Final exam chapter 18

Ng Company had 30 million shares of $1 par common stock outstanding on January 1, 2024. In October 2024, Ng Company's Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Ng would:

debit retained earnings for $18 million. Explanation Shares to be distributed = 0.01 × 30 million = 300,000 shares Retained earnings: Market value of shares = 300,000 × $60 = $18 million

On October 1, 2024, Liu Corporation declared and issued a 10% stock dividend. Before this date, Liu had 80,000 shares of $5 par common stock outstanding. The market price of Liu Corporation on the date of declaration was $10 per share. As a result of this dividend, Liu's retained earnings will:

decrease by $80,000.

At the beginning of 2022, Emily Corporation issued 10,000 shares of $100 par, 5%, cumulative, preferred stock for $110 per share. No dividends have been paid to preferred or common shareholders. What amount of dividends will a preferred shareholder owning 100 shares receive in 2024 if Emily pays $1,000,000 in dividends?

$1,500 Explanation $100 × 5% × 100 shares × 3 years = $1,500.

Johnny Deng, Incorporated initially issued 200,000 shares of $1 par stock for $1,000,000 in 2022. In 2023, the company repurchased 20,000 shares for $200,000. In 2024, 10,000 of the repurchased shares were resold for $160,000. In its balance sheet dated December 31, 2024, Johnny Deng, Incorporated's treasury stock account shows a balance of:

$100,000. Explanation A treasury stock account is created when a company reacquires its own stock as treasury stock. The full purchase price (cost) is debited to Treasury Stock. When treasury stock is sold, the Treasury Stock account is credited for the cost per share, with an additional credit to Paid-in capital—share repurchase, if the sale price exceeds the reacquisition price. The 2023 repurchase is accounted for with a debit to Treasury Stock for $200,000. When half of the treasury stock is resold, $100,000 is credited to Treasury Stock and $60,000 is credited to Paid-in capital—share repurchase. The balance in the Treasury Stock account is $200,000 − $100,000 = $100,000.

The corporate charter of Kunkel Company authorized the issuance of 10 million, $1 par common shares. During 2024, its first year of operations, Kunkel had the following transactions: January 1 Sold 8 million shares at $15 per share June 3 Purchased 2 million shares of treasury stock at $18 per share December 28 Sold the 2 million shares of treasury stock at $20 per share What amount should Kunkel report as additional paid-in capital in its December 31, 2024, balance sheet?

$116 million Explanation On January 1, additional paid-in capital—excess of par was credited for $112 million [8 million shares × $14/share ($15 − $1 par)]. On June 3, there was no impact on paid-in capital. On December 28, additional paid-in capital—share repurchase was credited for $4 million [2 million shares × $2/share ($20 − $18 cost)]

On January 1, 2024, the board of directors of Goby Incorporated declared a $540,000 dividend. The following data is from the balance sheet of Goby on that date: Common stock $ 500,000 Paid-in capital—excess of par. 300,000 Retained earnings 400,000 Paid-in capital—share repurchase. 50,000 How much is the liquidating dividend?

$140,000

C. Worthy Ships initially issued 300,000 shares of $1 par stock for $1,500,000 in 2024. In 2026, the company repurchased 30,000 shares for $300,000. In 2027, 15,000 of the repurchased shares were resold for $240,000. In its balance sheet dated December 31, 2027, C. Worthy's treasury stock account shows a balance of:

$150,000. Explanation The 2026 repurchase is accounted for with a debit to treasury stock for $300,000. When half of the treasury stock is resold, $150,000 is credited to treasury stock and $90,000 is credited to Paid-in capital—share repurchase. The balance in the treasury stock account is $150,000 ($300,000 − $150,000).

The shareholders' equity of Green Corporation includes $200,000 of $1 par common stock and $400,000 par of 6% cumulative preferred stock. The board of directors of Green declared cash dividends of $50,000 in 2024 after paying $20,000 cash dividends in each of 2023 and 2022. What is the amount of dividends common shareholders will receive in 2024?

$18,000 Explanation Green's common shareholders will receive dividends of $18,000 as a result of the 2024 distribution *$24,000 current preference (6% × $400,000), thus $4,000 dividends in arrears. **$24,000 current preference (6% × $400,000), thus another $4,000 dividends in arrears. ***$8,000 dividends in arrears plus the $24,000 current preference.

The shareholders' equity of Red Corporation includes $200,000 of $1 par common stock and $400,000 par of 6% cumulative preferred stock. The board of directors of Red declared cash dividends of $50,000 in 2024 after paying $20,000 cash dividends in 2023 and $40,000 in 2022. What is the amount of dividends common shareholders will receive in 2024?

$22,000

Roberto Corporation was organized on January 1, 2024. The firm was authorized to issue 100,000 shares of $5 par common stock. During 2024, Roberto had the following transactions relating to shareholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8). What is total shareholders' equity at the end of 2024?

$250,000

Doug Graves Cemetery had 50,000 shares of common stock issued and outstanding on January 1, 2024. During 2024, Graves took the following actions: June 1 Declared a 2-for-1 stock split, when the fair value of the stock was $25 per share. October 15 Declared a $0.40 per share cash dividend. In Graves's statement of shareholders' equity for 2024, what amount should Graves report as dividends?

$40,000

As of December 31, 2024, Warner Corporation reported the following: Cash dividends payable $ 20,000 Treasury stock 600,000 Paid-in capital—share repurchase 20,000 Common stock and other paid-in capital accounts 4,000,000 Retained earnings 3,000,000 What was shareholders' equity as of December 31, 2024?

$6,420,000

In 2024, Brock Lee Vegetables issued $1 par value common stock for $30 per share. No other common stock transactions occurred until March 31, 2026, when Brock Lee acquired some of the issued shares for $25 per share and retired them. Which of the following statements states an effect of the issuance and subsequent retirement of the shares?

Additional paid-in capital is increased. Explanation The entries to record the stock issuance and subsequent acquisition and retirement (per share) are as follows: The net result is an increase in Paid-in capital—share repurchase (additional paid-in capital) of $5 per share retired.

The par amount of common stock represents the:

Arbitrary dollar amount assigned to a share of stock.

The corporate charter sometimes is known as (a):

Articles of incorporation.

The par amount of shares issued is normally recorded in the:

Common stock account.

The 12/31/2024 balance sheet of Despot Incorporated included the following: Common stock, 25 million shares at $20 par$ 500million Paid-in capital—excess of par3,000million Retained earnings980million In January 2024, Despot recorded a transaction with this journal entry: Account Title Debit. Credit Cash 150million Common stock 100million Paid-in capital—excess of par 50million In February 2024, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts?

Decreased assets and liabilities

In 2024, Poe's Products completed the treasury stock transactions described below. January 2: Reacquired 10 million shares at $16 per share. February 15: Sold 3 million treasury shares at $20 per share. September 20:Sold 3 million treasury shares at $15 per share. Poe had issued 50 million shares of its $1 par common stock for $18 several years ago. 1. Reacquired 10 million shares at $16 per share. 2. Sold 3 million shares at $20 per share. 3. Sold 3 million treasury shares at $15 per share. Required: Record the above transactions assuming that Poe's Products uses the cost method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).

Explanation ($ in millions, except per share amounts) January 2, 2024 Treasury stock (10 × $16) = $160 Cash (10 × $16) = $160 February 15, 2024 Cash (3 × $20) = $60 Treasury stock (3 × $16) = $48 September 20, 2024 Cash (3 × $15) = $45 Treasury stock (3 × $16) = $48

The December 31, 2024, balance sheet of Garcia Company included the following: Common stock, 20 million shares outstanding at $1 par. $ 20,000,000 Paid-in capital—excess of par 100,000,000 Retained earnings 115,000,000 Garcia completed the following transactions in 2024 relating to treasury stock: March 17:Reacquired 5 million shares at $10 May 17:Reacquired 3 million shares at $9 August 10:Sold 6 million shares at $ 12. 1. Reacquired 5 million shares at $10. 2. Reacquired 3 million shares at $9. 3. Sold 6 million shares at $12. Required: Assuming Garcia uses the cost method, prepare journal entries to record the foregoing transactions on a FIFO basis. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).

Explanation (in millions, except per share amounts) March 17, 2024 Treasury stock (5 × $10) = $50 May 17, 2024 Treasury stock (3 × $9) = $27 August 10, 2024 Cash (6 × $12) = $72 Treasury stock 5 × $ 10 =$ 50 1 × $ 9 =9 $ 59

During the current year, JET Industries issued 5 million of its $1 par common shares to its underwriters for $25,000,000 less promotional and accounting services of $500,000 to effect the issue. 1.Record the issuance of the shares. Required: Prepare the journal entry to record the issuance of the shares. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.

Explanation Cash ($25,000,000 − $500,000) = $24,500,000 Common stock (5,000,000 × $1) = $5,000,000

In 2024, Southwestern Corporation completed the treasury stock transactions listed below. Southwestern had issued 100,000 shares of its $1 par common stock for $10 several months ago. 1. Reacquired 70,000 shares at $12. 2. Sold 20,000 shares at $14. 3. Sold 25,000 shares at $8. Required: Prepare the journal entries to record the above transactions, using the cost method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

Explanation February 2, 2024 Treasury stock (70,000 × $12) = $840,000 Cash (70,000 × $12) = $840,000 March 17, 2024 Cash (20,000 × $14) = $280,000 Treasury stock (20,000 × $12) = $240,000 May 17, 2024 Cash (25,000 × $8) = $200,000 Treasury stock (25,000 × $12) = $300,000

During its first year of operations, Zhang's Electronics Incorporated completed the following transactions relating to shareholders' equity. January 5:Issued 1,000,000 shares of common stock for $25 per share. February 12:Issued 20,000 shares of common stock to accountants for $500,000 of professional services. The articles of incorporation authorize 5,000,000 shares of common stock with a par of $1 per share and 1,000,000 preferred shares with a par of $100 per share. 1. Issued 1,000,000 shares of common stock for $25 per share. 2. Issued 20,000 shares of common stock to accountants for $500,000 of professional services. Required: Record the above transactions in general journal form. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

Explanation January 5 Cash (1,000,000 × $25) = $25,000,000 Common stock (1,000,000 × $1) = $1,000,000 February 12 Professional services expense (20,000 × $25) = $500,000 Common stock (20,000 × $1) = $20,000

During its first year of operations, Criswell Incorporated completed the following transactions relating to shareholders' equity. January 5:Issued 300,000 of its common shares for $8 per share and 3,000 preferred shares at $110. February 12:Issued 50,000 shares of common stock in exchange for equipment with a known cash price of $310,000. The articles of incorporation authorize 5,000,000 shares with a par of $1 per share of common and 1,000,000 preferred shares with a par of $100 per share. 1. Record the issue of 300,000 common shares for $8 per share. 2. Record the issue of 3,000 preferred shares at $110. 3. Issued 50,000 shares of common stock in exchange for equipment with a known cash price of $310,000.

Explanation January 5 Cash (300,000 × $8) = $2,400,000 Common stock (300,000 × $1) = $300,000 Cash (3,000 × $110) = $330,000 Preferred stock (3,000 × $100) = $300,000 February 12 Common stock (50,000 × $1) = $50,000

Sefcik Company's balance sheet showed the following on December 31, 2024: Common stock, $ 10 par $ 100,000 Paid-in capital—excess of par. 50,000 Retained earnings. 20,000 REQ 1 1.Record cash dividend declared on December 31, 2024. 2.Record the entry on date of record. 3.Record payment of cash dividend. REQ 2 1.Record cash dividend declared on December 31, 2024. 2.Record the entry on date of record. 3.Record payment of cash dividend. A cash dividend is declared on December 31, 2024, and is payable on January 20, 2025, to shareholders of record on January 10, 2025. Required: Prepare all appropriate journal entries, assuming a cash dividend in the amount of $1.00 per share. Prepare all appropriate journal entries, assuming a cash dividend in the amount of $5.00 per share.

Explanation Retained earnings [$1 × ($100,000 ÷ $10)] = $10,000 Retained earnings [$2 × ($100,000 ÷ $10)] = $20,000 Paid-in capital—excess of par* = $30,000 *Since the dividend exceeds the retained earnings balance, the excess is a liquidating dividend. PICTURE ON DESK TOP

On September 15, 2024, the Hanmei Company board of directors declared a 10% stock dividend on common shares. The shares are to be distributed on October 10, 2024, to shareholders of record on October 1, 2024. The market price per share on the date of declaration was $24 while the market price on the date of distribution was $26. The common stock has a par of $5 per share and there were 1,000,000 shares outstanding prior to the declaration of the stock dividend. 1. Record declaration of common stock dividend. 2. Record the entry on date of record. 3. Record issuable of common stock dividend. Required: Prepare any necessary journal entries to record the above transactions. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account fiel

Explanation September 15, 2024 Retained earnings [(1,000,000 × 10%) × $24] = $2,400,000

Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following except:

Low government regulation.

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

Option D Explanation Treasury stock is deducted from total shareholders' equity as a separate line item - it is not part of either paid-in capital or retained earnings.

Authorized common stock refers to the total number of shares:

That can be issued.

Corporations are formed in accordance with:

The laws of individual states.

The 12/31/2024 balance sheet of Despot Incorporated included the following: Common stock, 25 million shares at $20 par$ 500million Paid-in capital—excess of par3,000million Retained earnings980million In January 2024, Despot recorded a transaction with this journal entry: Account Title Debit. Credit Cash 150million Common stock 100million Paid-in capital—excess of par 50million The transaction was for the:

issue of common stock for $150 million in cash.