A) decrease the Retained Earnings account. B) increase the number of outstanding shares. C) increase the Share Capital account. D) all of the above. A) decrease the Retained Earnings account. B) increase the number of outstanding shares. C) increase the Share Capital account. D) all of the above.

Exam 11: Shareholders Equity

Preferred shares are often referred to as hybrid securities-a hybrid between debt and common shares. Instructions Discuss the features of a preferred share that make it resemble debt and explain why it is normally recorded in the equity section of the Statement of Financial Position. Why would a company choose to issue preferred shares?

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Question 1

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The features of a preferred share that make it resemble debt are that it normally has a fixed payment dividend associated with it that is similar to interest on debt. It also does not vote, like debt, and it has priority in the event of liquidation ahead of common shareholders, but behind debt.
Reasons for issuing preferred shares include:
$\bullet$ They enable a company to raise capital without having to dilute ownership interests of common shareholders
$\bullet$ Dividends can be postponed in periods of financial difficulty
$\bullet$ Provides new capital to a company while improving the debt to equity ratio
$\bullet$ Does not result in the dilution of future earnings as preferred shareholders would only be entitled to their fixed or stated dividend amount regardless of any increase in earnings.

For accounting purposes, the most important section of the articles of incorporation is the description of

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Question 2

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In 2020, Bouchard Enterprises reported net income of $75,000 and declared a dividend of $40,000. The dividend is to be paid on February 1, 2021 to shareholders of record on January 15, 2021. The balance in the retained earnings account on January 1, 2020 was $140,000. At Bouchard's year end on December 31, 2020 the company reported the following ending balance for retained earnings on the statement of changes in shareholders' equity:

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Question 3

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A legal liability for cash dividends occurs on which of the following dates?

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Question 4

When common or preferred shares are made available for sale to the public, the details of the shares are discussed in a legal document called

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Question 5

What type of preferred share is entitled to dividends above its specified dividend if the common shares receive excess dividends and must receive dividends in arrears before the common dividends can be declared?

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Question 6

Non-cumulative means that common shareholders must be paid for dividends in arrears before preferred shareholders are paid.

(True/False)

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Question 7

Shares that have been sold by the company are known as issued shares.

(True/False)

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Question 8

Corporations generally issue shares through investment bankers known as "tellers".

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Question 9

Pre-emptive rights prevent ownership interests from being diluted.

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Question 10

The maximum number of shares that a firm can issue is the number of

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Question 11

Hartly Inc. is a manufacturer of custom motorcycle and automotive parts. The company is publicly traded with its common shares trading at $8.75/share. In 2020, the company earned a net income of $975,250 and had an average shareholders' equity of $3,457,000. During 2020, the company had shareholders' equity consisting of 575,000 common shares and 125,000, $1 non-voting, cumulative preferred shares. There were no common shares sold or repurchased in 2020 and preferred shareholders received a dividend payment. Instructions Calculate and comment on the following ratios for Hartly for 2020: a) Earnings per share b) Price/earnings ratio c) Return on shareholders' equity

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Question 12

The articles of incorporation include all of the following except

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Question 13

Share capital represents the amount that investors paid for the shares when they were initially issued by the company.

(True/False)

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Question 14

Stock splits

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Question 15

Dividend yield measure the dividends an investor will receive relative to the share price.

(True/False)

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Question 16

Snowflake Corporation's shareholders' equity section at December 31, 2019 appears below: Shareholders' equity Instructions In 2020 Snowflake repurchases 2,000 shares. Please treat the following two situations independently. a) If the shares are repurchased at $9 / share, record this transaction. What is the impact of this repurchase on the shareholders' equity accounts? b) If the shares are repurchased at $11 / share, record this transaction. What is the impact of this repurchase on the shareholders' equity accounts?

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Question 17

The denominator in the return on equity calculation is the average number of common shares outstanding.

(True/False)

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Question 18

Dividends are not paid on

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Question 19

Every corporation must have one class of shares that represents the company's basic voting ownership rights.

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Question 20

Showing 1 - 20 of 106

For accounting purposes, the most important section of the articles of incorporation is the description of

A legal liability for cash dividends occurs on which of the following dates?

When common or preferred shares are made available for sale to the public, the details of the shares are discussed in a legal document called

What type of preferred share is entitled to dividends above its specified dividend if the common shares receive excess dividends and must receive dividends in arrears before the common dividends can be declared?

Non-cumulative means that common shareholders must be paid for dividends in arrears before preferred shareholders are paid.

Shares that have been sold by the company are known as issued shares.

Corporations generally issue shares through investment bankers known as "tellers".

Pre-emptive rights prevent ownership interests from being diluted.

The maximum number of shares that a firm can issue is the number of

The articles of incorporation include all of the following except

Share capital represents the amount that investors paid for the shares when they were initially issued by the company.

Stock splits

Dividend yield measure the dividends an investor will receive relative to the share price.

The denominator in the return on equity calculation is the average number of common shares outstanding.

Dividends are not paid on

Every corporation must have one class of shares that represents the company's basic voting ownership rights.

Overview of Corporate Financial Reporting

Analyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Inventory

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Financial Statement Analysis

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