chapter 13 Stockholders' Equity accounting 2301

Lu Company the following information on the financial statements: Net Income $60,000 Preferred Dividends 5,000 Average Common Stockholder's Equity 180,000 Average number of Common Shares Outstanding 200,000 shares Market Price $2 per share What is the earnings per share (to the nearest penny)?

Earnings per share is calculated by dividing the earnings available to common stockholders by the number of shares of common stock outstanding. Since $5,000 in dividends must be paid to preferred, earnings per share is ($60,000 - 5,000) / 200,000 shares = 0.28.

Smith Company the following information on the financial statements: Net Income $50,000 Preferred Dividends 8,000 Average Common Stockholder's Equity 180,000 Average number of Common Shares Outstanding 250,000 shares Market Price $2 per share What is the earnings per share (to the nearest penny)?

Earnings per share is calculated by dividing the earnings available to common stockholders by the number of shares of common stock outstanding. Since $8,000 in dividends must be paid to preferred, eanings per share is ($50,000 - 8,000) / 250,000 shares = 0.17

On the corporate income statement, Income from Continuing Operations generally appears below the

Income Tax Expense On the corporate income statement, Income from Continuing Operations generally appears below the Income Tax Expense.

Which of the following is NOT one of the four basic rights of common stockholders?

Stockholders receive additional shares of stock when cash dividends are paid. Stockholders receive additional shares of stock when cash dividends are paid is NOT a basic right. A stockholder may use a cash dividend to reinvest and buy more stock in the corporation but it is not a basic right. The right to vote on corporation matters is the fourth basic right.

Beta Electronics has 10,000 shares of $3 par common stock outstanding, which were issued at $5 per share. The balance in retained earnings is $40,000. What is total stockholders' equity?

The common stock was sold for $5 per share x 10,000 = $50,000, with this amount appearing in the Paid-In Capital. Add the $50,000 Paid-In Capital + $40,000 in retained earnings for total stockholders' equity of $90,000.

Smith Company the following information on the financial statements: Net Income $50,000 Preferred Dividends 8,000 Average Common Stockholder's Equity 180,000 Average number of Common Shares Outstanding 250,000 shares Market Price $2 per share What is the rate of return on common stockholder's equity (to nearest percent)?

The rate of return on common stockholder's equity is calculated by dividing the earnings available to common stockholders by average common stockholders' equity. Since $8,000 in dividends must be paid to preferred, return on common equity is (50,000 - 8,000) / 180,000 = 23%.

Assume Warren Company has 4,000 outstanding shares of 2%, $3 par value preferred stock and has declared the cash dividend as a payable. What is the amount of total dividends owed to preferred stockholders?

To calculate the amount of the dividend declared, begin by calculating the dividend per share. Each shareholder will receive a dividend of 2% of the $3 par value or $0.06 (2% x $3). The total dividend payable will be the number of shares times the dividend per share (4,000 * $0.06 = $240).

Which characteristic of a corporation is an advantage?

Transfer of corporation ownership is easy. Transfer of ownership is easy in a corporation. This is done by an owner of stock in a corporation selling a specified number of shares of stock to a new owner at an agreed upon price.

Jones Corporation purchases land with a market value of $200,000 in exchange for 180,000 shares of its $1 par common stock. The journal entry to record this transaction is:

accounts land debit 200,000 common stock credit 180,000 paid-in capital in excess of par-common credit credit 20,000 To record this transaction, debit Land for the market value of $200,000. Credit Common Stock for the par value (180,000 share * $1) = $180,000. Credit Paid-In Capital in Excess of Par - Common for the difference of $20,000.

Conner Health Foods has 9 , 000 shares of $ 3 par common stock​ outstanding, which were issued at $ 10 per share. Conner also has a deficit balance in Retained Earnings of $ 81, 000. How much is Conner​'s total​ stockholders' equity?

price per share x shares sold = paid-in-capital 10 x 9000 = 90000 retained earning(deficit) + total paid-in capital = total stockholder's equity 81,000 + 90000= 171000

Winston Corporation has 11 , 000 shares of 5​%, $ 15 par cumulative preferred stock and 48 , 000 shares of common stock outstanding. Winston declared no dividends in 2017 and had no dividends in arrears prior to 2017. In 2018​, Winston declares a total dividend of $ 45 , 000. How much of the dividends go to the common​ stockholders?

shares outstanding x par value x dividend rate = annual preferred dividends

A​ company's own stock that it has issued and repurchased is called

treasury stock.

Which characteristic of a corporation is a​ disadvantage?

Double taxation

The two basic sources of​ stockholders' equity are

​paid-in capital and retained earnings.

a. ownership and management are separated b. entity has continuous life c. transfer of ownership is easy d. stockholders' liability is limited e. exposure to double taxation is evident f. entity can raise more money than a parthnership or sole propritetorship. g. government regulation is expensive

a. disadvantage b. advantage c.advantage d. advantage e. disadvantage f. advantage g. disadvantage

Suppose Quality Home Imports issued 100 comma 000 shares of ​$0.02 par common stock at $ 1 per share. Which journal entry correctly records the issuance of this​ stock?

account cash debit 100,000 common stock-$0.02 par value credit 2,000 paid-in capital in excess of par-common credit 98,000

Beta Electronics issued 100,000 shares of $2 par common stock at $2 per share. What is the journal entry to record this transaction?

account cash debit 200,000 common stock credit 200,000 The common stock was sold at par value, so debit Cash for $200,000 and credit Common Stock for $200,000.

On March 1st, Jones Corporation purchased 1,000 shares of previously issued common stock, paying $2 per share. What is the journal entry to record the purchase?

accounts treasury stock debit 2,000 cash credit 2,000 To record the purchase of previously issued common stock, debit Treasury Stock for $2,000 (1,000 share * $2) and credit Cash for $2,000.

Beta Electronics issued 10,000 shares of $1 stated value common stock at $3 per share. What is the journal entry to record this transaction?

accounts cash debit 30,000 common stock credit 10,000 paid-in capital in excess of stated-common credit 20,000 To journalize for the sale of a stated value stock, debit Cash for the selling price of (10,000 shares * $3) = $30,000. Credit Common Stock for the STATED value (10,000 shares * $1) = $10,000. The difference of $20,000 is credited to Paid-In Capital in Excess of STATED - Common.

The maximum number of shares of stock the corporation can issue is called

authorized stock

Suppose Yummy Treats Bakery issues common stock in exchange for a building. Yummy Treats Bakery should record the building at

its market value.

Assume that a company paid $ 7 per share to purchase 1 ,100 shares of its $ 4 par common stock as treasury stock. The purchase of treasury stock

Begin by calculating the total value of the treasury stock that was purchased. Recall that treasury stock is recorded at​ cost, without reference to par value. Number of shares purchased x Purchase price per share = Treasury stock 1,100 x $7 = $16,000

The two basic sources of stockholders' equity are

Paid-In Capital and Retained Earnings

Smith Company the following information on the financial statements: Net Income $50,000 Earnings Per Share 0.50 per share Average number of Common Shares Outstanding 250,000 shares Market Price $2 per share What is the price/earnings ratio (to the nearest whole number)?

The price/earnings ratio is calculated as the market price of $2 per share / 0.50 earnings per share = 4.

On March 1st, Jones Corporation purchased 1,000 shares of previously issued common stock, paying $2 per share. On April 1st, Jones sold 500 shares at $3 per share. What is the amount of Paid-In Capital from Treasury Stock Transactions for the sale of 500 shares?

When the company sells the treasury stock, Cash is debited for the sales price (500 shares * $3 per share = $1,500) and Treasury Stock is credited for the price the company paid to acquire the stock (500 shares * $2 per share = $1,000). The difference between the sales and purchase prices ($1,500 - $1,000 = $500) is credited to Paid-In Capital from Treasury Stock Transactions. Another way to calculate the Paid-In Capital from Treasury Stock Transaction would be the selling price - the purchase price, so $3 - $2 = $1 per share. We sold 500 shares, so 500 * $1 per share gain is $500 (which goes to Paid-In Capital from Treasury Stock Transaction as a credit). 500

On March 1st, Nichols Corporation purchased 1,000 shares of previously issued common stock, paying $3 per share. On April 1st, Nichols sold 600 shares at $4 per share. What is the amount of Paid-In Capital from Treasury Stock Transactions for the sale of 600 shares?

When the company sells the treasury stock, Cash is debited for the sales price (600 shares * $4 per share = $2,400) and Treasury Stock is credited for the price the company paid to acquire the stock (600 shares * $3 per share = $1,800). The difference between the sales and purchase prices ($2,400 - $1,800 = $600) is credited to Paid-In Capital from Treasury Stock Transactions. Another way to calculate the Paid-In Capital from Treasury Stock Transaction would be the selling price - the purchase price, so $4 - $3 = $1 per share. We sold 600 shares, so 600 * $1 per share gain is $600 (which goes to Paid-In Capital from Treasury Stock Transaction as a credit).

Weaver Electronics issued 20,000 shares of $2 stated value common stock at $3 per share. What is the journal entry to record this transaction?

accounts cash debit 60,000 common stock credit 40,000 paid-in capital in excess of stated-common credit 20,000 To journalize for the sale of a stated value stock, debit Cash for the selling price of (20,000 shares * $3) = $60,000. Credit Common Stock for the STATED value (20,000 shares * $2) = $40,000. The difference of $20,000 is credited to Paid-In Capital in Excess of STATED - Common.

Stock that is held by the stockholders outside the corporation is called

outstanding stock

Assume Jones Company has 2,000 outstanding shares of 2%, $2 par value preferred stock and has declared the cash dividend as a payable. What is the amount of total dividends owed to preferred stockholders?

to calculate the amount of the dividend declared, begin by calculating the dividend per share. Each shareholder will receive a dividend of 2% of the $2 par value or $0.04 (2% x $2). The total dividend payable will be the number of shares times the dividend per share (2,000 * $0.04 = $80). previous

Suppose House and Home Imports issued 50 comma 000 shares of ​$0.04 par common stock at $ 1 per share. Which journal entry correctly records the issuance of this​ stock?

​Let's start by calculating the total amount of the par value received for the issuance of common stock. ​(Enter the par value per share to the nearest​ cent.) Total par value of Par value per share x Shares issued = common stock issued $0.04 x 50,000 = $2,000 ​Next, calculate the total amount of cash received from the stock issuance. Issue price Total cash received per share x Shares issued = for issuance of shares $1 x 50,000 = $50,000 Now determine the resulting​ paid-in capital in excess of par amount by subtracting the total par value of the shares issued from the cash received from the issuance of the shares. Total cash received Total par value Paid-in capital in for issuance of shares - of shares issued = excess of par $50,000 - $2,000 = $48,000 An alternate way of calculating the​ paid-in capital in excess of par that resulted from the issuance of shares is as​ follows: Premium Paid-in capital in ( Issue price per share - Par value per share ) x Shares issued = excess of par ( $1 - $0.04 ) x 50,000 = $48,000