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Exam 18: Shareholders Equity Key

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Question 101

Multiple Choice

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When a company issues a stock dividend, which of the following would be affected?

A) Earnings per share.
B) Total assets.
C) Total liabilities.
D) Total shareholders' equity.

E) B) and D)
F) B) and C)

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Question 102

Multiple Choice

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Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively?

A) $6; $12.
B) $18; $6.
C) $6; $6.
D) None of the above is correct.

E) A) and B)
F) A) and C)

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Question 103

Multiple Choice

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What ($ in 000s) was shareholders' equity as of December 31, 2014?

Paid-in capital must consist solely of amounts invested by shareholders.

Lucid Company declared a property dividend of 20,000 shares of $1 par Polk Company common stock. The Polk stock was purchased for $5 per share. Market value was $10 per share on the declaration date and $11 per share on the distribution date. What is the amount of the dividend?

What was shareholders' equity as of December 31, 2013?

Stock dividends cause a reduction in retained earnings, but they never reduce total shareholders' equity.

Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the listed transactions. ____ Declaration of a property dividend. ____ Net income for the year. ____ Purchase of treasury stock at a cost greater than the original issue price. ____ Purchase of treasury stock at a cost less than the original issue price. ____ Issue common stock. ____ Resale of treasury stock for less than cost, assuming no previous treasury stock sales. ____ Resale of treasury stock for more than cost.

The par value of common stock represents:

In February 2013, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts?

When preferred stock carries a redemption privilege, the shareholders may:

The owners of a corporation are its shareholders. If a corporation has only one class of shares, they typically are labeled common shares. Each of the following are ownership rights held by common shareholders, unless specifically withheld by agreement, except:

The costs of legal, promotional, and accounting services necessary to effect the sale of shares are referred to as share issue costs. How are these costs recorded? Compare this approach to the way debt issue costs are recorded.

Investors should be wary of stock buybacks during down times because the resulting decrease in shares and increase in earnings per share can be used to mask a slowdown in earnings growth.

When a corporation acquires its own shares, those shares assume the same status as authorized but unissued shares, as if they never had been issued. Explain how this is reflected in the accounting records if the shares are formally retired.

What ($ in 000s) was shareholders' equity as of December 31, 2013?

Mandatorily redeemable preferred stock is reported as a liability.

When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on:

In 2011, Winn, Inc., issued $1 par value common stock for $35 per share. No other common stock transactions occurred until July 31, 2013, when Winn acquired some of the issued shares for $30 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?

Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following except: