27 per share on December 31, 2019, and $29 per share on December 31, 2020. If Gordon uses the cost method to record treasury stock transactions, then in 2020, it should record its sale of 10,000 treasury shares by crediting Treasury Stock for $310,000. Treasury Stock for $250,000 and Paid-in Capital from Treasury Stock for $60,000. Treasury Stock for $250,000 and Retained Earnings for $60,000. Treasury Stock for $250,000 and Gain on Sale of Treasury Stock for $60,000.

Treasury Stock for $250,000 and Paid-in Capital from Treasury Stock for $60,000.

Jewel Manufacturing uses the cost method to account for treasury stock. After a recent treasury stock transaction, the firm recorded a $200,000 debit to Treasury Stock and a $200,000 credit to Cash. These entries suggest that Jewel sold $200,000 of treasury stock that it had purchased earlier in the year for $400,000. has outstanding stock worth $200,000 and treasury stock worth $200,000. spent $200,000 to acquire shares of treasury stock. made $200,000 from the sale of existing treasury stock.

spent $200,000 to acquire shares of treasury stock.

Which of the following are primary considerations management must make before declaring a cash dividend? 1. The tax impact on stockholders of the receipt of the dividends 2. The legal permissibility of the dividend 3. The availability of funds to pay the dividend 2 and 3 only 3 only 1 and 2 only 1, 2, and 3

2 and 3 only

In which order should the following sections generally be placed when preparing the statement of stockholders' equity? 1. Additions 2. Beginning balance 3. Deductions 4. Ending balance 3, 1, 2, 4 2, 3, 1, 4 1, 3, 2, 4 2, 1, 3, 4

2, 1, 3, 4

Which of the following statements about property dividends is correct? The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred. A property dividend is also called a dividend in kind. A property dividend is usually in the form of inventory of the company. Gains or losses cannot be recognized for property dividends.

A property dividend is also called a dividend in kind.

On June 30, 2020, Dean & Associates paid a cash dividend to stockholders that was declared on June 10, 2020. On which date will the company make a journal entry crediting cash? June 10, 2020 only Cash will not be credited on either June 10 or June 30, 2020 June 30, 2020 only Both June 10 and June 30, 2020

June 30, 2020 only

Which of the following does the SEC encourage companies that consistently pay dividends to do in their annual report? Disclose the method used for calculating dividends. Indicate whether they intend to continue paying dividends in the future. Calculate their level of liquidity both before and after paying dividends. Show the percentage of dividends paid to both preferred and common stockholders.

Indicate whether they intend to continue paying dividends in the future.

Which of the following conditions should exist in order for a company to pay a dividend when funds are available to do so? The research and development group must not require reinvestment of assets. The preferred stockholders must agree to the payment of the dividend. The SEC must allow for the payment of dividends. The company's present and future financial positions should warrant the distribution.

The company's present and future financial positions should warrant the distribution.

What typically happens to the price of a company's stock when a company opts to purchase shares of its stock in the marketplace? The price increases. The price decreases. The price stabilizes or decreases. The price stabilizes or increases.

The price stabilizes or increases.

Richard's company has been doing very well over the last two years. In the first year their profits went up by $50,000, and in the second year the profits went up by almost $125,000. What impact will this have on stockholders' equity? The stockholders' equity will stay the same regardless of profitability. The stockholders' equity will decrease in proportion to profitability. The stockholders' equity will grow only if the company adds more liabilities. The stockholders' equity will grow with profitability.

The stockholders' equity will grow with profitability.

Which of the following statements accurately describes treasury shares? Treasury shares are shares of a corporation's stock that have been issued but are not currently outstanding. Treasury shares are shares of a corporation's stock that have been issued and are currently outstanding. Treasury shares are shares of a corporation's stock that are being held as an investment by the corporation's treasurer. Treasury shares are shares of a corporation's stock that are being held as an investment by the corporation itself.

Treasury shares are shares of a corporation's stock that have been issued but are not currently outstanding.

On March 1, ABC Corporation and XYZ Corporation both had 250,000 outstanding shares of common stock, and neither firm had any shares in treasury. Over the course of the month, ABC purchased 40,000 of its outstanding shares for placement in treasury, while XYZ purchased 80,000 of its outstanding shares for placement in treasury. The firms' purchases of treasury stock suggest that ABC may be more worried than XYZ about the threat of a takeover attempt. XYZ may be more worried than ABC about the threat of a takeover attempt. XYZ may be more interested than ABC in increasing its stockholders' equity. ABC may be more interested than XYZ in increasing its stockholders' equity.

XYZ may be more worried than ABC about the threat of a takeover attempt.

Grand Inc. uses the cost method to account for treasury stock. After a recent transaction, the firm recorded a $34,000 debit to cash and a $41,000 credit to Treasury Stock. What else should Grand have recorded in relation to this transaction? a $7,000 credit to Common Stock a $7,000 debit to Paid-in Capital from Treasury Stock a $7,000 credit to Paid-in Capital from Treasury Stock a $7,000 debit to Common Stock

a $7,000 debit to Paid-in Capital from Treasury Stock

Current Manufacturing has 200,000 shares of unissued capital stock and 100,000 shares of treasury stock. When compiling its balance sheet, Current should ____________ shares as an asset. treat only the treasury treat only the unissued capital not treat any of these treat all of these

not treat any of these