Exam 11: Reporting and Analyzing Stockholders Equity

The following information pertains to Benedict Company. Assume that all balance sheet amounts represent average balance figures. Total assets \ 300,000 Stockholders' equity-common 150,000 Total stockholders' equity 200,000 Sales revenue 100,000 Net income 25,000 Number of shares of common stock 6,000 Common dividends 6,000 Preferred dividends 4,000 What is the payout ratio for Benedict?

Which of the following is not a right or preference associated with preferred stock?

Jason Hansen has invested $600,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Hansen stand to lose?

The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

If an investment firm underwrites a stock issue, the

On January 1, Hamblin Corporation had 90,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The stock was distributed on March 30. The entry to record the transaction of March 30 would include a

If a stockholder cannot attend a stockholders' meeting, he may delegate his voting rights by means of a(n)

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

A corporation is not an entity that is separate and distinct from its owners.

Manning Company has $1,000,000 in assets and $1,000,000 in stockholders' equity, with 50,000 shares outstanding the entire year. It has a return on assets ratio of 9%. In the past year it had net income of $75,000. On January 1, 2014, it issued $300,000 in debt at 5% and immediately repurchased 25,000 shares for $300,000. Management expected that, had it not issued the debt, it would have again had net income of $75,000. Instructions (a) Determine the Company's net income and earnings per share for 2013 and 2014. (Ignore taxes in your computations.) (b) Compute the Company's return on common stockholders' equity for 2013 and 2014. (c) Compute the company's debt to assets ratio for 2013 and 2014.

A net loss

A stock split will

As soon as a corporation is authorized to sell stock, an accounting journal entry should be made recording the total value of the shares authorized.

Cerner Corporation began business by issuing 250,000 shares of $5 par value common stock for $24 per share. During its first year, the corporation sustained a net loss of $50,000. The year-end balance sheet would show

Cey, Inc. issued 8,000 shares of stock at a stated value of $10/share. The total issue of stock sold for $15/share. The journal entry to record this transaction would include a

Mark Remington, the president and CEO of Earth Systems, Inc., a waste management firm, was recently hospitalized, suffering from exhaustion and a heart ailment. Immediately prior to his hospitalization, Earth Systems had experienced a sharp decline in its stock price, and trading activity became almost nonexistent. The primary reason for this was concern expressed in the media over a new untested waste management system implemented by the company. Mr. Remington had been unwilling to submit the procedure to testing before implementation, but he reluctantly agreed to limited tests after the system was operational. No problems have been identified by the tests to date. The other members of management called a meeting to determine what they should do. Terry Jackson, the marketing manager, suggested that the company purchase a large number of shares of treasury stock. In that way, investors might notice that activity had picked up, and might decide to buy some more shares. This plan would use up most of the company's available cash, so that there will be no money available for a cash dividend. Earth Systems has paid cash dividends every quarter for over ten years. Required: 1. Is Mr. Jackson's suggestion ethical? Explain. 2. Is it ethical to discontinue the cash dividend? Explain.

The following stockholders' equity accounts, arranged alphabetically, are in the ledger of Marvel Corporation at December 31, 2014. Common Stock ( \ 5 stated value) \ 2,800,000 Paid-in Capital in Excess of Par Value-Preferred Stock 45,000 Paid-in Capital in Excess of Stated Value-Common Stock 1,050,000 Preferred Stock ( 8\%,\ 100 par, noncumulative) 1,000,000 Retained Earnings 1,684,000 Treasury Stock (10,000 shares) 98,000 Instructions Prepare the stockholders' equity section of the balance sheet at December 31, 2014.

A corporation purchases 20,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?

The ability of a corporation to obtain capital is

For what reasons might a company like IBM repurchase some of its stock (treasury stock)?