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Exam 11: Stockholders Equity

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Question 41

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Stockholders' equity is composed of three parts: contributed capital, earnings retained in the business, and dividends paid.

A) True
B) False

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Question 42

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What is the difference between par value and market value? Which is the better indicator of the true worth of the stock?

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Par value is an arbitrary amount stated ...

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Question 43

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Assume that the Stockholders' Equity section of Cherokee Company's balance sheet on December 31, 2015, appears as follows: 1. If on February 1, 2016, Cherokee buys 120 of its shares as treasury stock at $30 per share, what are the accounting equation effects on Cherokee's books? 2. How with the Stockholders' Equity section of Cherokee's balance sheet appear on February 1, 2016, after the purchase of the treasury stock?

Derek and Kent are partners. At the beginning of the current year, Derek's capital account is $30,000, while Kent's is $50,000. The partners decided to allocate income with 10% interest on capital balances at the beginning of the period and divide the balance equally. Net income for the current year, 2015, is $80,000. Each partner withdrew $15,000 for personal use during the year. Determine the amount of income that each partner will be allocated.

Given below are several transactions for Vision Inc. In the space provided, indicate the impact on each of the stockholders' equity accounts given, by placing the dollar amount and either a plus sign + or a minus sign - in the box provided. For each account in which there is no effect, place an X in the box.

Which of the following is true?

At December 31, 2016, Corning Company has the following: Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding Preferred Stock, $100 par, 8%, cumulative, 1,000 shares authorized, issued, and outstanding The company did not pay any dividend during 2015 or 2014. REQUIRED: Compute the amount of dividend to be received by the common and preferred stockholders in 2016 if the company declared a dividend of $24,000.

Watson Company has 5,000 shares of $5 par, 3% preferred stock outstanding, and 25,000 shares of $2 par common stock outstanding. The preferred stock is cumulative and no dividends have been paid for the past two years. If the company wishes to distribute $2 per share to the common stockholders, what is the total amount of dividends that must be paid in the current year?

Falcon Company has 1,000 shares of $100 par value, 9% preferred stock and 10,000 shares of $10 par value common stock outstanding. The preferred stock is cumulative and nonparticipating. Dividends were paid in 2012. Since 2012, Falcon has declared and paid dividends as follows: Required 1. Determine the amount of the dividends to be allocated to preferred and common stockholders for each year 2014 to 2016. 2. If the preferred stock had been noncumulative, how much would have been allocated to the preferred and common stockholders each year?

Stock dividends reduce the par value of the stock.

Which of the following should be considered when a company decides to declare a cash dividend on common stock?

Select the statement on which each of the items provided below would be reported. -Dividends for the period.

Albion Company reported the following amounts on its balance sheet at January 1, 2015: The following transactions occurred during 2015: 1. Declared a 20% stock dividend on preferred stock on May 21, when the stock was selling at $15 per share. The stock dividend will be distributed on June 30, 2015. 2. Distributed the preferred stock dividend on June 30. Show the effects of the transactions on the accounting equation and prepare the stockholders' equity section of Albion's balance sheet at December 31, 2015.

Match the terms to the definitions by selecting the letter of the term. Each term may be used more than once or not at all. -Allows the holders of this stock to share in the distribution of dividends above the predetermined per share amount.

Comfort Shoes had the following items included in its accounting records. In the space provided, indicate whether each of the items listed is included in an account in the stockholders' equity section of the balance sheet.

Chad Jones established Jones' Cleaning Services, a sole proprietorship, by investing $1,000 on January 1, 2015. During the first year of operations, the business generated net income of $42,000. The owner withdrew cash for personal use. The ending balance of the capital account was $20,000. Prepare Jones' statement of owner's equity for the year ended December 31, 2015.

Select the best answer from the list below to complete statements 1-11 that follow. -The maximum numbers of shares a company may issue are .

When a company declares a cash dividend, which of the following is true?

Select the letter of the term each statement best describes. -Total stockholders' equity divided by the number of shares of common stock outstanding.

Match the terms to the definitions by selecting the letter of the term. Each term may be used more than once or not at all. -Allows preferred stock to be returned to the corporation in exchange for common stock.