Exam 11: Contributed Capital

Use the following information to answer the question below. When Calvert Corporation was formed on January 1,2010,the corporate charter provided for 50,000 shares of $20 par value common stock.The following transactions were among those engaged in by the corporation during its first month of operation: 1)The corporation issued 200 shares of stock to its lawyer in full payment of the $5,000 bill for assisting the company in drawing up its articles of incorporation and filing the proper papers with the state agency. 2)The company issued 8,000 shares of stock at a price of $25 per share. 3)The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of $160,000. The entry to record transaction 2 would be:

Use the following information to obtain the ratios requested below.Where necessary,carry answers to one decimal place. Dividends per share: $.54 Market price per share: $30 Net income: $88,000 Average stockholders' equity: $625,000 Earnings per share: $1.25 A) Dividends yield = _____________% B) Return on equity = _____________% C) Price/earnings (P/E) ratio = __________times

Start-up and organization costs include all of the following except

Under what circumstances should compensation expense be recorded for a stock option plan?

The excess of the issuance price over the stated value of a no-par common stock should be credited to the

Return on equity equals average stockholders' equity divided by net income.

The declaration of a cash dividend causes an increase in a corporation's liabilities at the date of record.

When common stock with a par value is sold for a price that exceeds par value,the Common Stock account is credited only for the par value of the shares sold.

The board of directors of Berweck Corporation declared a cash dividend on January 18,2010,to be paid on February 18,2010,to shareholders holding the stock on February 2,2010.Given these facts,the date February 2,2010,is referred to as the

Most preferred stocks are callable preferred stocks,which means that the callable feature may be exercised by

Paloma Corporation had 5,000 shares of $100 par value,9 percent cumulative preferred stock and 30,000 shares of $10 par value common stock outstanding during each of its first four years of operation.The following amounts of cash dividends were paid during the years indicated: 2007,$0; 2008,$80,000; 2009,$220,000; 2010,$270,000.Determine the cash dividends per share paid to the preferred and common stockholders during each of the four years.

Cash dividends become a liability of a corporation when the stock goes ex-dividend.

Duncan Corporation has 2,000 shares of $100 par value,6 percent cumulative preferred stock and 20,000 shares of $10 par value common stock outstanding.In its first four years of operation,Duncan Corporation paid cash dividends as follows: 2007,$15,000; 2008,$0; 2009,$20,000; 2010,$25,000.Calculate the total cash dividends received by owners of preferred and common stock in each year.

The sale of treasury stock at an amount greater than cost results in a gain to be reported on the income statement.

In its 2010 annual report,Gamma Company indicated that the number of common shares held in the treasury decreased from 45,546,171 in 2009 to 3,397,381 in 2010.The following also was reported: By Board authorization,effective December 31,2010 the Company canceled 50 million shares of common stock held in treasury.As a result of the cancellation,common stock decreased by $125 million,capital in excess of par value of stock decreased by $228 million,and retained earnings decreased by $3,119 million. The shares canceled or retired represent almost 25 percent of the shares of common stock issued by Gamma.Explain the accounting for the treasury shares by Gamma.Did the company buy any treasury shares during the year? Prepare the entry in journal form that was made to record the cancellation or retirement of the treasury shares.At what average price were the treasury shares purchased,and at what average price were they originally issued? What do you think was management's reason for purchasing the treasury shares? (Omit explanations.)

Use the following information to answer the question below. On January 1,2010,Falcon Corporation had 40,000 shares of $10 par value common stock issued and outstanding.All 40,000 shares had been issued in a prior period at $17 per share.On February 1,2010,Falcon purchased 6,100 shares of treasury stock for $19 per share and later sold the treasury shares for $26 per share on March 2,2010. What amount of gain due to these treasury stock transactions should be reported on the income statement for the year ended December 31,2010?

Indicate on the blanks below the net effect (I = increase,D = decrease,NE = no effect)of each of the following entries on working capital. _____ 1.To record the declaration of a cash dividend _____ 2.To record the payment of a previously declared and recorded cash dividend _____ 3.To close the Dividends account at the end of the accounting period

How is it possible for a corporation to have more shares issued than it has outstanding?

Holders of common stock must be made aware of possible restrictions on common dividends when the preferred stock is

Indicate on the blanks below the net effect (I = increase,D = decrease,NE = no effect)of each of the following entries on total stockholders' equity. _____ 1.To record the declaration of a cash dividend _____ 2.To record the payment of a previously declared and recorded cash dividend _____ 3.To close the Dividends account at the end of the accounting period