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Exam 11: Reporting and Analyzing Equity

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Question 21

Multiple Choice

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Rights to purchase common stock at a fixed price over a specified period are:

A) Preferred stocks.
B) Class B stocks.
C) Stock options.
D) Stock restrictions.
E) Preemptive rights.

F) A) and C)
G) D) and E)

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Question 22

Multiple Choice

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The following data has been collected about Keller Company's stockholders' equity accounts: Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:

A) 1,150.
B) 1,000.
C) 575.
D) 11,000.
E) 21,000.

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

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Question 23

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The amount assigned per share to stock by the corporation in its charter is the _____________________.

Stock not assigned a value per share by the corporate charter, allowing it to be issued at any price without the possibility of a minimum legal capital deficiency, is called _________________.

On August 1, a company's board of directors declared a 10% stock dividend to be distributed on September 1 to the stockholders of record on August 20. The company had 1,000,000 shares of $2.50 par value common stock outstanding with a market value of $23 per share. Prepare the journal entries required on August 1, August 20, and September 1.

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

On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

The costs of bringing a corporation into existence, including legal fees, promoter fees, and amounts paid to obtain a charter are called:

Minimum legal capital requirements are intended to protect creditors.

A company was organized in January 2016 and has 20,000 shares of $10 par value, 10%, nonparticipating preferred stock outstanding and 150,000 shares of $2 par value common stock outstanding. It has declared and paid cash dividends each year as shown below. Calculate the total dividends distributed to each class of stockholder under each of the assumptions given.

Druffle Industries issues 5,000 shares of $100 par, 7% noncumulative, nonparticipating preferred stock at par. The correct journal entry to record this stock issue is:

Druffle Industries has 5,000 shares of $100 par, 7% noncumulative, nonparticipating preferred stock issued and outstanding. In 2016, the board of directors declared cash dividends of $75,000. The amount of dividends to be distributed to preferred shareholders is:

A company has 2,000,000 common shares authorized, 400,000 common shares issued, and 15,000 common shares in treasury stock at the current year-end. It paid $0.96 per share cash dividends during the year. The year-end market price of the stock is $15. Calculate (1) the total dividends paid and (2) the dividend yield.

A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80. Its price-earnings ratio equals 13. Price-Earnings Ratio = Market Price per Share/Earnings per Share; $80/$6.50 = 12.3

Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

The total amount of cash and other assets the corporation receives from its stockholders in exchange for common stock is called __________________________.

Which of the following is true of a stock dividend?

A dividend preference for preferred stock means that:

Participating preferred stock has a feature that allows its holders to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock.

On January 3, Nebco Corporation issued 15,000 shares of its $2 par common stock at $19.50 per share. On May 4, the company issued 3,000 shares of its $50 par preferred stock at $83.00 per share. Prepare the journal entries required on January 3 and May 4.