Exam 11: Reporting and Interpreting Stockholders Equity

Preferred stockholders do not have voting rights but do have a preference with respect to dividend payments.

Wendell Company provided the following pertaining to its accounting year that ended December 31, 2016: • Common stock with a $10,000 par value was sold for $50,000 cash • Cash dividends totaling $20,000 were declared, of which $15,000 were paid • Net income was $70,000 • A 5% stock dividend resulted in a common stock distribution, which had a $5,000 par value and a $23,000 market value • Treasury stock repurchased in a prior year for $9,000 was resold for $7,000 and in the journal entry to record the sale, Additional paid-in capital was debited for the amount of the difference between the repurchase price and the resale price What is the amount of net increase in Wendell's additional paid-in capital account during the year 2016?

On February 1, 2015, Cue Company acquired 1,000 shares of its $1 par value stock for $47 per share and held these shares in treasury. On April 10, 2016, Cue resold all the treasury shares for $50 per share. Which of the following entries would be recorded when Cue Company resells the shares of treasury stock?

The dividend yield ratio increases when a cash dividend is paid.

Common stockholders have voting rights and can declare cash dividends.

Earnings per share is calculated by dividing net income by the average number of outstanding shares of common stock at year-end.

The charter of Delta Corporation specified a maximum of 25,000 shares of common stock. At the current date, 5,000 shares remain unissued, and 2,000 of the issued shares have been repurchased and are still held by Delta. Required: Calculate the number of shares that are: A)Authorized B)Issued C)Held in the treasury D)Outstanding

The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for three prior years (2014­­-2016) • Total dividends declared and paid in 2017 were $50,000. Assuming the preferred stock is cumulative, what amount of the 2017 dividend declaration for dividends in arrears was recorded with a debit to the Dividends payable account on the date of declaration?

The declaration and payment of a cash dividend on common stock results in a reduction of the issuing corporation's total stockholders' equity.

The following information is available for Italiano Ices for the years 2017 and 2016: Required: A.Calculate the dividend yield for both 2017 and 2016. B.What caused the change in the dividend yield ratio from 2016 to 2017? C.Comment on the payout of dividends relative to the net income earned over the two years.What does your choice indicate about the company's strategy with regard to paying dividends?

Preferred stock often has a preference over common stock in the distribution of assets in the event of dissolution of the corporation.

A company reported the following asset and liability balances at the end of 2015 and 2016: During 2016, cash dividends of $50,000 were declared and paid, and common stock was issued for $100,000. What was the amount of net income for 2016?

Wendell Company provided the following pertaining to its accounting year that ended December 31, 2016: • Common stock with a $10,000 par value was sold for $50,000 cash • Cash dividends totaling $20,000 were declared, of which $15,000 were paid • Net income was $70,000 • A 5% stock dividend resulted in a common stock distribution, which had a $5,000 par value and a $23,000 market value • Treasury stock repurchased in a prior year for $9,000 was resold for $7,000 and in the journal entry to record the sale, Additional paid-in capital was debited for the amount of the difference between the repurchase price and the resale price What is the amount of increase in Wendell's total stockholders' equity for the year ended December 31, 2016?

Watson Company has provided the following data about its common stock: • Par value is $1 per share • 10,000,000 authorized shares • 4,300,000 shares are outstanding • 4,700,000 shares are issued How many shares of treasury stock are there?

The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for three prior years (2014­­-2016) • Total dividends declared and paid in 2017 were $50,000. Assuming the preferred stock is noncumulative, what amount of the 2017 dividend declaration for the amount of dividends in arrears was recorded with a credit to the Dividends payable account on the date of declaration?

The following information is provided for Slickers, Inc. for year 2016: • Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for 2014 and 2015 • Total dividends declared and paid during 2016 totaled $25,000 How much of the dividend was paid to the preferred stockholders during 2016 assuming the preferred stock is noncumulative?

The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for three prior years (2014-2016) • Total dividends declared and paid in 2017 were $50,000. How much of the 2017 dividend payment was paid to the preferred stockholders assuming the preferred stock is cumulative?

Marlin, Inc., declared a cash dividend of $40,000 in 2015 when the following stocks were outstanding: No dividends were declared or paid during the prior year. Required: Compute the amount of cash that would be paid to each stockholder group under each of the following separate cases. Show the amount of current dividend and dividends paid in arrears wherever applicable. Case A The preferred stock is noncumulative. Preferred: $_______ Common $______ Case B The preferred stock is cumulative. Preferred: $_______ Common $______

Rye Company has provided the following information: • Number of issued common shares, 225,000 • Net income, $500,000 • Number of authorized common shares, 400,000 • Number of treasury shares, 25,000 What is Rye's earnings per share (EPS)?

RKJ Company has provided the following information: • 100,000 shares of $5 par value common stock are authorized • 70,000 shares have been issued • 65,000 shares are outstanding The 70,000 shares of issued common stock were issued for $9 per share. Which of the following statements is correct?