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Exam 11: Reporting and Analyzing Stockholders Equity

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Question 91

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On November 1, 2014, Kalen Corporation's stockholders' equity section is as follows: $\begin{array}{lr}\text { Common stock, } \$ 10 \text { par value } & \$ 600,000 \\\text { Paid-in capital in excess of par value-Common Stock } & 180,000 \\\text { Retained earnings } & 200,000 \\\text { Total stockholders' equity } & \underline{\$ 980,000}\end{array}$ On November 1, Kalen declares and distributes a 15% stock dividend when the market value of the stock is $16 per share. Instructions Indicate the balances in the stockholders' equity accounts after the stock dividend has been distributed.

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Question 92

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A disadvantage of the corporate form of organization is

A) professional management.
B) tax treatment.
C) ease of transfer of ownership.
D) lack of mutual agency.

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Question 93

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On January 1, Hamblin Corporation had 90,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The entry to record the transaction of March 17 would include a

Kaplan Manufacturing Corporation purchased 2,500 shares of its own previously issued $10 par common stock for $57,500. As a result of this event,

On January 1, 2014, Wooden Company issued 16,000 shares of $2 par value common stock for $120,000. On March 1, 2014, the company purchased 2,000 shares of its common stock for $15 per share for the treasury. Instructions Journalize the stock transactions of Wooden Company in 2014.

Which of the following show the proper effect of a stock split and a stock dividend?

The tax laws can be a significant disadvantage of the corporate form of business.

The stockholders' equity section of Patrick Corporation's balance sheet at December 31 is presented here: Instructions From a review of the stockholders' equity section, answer the following questions. (a) How many shares of common stock are outstanding? (b) Assuming there is a stated value, what is the stated value of the common stock? (c) What is the par value of the preferred stock? (d) If the annual dividend on preferred stock is $30,000, what is the dividend rate on preferred stock? (e) If dividends of $60,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?

The term residual claim refers to a stockholders' right to

A stock dividend will cause an increase in total contributed capital at the date the dividend is declared.

Retained earnings that are restricted are unavailable for dividends.

When stock dividends are distributed,

Companies frequently issue both preferred stock and common stock. What are the major differences in the rights of stockholders between these two classes of stock?

In the stockholders' equity section of the balance sheet

The following information pertains to Marsh Company. Assume that all balance sheet amounts represent average balance figures. $\begin{array} { l r } \text { Total asset } & \$ 400,000 \\\text { Stockholders' equity-common } & 200,000 \\\text { Total stockholders' equity } & 280,000 \\\text { Sales revenue } & 120,000 \\\text { Net income } & 25,000 \\\text { Number of shares of common stock } & 8,000 \\\text { Common dividends } & 9,000 \\\text { Preferred dividends } & 6,000\end{array}$ What is Marsh's payout ratio?

In published annual reports

La Vida Corporation issued 24,000 shares of no-par value ordinary shares for €29.50 per share. Which of the following statements is true?

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2013, West declared and paid dividends of $4,000. In 2014, West declared and paid dividends of $12,000. How much of the 2014 dividend was distributed to preferred shareholders?

The board of directors must assign a per share value to a stock dividend declared that is