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Exam 11: Reporting and Interpreting Stockholders Equity

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Question 1

Multiple Choice

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Which of the following statements is false?

A) Common stockholders have a residual claim on assets in the event of liquidation.
B) Shares of stock held in the treasury are subtracted from the number of issued shares in the determination of the number of outstanding shares.
C) Common stockholders have voting rights at annual stockholder meetings.
D) Corporations are governed by their stockholders.

E) A) and C)
F) None of the above

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Question 2

Multiple Choice

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Which of the following transactions does not result in an increase in stockholders' equity?

A) Sale of no-par common stock for cash.
B) Declaration and distribution of a common stock dividend.
C) Sale of preferred stock for cash at par value.
D) Sale of treasury stock for cash at a price less than its cost.

E) A) and B)
F) All of the above

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Question 3

Multiple Choice

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Which of the following does not correctly describe preferred stock?

The declaration and distribution of a 2-for-1 stock split results in a reduction of retained earnings.

A company reported total stockholders' equity of $170,000 on its balance sheet dated December 31,2018.During the year ended December 31,2019,the company reported net income of $20,000,declared and paid a cash dividend of $4,000,declared and distributed a 10% stock dividend with a $5,000 total market value,and issued additional common stock for $40,000.What is total stockholders' equity as of December 31,2019?

The following information is available for Italiano Ices for the years 2020 and 2019: A.Calculate the dividend yield for both 2020 and 2019. B.What caused the change in the dividend yield ratio from 2019 to 2020? 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?

Irish Corporation issued (sold) 10,000 shares of common stock for $70 per share.The bylaws established a stated value of $10 per share.What is the amount of increase in the common stock account as a result of this transaction?

The following information is provided for Slickers,Inc.for year 2019: • 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 2017 and 2018 • Total dividends declared and paid during 2019 totaled $25,000 - How much of the dividend was paid to the preferred stockholders during 2019 assuming the preferred stock is noncumulative?

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 provided for Bold Company for the year 2019: • 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 (2016-2018) • Total dividends declared and paid in 2019 were $50,000. - How much of the 2019 dividend payment was paid to the preferred stockholders assuming the preferred stock is cumulative?

The following information is available for Bradford Bikes for the years 2020 and 2019: A.Calculate the dividend yield ratio for both 2020 and 2019. B.Interpret the yield ratio in terms of whether it is high or low,or whether it indicates a steady dividend policy,and whether Bradford Bikes appears to be growing or to be stagnant.

The two primary sources of equity shown in a balance sheet are:

On December 31,2019,Brave Corporation reported the following on its balance sheet: Prepare the stockholders' equity section of the balance sheet.

The declaration of a stock dividend by a corporation's board of directors creates a liability on the declaration date.

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. Calculate the number of shares that are: A.Authorized B.Issued C.Held in the treasury D.Outstanding

On January 1,2019,the accounts of Mac Corporation showed the following: During 2019,the following transactions occurred which affected stockholders' equity (in the order given): The stockholders' equity section of the balance sheet for the company must be prepared for the December 31,2019 balance sheet.The format is provided below with certain amounts missing.Supply the missing amounts by entering them in the blanks.

Which of the following journal entries is correct when common stock is initially issued for cash at a price in excess of the stock's stated value?

Which of the following statements does not correctly describe preferred stock?

A company has 10 million common shares authorized and 2.5 million shares issued.The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split.Which of the following is correct?

The following information is provided for Bold Company for the year 2019: • 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 (2016-2018) • Total dividends declared and paid in 2019 were $50,000. - How much of the 2019 dividend payment was paid to the common stockholders assuming the preferred stock is cumulative?