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Exam 11: Reporting and Interpreting Owners Equity

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Question 21

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Which of the following is a correct statement about cumulative and noncumulative preferred stock?

A) They both receive dividends in arrears.
B) Cumulative stock's undeclared dividends accumulate each year until paid, while noncumulative stock's right to receive dividends is forfeited in any year that dividends are not declared.
C) Cumulative preferred stock is guaranteed to receive their dividends.
D) Cumulative preferred stock's right to receive dividends is forfeited in any year that dividends are not declared.However, noncumulative stock's undeclared dividends accumulate each year until paid.

E) A) and D)
F) A) and B)

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Question 22

True/False

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A stock split results in the reduction of the par or stated value per share and a proportionate increase in the number of shares outstanding.

A) True
B) False

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Question 23

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A company declares a 40% stock dividend when there were 4 million common shares outstanding with a $1 par value.The current market price is $20 per common share.Which of the following will be the effect of the stock dividend?

CGJ Company has provided the following: 200,000 shares of $5 par value common stock are authorized; 140,000 shares of common stock were issued for $11 per share; 130,000 shares are outstanding. Which of the following statements is false?

Assume the following capital structure: Preferred stock,6%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 - 2009) . Common stock,$100 par value,2,000 shares issued and outstanding. Total dividends declared and paid in 2010 were $50,000.How much of the 2010 dividend will be paid to the common stockholders assuming the preferred stock is noncumulative?

Assume the following capital structure: Preferred stock,6%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 - 2009) . Common stock,$100 par value,2,000 shares issued and outstanding. Total dividends declared and paid in 2010 were $50,000.How much of the 2010 dividend will be paid to the preferred stockholders assuming the preferred stock is cumulative?

Most investors that are retired prefer to receive their return on investment in the form of stock price appreciation rather in dividends.

Irish Corporation issued (sold) 10,000 shares of its no par common stock for $70 per share.The bylaws established a stated value of $10 per share.The transaction would increase the common stock account on the balance sheet by how much?

Treasury stock is a corporation's own stock that was issued and then repurchased,and is still held by the corporation.

Which of the following statements regarding earnings per share (EPS) is correct?

Which of the following is true about a proprietorship?

Which of the following statements is true about a partnership?

A company reported total stockholders' equity of $540,000 on its balance sheet dated December 31,2010.During the year ended December 31,2011,the company reported net income of $60,000,declared and paid a cash dividend of $18,000,declared and distributed a 10% stock dividend with a $15,000 total market value,sold treasury stock costing $12,000 for $15,000,and issued additional common stock for $70,000.What is total stockholders' equity as of December 31,2011?

Which of the following statements is not correct?

Which of the following statements is false?

What is the correct entry for the sale of 1,000 shares of $10 par value preferred stock for $50,000 cash? $\begin{array}{lr}\text { A. Cash } & \quad\quad\quad\quad\quad\quad50,000 \\\text { Preferred stock } & &50,000 \\\end{array}$ $\begin{array}{lr}\text { B. Cash } & \quad\quad\quad\quad\quad\quad10,000 \\\text { Preferred stock } & &10,000 \\\end{array}$ $\begin{array}{lr}\text { C. Cash } & 50,000 \\\text { Gain on sale of preferred stock} & &40,000 \\\text { Preferred stock } & &10,000 \\\end{array}$ $\begin{array}{lr}\text { D. Cash } & 50,000 \\\text { Preferred stock } & &10,000 \\\text { Gain on sale of preferred stock} & &40,000 \\\end{array}$

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

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

Which of the following statements regarding earnings per share (EPS) is false?

Total stockholders' equity increases when treasury stock is sold for an amount less than its cost.