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Exam 11: Reporting and Interpreting Owners Equity

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Question 41

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A company reported the following asset and liability balances at the end of 2013 and 2014: $\begin{array} { l r r } & \underline { 2013 } & \underline { 2014 } \\\text { Total Assets } & \$ 6,800,000 & \$ 7,600,000 \\\text { Total Liabilities } & 3,200,000 & 3,600,000\end{array}$ During 2014, cash dividends of $50,000 were declared and paid, and common stock was issued for $100,000. How much was the 2014 net income?

A) $400,000.
B) $480,000.
C) $350,000.
D) $300,000.

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

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Question 42

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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? A. Cash $\quad$ Common stock B. Cash $\quad$ Common stock $\quad$ Capital in excess of stated value C. Cash $\quad$ Common stock $\quad$ Retained earnings D. Cash $\quad$ Common stock $\quad$ Gain on sale of stock

A) Option A
B) Option B
C) Option C
D) Option D

E) None of the above
F) All of the above

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Question 43

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On January 1, 2014, the stockholders' equity section of Gibbons Corporation's balance sheet reported the following: $\begin{array}{l}\text { Common stock, par } \$ 10 \text {, authorized } 100,000 \text { shares, }\\\text { issued 10,000 shares } & \$ 100,000 \\\text { Capital in excess of par } & 50,000 \\\text { Retained earnings } & 160,000\end{array}$ During 2014, the following selected transactions occurred (assume they occurred in the order given): April 1 $\quad$ Issued a $10 \%$ stock dividend when the market price was $\$ 12$ . May 1 $\quad$ 200 shares of treasury stock were purchased at $\$ 11$ per share. Sept. 1 $\quad$ Declared and paid a cash dividend of $\$ 19,800$ . Dec. 31 $\quad$ Net income was $\$ 30,000$ . Required: Prepare the stockholders' equity section of the balance sheet as of December 31, 2014.

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?

Wendell Company provided the following pertaining to its recent year of operation: • 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 costing $9,000 was sold for $7,000. How much did Wendell's retained earnings increase during the recent year of operation?

What is the correct entry for the sale of 1,000 shares of $10 par value preferred stock for $50,000 cash?

Shares of stock held as treasury stock do not have voting rights or the right to receive dividends.

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

RKJ Company has provided the following: • 100,000 shares of $5 par value common stock are authorized • 70,000 shares were issued for $9 per share • 65,000 shares are outstanding Which of the following statements is correct based only on the above facts?

Wendell Company provided the following pertaining to its recent year of operation: • 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 costing $9,000 was sold for $7,000. How much did Wendell's capital in excess of par increase during the recent year of operation?

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

A company reported the following asset and liability balances at the end of 2013 and 2014: $\begin{array} { l r r } & \underline { 2013 } & \underline { 2014 } \\\text { Assets } & \$ 150,000 & \$ 180,000 \\\text { Liabilities } & \$ 70,000 & \$ 80,000\end{array}$ If the company paid dividends totaling $5,000, what is the amount of net income for 2014?

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?

Slickers, Inc. had the following capital structure during 2014: Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for 2012 and 2013. Common stock, $100 par value, 2,000 shares issued and outstanding. The total dividends declared and paid during 2014 totaled $25,000. How much of the dividend is paid to the common stockholders during 2014 assuming the preferred stock is noncumulative?

HighRise Company reported the following amounts of contributed capital in the stockholders' equity accounts as of January 1, 2014: $\begin{array}{lr}\text { Contributed capital: }\\\text { Common stock, par } \$ 5 \text {, authorized 50,000 shares; }\\\text { Issued and outstanding 30,000 shares } & \$ 150,000 \\\text { Capital in excess of par } & 100,000\end{array}$ Required: Indicate the journal entry to record each of the following transactions by entering the letter code corresponding to each account that would be debited and credited. Enter the code letter and the amount of each debit and credit (do not use dollar signs). The transactions, including the example, are not interrelated.

Which of the following statements about treasury stock transactions is correct?

Which of the following correctly describes the effect of declaring and distributing a common stock dividend?

Which of the following entries would be recorded when a company reissues 1,000 shares of treasury stock for $40 per share when they were repurchased at a cost of $44 per share and have a $1 par value?

Three dates that are significant for cash dividends are described in each part below. Part A: Name each of the described dates. $\quad$$\quad$$\quad$ Description 1. Date on which the board of directors approves the dividend. 2. Date on which a list of stockholder names is prepared. 3. Date on which the dividend checks are written. Part B: Prepare the journal entry for each date. Assume a $25,000 cash dividend. Description $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Journal Entry 1. Date on which the board of directors $\quad$ approves the dividend. 2. Date on which a list of stockholder $\quad$ names is prepared. 3. Date on which the dividend checks $\quad$ are written.

When a company reissues treasury stock, it creates a cash inflow from an investing activity because treasury stock is an investment asset on the balance sheet.