Deck 12: Income and Changes in Retained Earnings

Question 1

Beck Corporation declared a 2-for-1 common stock split, but this transaction was erroneously recorded as a 100% common stock dividend. As a result:

A) The common stock account is overstated.
B) The total dollar amount of stockholders' equity is overstated.
C) The corporate records do not show the correct number of shares of common stock outstanding.
D) The par value per share is understated.

Answer 1

The common stock account is overstated.

Question 2

On the basis of this information, net income for the current year is:

A) $488,800.
B) $922,400.
C) $725,600.
D) $1,102,400.

Answer 2

$922,400.

Question 3

The following two items are disclosed in the stockholders' equity section of Cort Corporation's current year balance sheet:
Treasury stock (500 shares, at cost) $50,000
Additional paid-in capital: treasury stock transactions 22,500
If the company had reacquired 3,000 shares of treasury stock in February of the current year and has recorded no other treasury stock transactions, then some of the treasury stock must have been sold during the current year for:

A) $9 per share above its par value.
B) $9 per share.
C) $109 per share.
D) $109 per share above its cost.

Answer 3

$109 per share.

Question 4

At the beginning of the current year, Bard Corporation had 400,000 shares of $1 par common stock outstanding and had retained earnings of $11,000,000. During the year, the company earned $5,000,000, declared a 5% stock dividend when the price of stock was $25 per share, and paid a year-end cash dividend of $2 per share. (The cash dividend was paid after the stock dividend had been distributed.) Bard Corporation's retained earnings at the end of the year amount to:

A) $16,000,000.
B) $14,660,000.
C) $14,320,000.
D) $14,700,000

Question 5

Donnell Corp. had 100,000 shares of 8% preferred stock, $100 par, and 500,000 shares of $1 par common stock outstanding throughout the year. Net income for the year was $4,800,000, and Donnell declared and distributed a cash dividend of $4 per share on its common stock. Earnings per share amounted to:

A) $8.80.
B) $4.00.
C) $8.00.
D) $2.00.

Question 6

The stockholders' equity section of the balance sheet of Global Publishing at December 31, Year 1, appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company had no treasury stock purchases before Year 1.

-Refer to the above data. What was the average issue price per share of preferred stock?

A) $80.
B) $100.
C) $124.
D) $148.

Question 7

The stockholders' equity section of the balance sheet of Global Publishing at December 31, Year 1, appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company had no treasury stock purchases before Year 1.

-Refer to the above data. How many shares of common stock are outstanding?

A) 140,000.
B) 126,000.
C) 500,000.
D) 120,000.

Question 8

The stockholders' equity section of the balance sheet of Global Publishing at December 31, Year 1, appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company had no treasury stock purchases before Year 1.

-Refer to the above data. A small stock dividend of 5,000 shares was declared and distributed during Year 1. What was the market price per share on the date of declaration?

A) $82 per share.
B) $80 per share.
C) $2 per share.
D) $78 per share

Question 9

The stockholders' equity section of the balance sheet of Global Publishing at December 31, Year 1, appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company had no treasury stock purchases before Year 1.

-Refer to the above data. If Global Publishing had reacquired 16,000 shares of treasury stock early in Year 1, then some treasury stock must have been sold during Year 1 for:

A) $5 per share.
B) $8 per share.
C) $6 per share.
D) $16 per share.

Question 10

The stockholders' equity section of the balance sheet of Global Publishing at December 31, Year 1, appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company had no treasury stock purchases before Year 1.

-Refer to the above data. Assume that all remaining treasury stock is reissued at a price of $18 per share in January of Year 2. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?

A) $96,000.
B) $140,000.
C) $112,000.
D) $288,000.

Question 11

The stockholders' equity section of the balance sheet of Xanadu Fashions, Inc., at December 31, Year 1 appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company purchased no treasury stock before Year 1.
-Refer to the above data. What was the average issue price per share of preferred stock?

Question 12

The stockholders' equity section of the balance sheet of Xanadu Fashions, Inc., at December 31, Year 1 appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company purchased no treasury stock before Year 1.
-Refer to the above data. How many shares of common stock are outstanding?

Question 13

The stockholders' equity section of the balance sheet of Xanadu Fashions, Inc., at December 31, Year 1 appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company purchased no treasury stock before Year 1.
-Refer to the above data. A small stock dividend of 20,000 shares was declared and distributed during Year 1. What was the market price per share on the date of declaration?

Question 14

The stockholders' equity section of the balance sheet of Xanadu Fashions, Inc., at December 31, Year 1 appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company purchased no treasury stock before Year 1.
-Refer to the above data. If Xanadu Fashions had reacquired 35,000 shares of treasury stock early in Year 1, compute the price per share for which the reissued treasury stock was sold.

Question 15

The stockholders' equity section of the balance sheet of Xanadu Fashions, Inc., at December 31, Year 1 appears as follows:
Answer the following questions based on the stockholders' equity section given above. The company purchased no treasury stock before Year 1.
-Refer to the above data. Assume all remaining treasury stock is reissued at a price of $24 per share in January of Year 2. Prepare the journal entry to record this transaction:

Question 16

Shown below is information relating to operations of R. Brook, Inc. for the current year:
In the space provided, complete the income statement for R. Brook, Inc., including earnings per share figures. R. Brook, Inc. has 100,000 shares of a single class of common stock outstanding throughout the year.
R. BROOK, INC.
Condensed Income Statement
For the Year Ended December 31, XX