Question 1

Tomlinson Packaging Corporation began business in 2014 by issuing 30,000 shares of $5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2014 balance sheet, Tomlinson Packaging would report

Accepted Answer

A)  Common Stock of $300,000. 
B)  Common Stock of $150,000. 
C)  Common Stock of $240,000. 
D)  Paid-in Capital of $200,000.

Question 2

A stock split will

Accepted Answer

A)  have no effect on retained earnings. 
B)  increase total paid-in capital. 
C)  increase the total par value of the stock. 
D)  have no effect on the par value per share of stock.

Question 3

Outstanding stock of the Hall Corporation included 40,000 shares of $5 par common stock and 20,000 shares of 6%, $10 par non-cumulative preferred stock. In 2013, Hall declared and paid dividends of $8,000. In 2014, Hall declared and paid dividends of $24,000. How much of the 2014 dividend was distributed to preferred shareholders?

Accepted Answer

A)  $16,000. 
B)  $28,000. 
C)  $12,000. 
D)  None of these answer choices are correct.

Question 4

The liability of a stockholder is usually limited to the stockholder's investment in the corporation.

Accepted Answer

A) True 
 B)False

Question 5

The board of directors of Yancey Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on August 15, 2014, to stockholders of record on July 31, 2014. The effects of the journal entry to record the declaration of the dividend on July 15, 2014, are to

Accepted Answer

A)  decrease stockholders' equity and increase liabilities. 
B)  decrease stockholders' equity and decrease assets. 
C)  increase stockholders' equity and increase liabilities. 
D)  increase stockholders' equity and decrease assets.

Question 6

The effect of the declaration of a cash dividend by the board of directors is to

Accepted Answer

The answer of The effect of the declaration of a...

Question 7

The acquisition of treasury stock by a corporation

Accepted Answer

A)  increases its total assets and total stockholders' equity. 
B)  decreases its total assets and total stockholders' equity. 
C)  has no effect on total assets and total stockholders' equity. 
D)  requires that a gain or loss be recognized on the income statement.

Question 8

When preferred stock is cumulative, preferred dividends not declared in a given period are called dividends in arrears.

Accepted Answer

A) True 
 B)False

Question 9

The term legal capital is a descriptive term for

Accepted Answer

A)  stockholders' equity. 
B)  par value. 
C)  residual equity. 
D)  market value.

Question 10

When no-par common stock with a stated value is issued for cash, the common stock account is credited for an amount equal to the cash proceeds.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  debit to Cash for $80,000. 
B)  credit to Common Stock for $80,000. 
C)  credit to Paid-in Capital in Excess of Par Value for $40,000. 
D)  credit to Common Stock for $120,000.

Question 12

Oxford Inc. was authorized to issue 100,000 £10 par value ordinary shares. As of December 31, 2014, the company had issued 44,000 shares at an average price of £22 per share. During 2014, the company felt that the shares were undervalued so it purchased 10,000 treasury shares at £18 per share. When the share price rebounded later in the year, the company sold 4,000 of the treasury for £25. Retained earnings was £1,658,000 at December 31, 2014. Total equity at December 31, 2014 is

Accepted Answer

A)  £2,446,000. 
B)  £2,518,000. 
C)  £2,546,000. 
D)  £2,762,000.

Question 13

Preferred stock may be cumulative. Discuss this feature.
(b) How are dividends in arrears presented in the financial statements?

Accepted Answer

The answer of Preferred stock may be cumulative. Discuss this...

Question 14

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 15

The following information pertains to Marsh Company. Assume that all balance sheet amounts represent average balance figures.  What is Marsh's return on common stockholders' equity?

Accepted Answer

A)  12%. 
B)  9%. 
C)  7.5%. 
D)  6.4%.

Question 16

Ace Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock?

Accepted Answer

A)  $50 per share 
B)  $50,000 in total 
C)  $5,000 in total 
D)  $0.50 per share

Question 17

Freidrichs Company has issued and outstanding 11,000 shares of cumulative, 6%, €50 par value preference shares which it sold for €54 per share at the beginning of 2012. The company has never paid preference dividends. As of December 31, 2014, dividends in arrears are

Accepted Answer

A)  €66,000. 
B)  €99,000. 
C)  €121,500. 
D)  €106,920.

Question 18

The term residual claim refers to a stockholders' right to

Accepted Answer

A)  receive dividends. 
B)  share in assets upon liquidation. 
C)  acquire additional shares when offered. 
D)  exercise a proxy vote.

Question 19

In its first year of operations, Martinez Corporation had the following transactions pertaining to its $10 par value preferred stock.  Instructions
(a) Journalize the transactions.
(b) Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital in excess of par value-preferred stock at the end of the year.

Accepted Answer

The answer of In its first year of operations, Martinez...

Question 20

When stock dividends are distributed,

Accepted Answer

A)  Common Stock Dividends Distributable is decreased. 
B)  retained earnings is decreased. 
C)  Paid-in Capital in Excess of Par Value is debited if it is a small stock dividend. 
D)  no entry is necessary if it is a large stock dividend.

Exam 11: Reporting and Analyzing Stockholders Equity

A stock split will

The liability of a stockholder is usually limited to the stockholder's investment in the corporation.

The effect of the declaration of a cash dividend by the board of directors is to

The acquisition of treasury stock by a corporation

When preferred stock is cumulative, preferred dividends not declared in a given period are called dividends in arrears.

The term legal capital is a descriptive term for

When no-par common stock with a stated value is issued for cash, the common stock account is credited for an amount equal to the cash proceeds.

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

Preferred stock may be cumulative. Discuss this feature. (b) How are dividends in arrears presented in the financial statements?

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

The following information pertains to Marsh Company. Assume that all balance sheet amounts represent average balance figures. What is Marsh's return on common stockholders' equity?

Ace Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock?

Freidrichs Company has issued and outstanding 11,000 shares of cumulative, 6%, €50 par value preference shares which it sold for €54 per share at the beginning of 2012. The company has never paid preference dividends. As of December 31, 2014, dividends in arrears are

The term residual claim refers to a stockholders' right to

When stock dividends are distributed,