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Exam 13: Accounting for Corporations

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Question 61

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Large stock dividends are recorded at par or stated value.

A) True
B) False

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Question 62

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Halverstein Company's outstanding stock consists of 7,000 shares of cumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. $\begin{array}{lc}&\text { Dividend Declared }\\\text { Year 1 } & \$ 0 \\\text { Year 2 } & \$ 6,000 \\\text { Year 3 } & \$ 32,000\end{array}$ The amount of dividends paid to preferred and common shareholders in Year 2 is:

A) $3,000 preferred; $3,000 common.
B) $3,500 preferred; $2,500 common.
C) $0 preferred; $6,000 common.
D) $4,200 preferred; $1,800 common.
E) $6,000 preferred; $0 common.

F) B) and E)
G) A) and E)

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Question 63

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When preferred stock is cumulative and the directors either do not declare a dividend to preferred stockholders or declare one that does not cover the total amount of cumulative dividends, the unpaid amount is called ________.

A corporation had the following stock outstanding when the company's board of directors declared a $75,000 cash dividend in the current year: $\begin{array} { l | l } \text { Preferred stock, \$40 par, 6\%, 12,500 shares issued } & \$ 500,000 \\\hline \text { Common stock, \$10 par, 70,000 shares issued } \ldots \ldots \ldots \ldots \ldots & 700,000 \\\hline \text { Total } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & \$ 1,200,000 \\\hline\end{array}$ Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is noncumulative and nonparticipating.

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the declaration of the cash dividend is:

What is a corporation? Identify the key advantages and disadvantages of corporations.

A debit balance in retained earnings is referred to as an accumulated deficit.

Cactus Joe Corporation reported stockholders' equity on January 1 of the current year as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,025,000; Retained Earnings, $1,850,000. Prepare journal entries to record the following transactions: May 1 A cash dividend of $1.05 per common share was declared by the board of directors to stockholders of record on May 20, payable June 1. May 20 The date of record. June 1 Paid the cash dividend.

Book value per share reflects the value per share if a company is liquidated at balance sheet amounts.

A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

When a corporation has only one class of stock, the stock is called:

Dividend yield is computed by dividing earnings per share by the market value per share.

A corporation may be authorized to issue both common and preferred stock.

A reverse stock split increases the market value per share and the par value per share of stock.

A corporation had the following stock outstanding when the company's board of directors declared a $55,000 cash dividend during the current year: Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is cumulative and nonparticipating and dividends are one year in arrears.

Stockholders' equity consists of paid-in capital and retained earnings.

Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

________ is the stockholders' equity applicable to common shares divided by the number of common shares outstanding.

Dynasty Corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 400,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $800,000; Retained Earnings, $3,600,000. Prepare journal entries to record the following transactions: Feb. 15 The board of directors declared a 5% stock dividend to stockholders of record on March 1, to be issued on March 20. The stock was trading at $7 per share prior to the dividend Mar. 1 The date of record. Mar. 20 Issued the stock dividend.