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Exam 10: Reporting and Analyzing Stockholders Equity

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Question 1

Multiple Choice

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A corporation has the following account balances: Common Stock, $1 par value, $80,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the

A) legal capital is $2,780,000.
B) number of shares issued is 80,000.
C) number of shares outstanding is 2,780,000.
D) average price per share issued is $3.48.

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Question 2

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The term residual claim refers to a stockholders' right to

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

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Question 3

Multiple Choice

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If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

Ace Inc. has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?

The number of common shares outstanding can never be greater than the number of shares issued.

Treasury Stock is a(n)

What is the total stockholders' equity based on the following account balances? $\begin{array} { l r } \text { Common Stock } & \$ 1,800,000 \\\text { Paid-In Capital in Excess of Par } & 100,000 \\\text { Retained Earnings } & 360,000 \\\text { Treasury Stock } & 60,000\end{array}$

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Which one of the following is not an ownership right of a stockholder in a corporation?

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

A stockholder who receives a stock dividend would

Corporations generally issue stock dividends in order to

A stockholder has the right to vote in the election of the board of directors.

Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 7,000 shares of preferred stock for land with an asking price of $875,000 and a market value of $770,000, which of the following would be the best journal entry for Retro to record?

The chief accounting officer in a company is known as the

When no-par value stock does not have a stated value, the entire proceeds from the issuance of the stock become legal capital.

The two ways that a corporation can be classified by purpose are

Berman Inc. has 6,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2016, and December 31, 2017. The board of directors declared and paid an $12,000 dividend in 2016. In 2017, $72,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2017?

Which of the following statements is not true about a 2-for-1 split?