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Exam 11: Reporting and Interpreting Stockholders Equity

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Question 1

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A company reported total stockholders' equity of $340,000 on its balance sheet dated December 31, 2016. During the year ended December 31, 2017, the company reported net income of $40,000, declared and paid a cash dividend of $8,000, declared and distributed a 10% stock dividend with a $10,000 total market value, issued additional common stock for $60,000, and paid $12,000 to purchase treasury stock. What is total stockholders' equity as of December 31, 2017?

A) $432,000.
B) $410,000.
C) $444,000.
D) $420,000.

E) None of the above
F) B) and C)

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Question 2

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On December 31, 2016, Brave Corporation reported the following on its balance sheet: Required: Prepare the stockholders' equity section of the balance sheet.

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Question 3

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During 2017, Sanders Corporation prepared the following journal entry to record the declaration and payment of a cash dividend: The total par values of common and preferred stock outstanding were $55,000 and $40,000, respectively. No dividends were declared or paid during 2016. There are 7,500 shares of common stock held in treasury. The common stock has a par value of $2 per share. Required: A.If the preferred stock is noncumulative, calculate the current dividend rate on the preferred stock. B.Calculate the number of common stock shares that received dividends. C.Calculate the dividend paid per share of common stock.

Most investors who are retired people prefer to receive their return on investment in common stock in the form of stock price appreciation rather than in dividends.

Which of the following correctly describes the effect of declaring and distributing a common stock dividend?

A company has 10 million common shares authorized and 2.5 million shares issued. The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split. Which of the following is correct?

The following information is provided for Slickers, Inc. for year 2016: • Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for 2014 and 2015 • Total dividends declared and paid during 2016 totaled $25,000 How much of the dividend was paid to the common stockholders during 2016 assuming the preferred stock is noncumulative?

Date on which a list of stockholder names is prepared.

A company reported total stockholders' equity of $170,000 on its balance sheet dated December 31, 2016. During the year ended December 31, 2017, the company reported net income of $20,000, declared and paid a cash dividend of $4,000, declared and distributed a 10% stock dividend with a $5,000 total market value, and issued additional common stock for $40,000. What is total stockholders' equity as of December 31, 2017?

Which of the following represents the number of shares currently owned by investors?

The dividend yield ratio increases when the market price per share increases.

CGJ Company has provided the following: • 200,000 shares of $5 par value common stock are authorized • 140,000 shares of common stock were issued for $11 per share • 130,000 shares are outstanding Which of the following statements is false?

Which of the following journal entries does not reflect the initial cash sale of shares of common stock?

Which of the following is not a primary advantage of a general partnership relative to a corporation?

The board of directors of Atlantic Corp. does is deciding whether to declare and pay a cash dividend or to declare and distribute a stock dividend. Required: Complete the following chart to show the overall effect on each financial statement item for a cash dividend and a stock dividend. Enter the letter "I" if the effect of the dividend is to increase the financial statement item, a letter "D" if the effect of the dividend is to decrease the financial statement item, or a letter "N" if there is no overall effect. (Hint: Think of the journal entries that would be prepared for a cash dividend and a stock dividend. The overall effect is the net effect from declaration to final payment or distribution.)

The declaration and issuance of a stock dividend results in a reduction of the issuing corporation's total stockholders' equity.

The following information is available for Bradford Bikes for the years 2017 and 2016: Required: A.Calculate the dividend yield ratio for both 2017 and 2016. B.Interpret the yield ratio in terms of whether it is high or low, or whether it indicates a steady dividend policy, and whether Bradford Bikes appears to be growing or to be stagnant.

When a company pays its previously declared cash dividend, an investing cash outflow is reported.

Employees who receive stock options as compensation:

Which of the following statements does not correctly describe preferred stock?