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Exam 11: Reporting and Interpreting Stockholders Equity

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Question 1

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During 2017, Sanders Corporation prepared the following journal entry to record the declaration and payment of a cash dividend: The total par values of common and preferred stock outstanding were $55,000 and $40,000, respectively. No dividends were declared or paid during 2016. There are 7,500 shares of common stock held in treasury. The common stock has a par value of $2 per share. Required: A.If the preferred stock is noncumulative, calculate the current dividend rate on the preferred stock. B.Calculate the number of common stock shares that received dividends. C.Calculate the dividend paid per share of common stock.

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A. $40,000 par value × Rate = $3,600 div...

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Question 2

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

A) Preferred shareholders have a preference with respect to dividend payments.
B) Preferred shareholders have a preference with respect to assets in the event of dissolution.
C) Preferred shareholders have voting rights on a per share basis.
D) Preferred stock typically has a fixed dividend rate.

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

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Question 3

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Which of the following represents the number of shares currently owned by investors?

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?

The dividend yield ratio increases when the market price per share increases.

A company reported total stockholders' equity of $340,000 on its balance sheet dated December 31, 2016. During the year ended December 31, 2017, the company reported net income of $40,000, declared and paid a cash dividend of $8,000, declared and distributed a 10% stock dividend with a $10,000 total market value, issued additional common stock for $60,000, and paid $12,000 to purchase treasury stock. What is total stockholders' equity as of December 31, 2017?

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?

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

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

A company reported total stockholders' equity of $170,000 on its balance sheet dated December 31, 2016. During the year ended December 31, 2017, 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, 2017?

Which of the following is not a primary advantage of a general partnership relative to a corporation?

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

When a company pays its previously declared cash dividend, an investing cash outflow is reported.

Which of the following journal entries does not reflect the initial cash sale of shares of common stock?

The following information is provided for Slickers, Inc. for year 2016: • 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 2014 and 2015 • Total dividends declared and paid during 2016 totaled $25,000 How much of the dividend was paid to the common stockholders during 2016 assuming the preferred stock is noncumulative?

Employees who receive stock options as compensation:

The following information is available for Bradford Bikes for the years 2017 and 2016: Required: A.Calculate the dividend yield ratio for both 2017 and 2016. 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.

On December 31, 2016, Brave Corporation reported the following on its balance sheet: Required: Prepare the stockholders' equity section of the balance sheet.

The board of directors of Atlantic Corp. does is deciding whether to declare and pay a cash dividend or to declare and distribute a stock dividend. Required: Complete the following chart to show the overall effect on each financial statement item for a cash dividend and a stock dividend. Enter the letter "I" if the effect of the dividend is to increase the financial statement item, a letter "D" if the effect of the dividend is to decrease the financial statement item, or a letter "N" if there is no overall effect. (Hint: Think of the journal entries that would be prepared for a cash dividend and a stock dividend. The overall effect is the net effect from declaration to final payment or distribution.)

Date on which a list of stockholder names is prepared.