Equity

Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of $2 par value common stock, which had a fair value of $5 per share before the stock dividend was declared. This stock dividend was distributed 60 days after the declaration date. By what amount did Ray's current liabilities increase as a result of the stock dividend declaration?

$0

The following information pertains to Meg Corp.: Dividends on its 1,000 shares of 6%, $10 par value cumulative preferred stock have not been declared or paid for 3 years. Treasury stock that cost $15,000 was reissued for $8,000. What amount of retained earnings should be appropriated as a result of these items?

$0

Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease shareholders' equity for the dividend?

$0

On February 1, Hyde Corp., a newly formed company, had the following stock issued and outstanding: Common stock, no par, $1 stated value, 10,000 shares originally issued for $15 per share Preferred stock, $10 par value, 3,000 shares originally issued for $25 per share Hyde's February 1 statement of equity should report

$10,000 $30,000 $185,000

East Co. issued 1,000 shares of its $5 par-value common stock to Howe as compensation for 1,000 hours of legal services performed. Howe usually bills $160 per hour for legal services. On the date of issuance, the stock was trading on a public exchange at $140 per share. By what amount should the additional paid-in capital account increase as a result of this transaction?

$135,000

Earl was engaged by Farm Corp. to perform consulting services. Earl's compensation for these services consisted of 1,000 shares of Farm's $10 par value common stock, to be issued to Earl on completion of Earl's services. On the execution date of Earl's employment contract, Farm's stock had a market value of $40 per share. Six months later, when Earl's services were completed and the stock issued, the stock's market value was $50 per share. Farm's management estimated that Earl's services were worth $100,000 in cost savings to the company. As a result of this transaction, additional paid-in capital should increase by

$30,000

At December 31, Year 3 and Year 4, Carr Corp. had outstanding 4,000 shares of $100 par value, 6% cumulative preferred stock and 20,000 shares of $10 par value common stock. At December 31, Year 3, dividends in arrears on the preferred stock were $12,000. Cash dividends declared in Year 4 totaled $44,000. What amounts were payable on each class of stock?

$36,000 $8,000

On July 1, Rya Corporation issued 1,000 shares of its $20 par common and 2,000 shares of its $20 par convertible preferred stock for a lump sum of $80,000. At this date, Rya's common stock was selling for $36 per share and the convertible preferred stock for $27 per share. The amount of proceeds allocated to Rya's preferred stock should be

$48,000

In Year 3, Seda Corp. acquired 6,000 shares of its own $1 par value common stock at $18 per share. In Year 4, Seda reissued 3,000 of these shares at $25 per share. Seda uses the cost method to account for its treasury stock transactions. What accounts and amounts should Seda credit in Year 4 to record the reissuance of the 3,000 shares?

$54,000 $21,000

On December 1, Year 4, Nilo Corp. declared a property dividend to be distributed on December 31, Year 4, to shareholders of record on December 15, Year 4. On December 1, Year 4, the property to be transferred had a carrying amount of $60,000 and a fair value of $78,000. What is the effect of this property dividend on Nilo's Year 4 retained earnings, after all nominal accounts are closed?

$60,000 Decrease

On July 1, Year 4, Cove Corp., a closely held corporation, issued 6% bonds with a maturity value of $60,000 together with 1,000 shares of its $5 par value common stock for a combined cash amount of $110,000. The market value of Cove's stock cannot be ascertained. If the bonds were issued separately, they would have sold for $40,000 on an 8% yield to maturity basis. What amount should Cove record for additional paid-in capital on the issuance of the stock?

$65,000

Ashe Corp. was organized on January 1, with authorized capital of 100,000 shares of $20 par value common stock. During the year, Ashe had the following transactions affecting equity: January 10 issued 25,000 shares at $22 a share March 25 issued 1,000 shares for legal services when the fair value was $24 a share September 30 issued 5,000 shares for a tract of land when the fair value was $26 a share What amount should Ashe report for additional paid-in capital at December 31?

$84,000

Grid Corp. acquired some of its own common shares at a price greater than both their par value and original issue price but less than their book value. Grid uses the cost method of accounting for treasury stock. What is the impact of this acquisition on total equity and the book value per common share?

Decrease Increase

On May 1, Rhud Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Rhud had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Rhud's common stock was $30 per share on May 1. As a result of the stock dividend, Rhud's total equity

Did Not Change

At December 31, Year 3 and Year 4, Apex Co. had 3,000 shares of $100 par, 5% cumulative preferred stock outstanding. No dividends were in arrears as of December 31, Year 2. Apex did not declare a dividend during Year 3. During Year 4, Apex paid a cash dividend of $10,000 on its preferred stock. Apex should report dividends in arrears in its Year 4 financial statements as a(n)

Disclosure of $20,000.

On December 1, Year 4, Pott Co. declared and distributed a property dividend when the fair value exceeded the carrying amount. As a consequence of the dividend declaration and distribution, what are the accounting effects?

Fair Value Decreased

A property dividend should be recorded in retained earnings at the property's

Fair value at date of declaration.

Which one of the following statements regarding treasury stock is correct?

It is reflected in shareholders' equity as a contra account.

On January 15, Year 5, Rico Co. declared its annual cash dividend on common stock for the year ended January 31, Year 5. The dividend was paid on February 9, Year 5, to shareholders of record as of January 28, Year 5. On what date should Rico decrease retained earnings by the amount of the dividend?

January 15, Year 5.

Murphy Co. had 200,000 shares outstanding of $10 par common stock on March 30 of the current year. Murphy reacquired 30,000 of those shares at a cost of $15 per share and recorded the transaction using the cost method on April 15. Murphy reissued the 30,000 shares at $20 per share and recognized a $50,000 gain on its income statement on May 20. Which of the following statements is correct?

Murphy's net income for the current year is overstated.

Ten thousand shares of $10 par value common stock were issued initially at $15 per share. Subsequently, 1,000 of these shares were purchased as treasury stock at $13 per share. The cost method of accounting for treasury stock is used. What is the effect of the purchase of the treasury stock on the amount reported in the balance sheet on each of the following?

No Effect Decrease

Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued for cash at a price in excess of its acquisition price. Assuming that the cost method of accounting for treasury stock transactions is used, what is the effect on retained earnings?

No Effect No Effect

The number of common stock shares outstanding will be decreased by the

No Yes

An entity declared a cash dividend on its common stock in December Year 1, payable in January Year 2. Retained earnings will

Not be affected on the date of payment.

On July 1, Alto Corp. split its common stock 5-for-1 when the market value was $100 per share. Prior to the split, Alto had 10,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock

Was reduced to $2

A corporation issuing stock should charge retained earnings for the fair value of the shares issued in a(n)

10% stock dividend.

Jones Co. had 50,000 shares of $5 par value common stock outstanding at January 1. On August 1, Jones declared a 5% stock dividend followed by a two-for-one stock split on September 1. What amount should Jones report as common shares outstanding at December 31?

105,000

In Year 2, Fogg, Inc., issued $10 par value common stock for $25 per share. No other common stock transactions occurred until March 31, Year 4, when Fogg acquired some of the issued shares for $20 per share and retired them. Which of the following statements accurately states an effect of this acquisition and retirement?

Additional paid-in capital is decreased.

When collectibility is reasonably assured, the excess of the subscription price over the stated value of no-par common stock subscribed should be recorded as

Additional paid-in capital when the subscription is recorded.

When an entity declares a cash dividend, retained earnings is decreased by the amount of the dividend on the date of

Declaration.

Bal Corp. declared a $25,000 cash dividend on May 8 to shareholders of record on May 23, payable on June 3. As a result of this cash dividend, working capital

Decreased on May 8.

On May 18, Sol Corp.'s board of directors declared a 10% stock dividend. The market price of Sol's 3,000 outstanding shares of $2 par value common stock was $9 per share on that date. The stock dividend was distributed on July 21, when the stock's market price was $10 per share. What amount should Sol credit to additional paid-in capital for this stock dividend?

$2,100

Effective April 27, the shareholders of Dorr Corp. approved a 2-for-1 split of its common stock and an increase in authorized common shares from 100,000 shares (par value $20 per share) to 200,000 shares (par value $10 per share). Dorr's equity accounts immediately before issuance of the stock-split shares were as follows: Common stock, par value $20; 100,000 shares authorized; 50,000 shares outstanding $1,000,000 Additional paid-in capital ($3 per share on issuance of common stock) 150,000 Retained earnings 1,350,000 The stock-split shares were issued on June 30. In Dorr's June 30 statement of equity, the balances of additional paid-in capital and retained earnings are

$150,000 $1,350,000

Selected information from the accounts of Row Co. at December 31, Year 4, follows: Total income since incorporation $420,000 Total cash dividends paid 130,000 Total value of property dividends distributed 30,000 Excess of proceeds over cost of treasury stock sold, accounted for using the cost method 110,000 In its December 31, Year 4, financial statements, what amount should Row report as retained earnings?

$260,000

Cyan Corp. issued 20,000 shares of $5 par common stock at $10 per share. On December 31, Year 3, Cyan's retained earnings were $300,000. In March Year 4, Cyan reacquired 5,000 shares of its common stock at $20 per share. In June Year 4, Cyan sold 1,000 of these shares to its corporate officers for $25 per share. Cyan uses the cost method to record treasury stock. Net income for the year ended December 31, Year 4 was $60,000. At December 31, Year 4, what amount should Cyan report as retained earnings?

$360,000

Arp Corp.'s outstanding capital stock at December 15, Year 4, consisted of the following: 30,000 shares of 5% cumulative preferred stock, par value $10 per share, fully participating as to dividends. No dividends were in arrears. 200,000 shares of common stock, par value $1 per share On December 15, Year 4, Arp declared dividends of $100,000. What was the amount of dividends payable to Arp's common shareholders?

$40,000