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Exam 11: Reporting and Analyzing Stockholders Equity

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Question 111

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Retained earnings represents the amount of cash available for dividends.

A) True
B) False

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Question 112

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On January 1, 2014, Wooden Company issued 16,000 shares of $2 par value common stock for $120,000. On March 1, 2014, the company purchased 2,000 shares of its common stock for $15 per share for the treasury. Instructions Journalize the stock transactions of Wooden Company in 2014.

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Question 113

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The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.

Listed below are items typically found in the stockholders' equity section of the balance sheet. Instructions Place each of the items listed below in the appropriate subdivision of the stockholders' equity section of a balance sheet.

The issuance of common stock affects both paid-in capital and retained earnings.

Companies frequently issue both preferred stock and common stock. What are the major differences in the rights of stockholders between these two classes of stock?

Treasury stock is a contra stockholders' equity account.

Johnson Company issued 900 shares of no-par common stock for $15,300. Which of the following journal entries would be made if the stock has no stated value?

Mann Corporation decided to issue common stock and used the $120,000 proceeds to retire all of its outstanding bonds on January 1, 2014. The following information is available for the company for 2013 and 2014. Instructions (a) Compute the return on common stockholders' equity for both years. (b) Explain how it is possible that net income increased, but the return on common stockholders' equity decreased. (c) Compute the debt to assets ratio for both years, and comment on the implications of this change in the company's solvency.

Name at least three advantages of a corporation. 2. Corporations acquire treasury stock for a variety of purposes. Name three reasons why a corporation may acquire treasury stock.

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 5,000 shares of common stock to pay its recent attorney's bill of $25,000 for legal services on a land access dispute, which of the following would be the best journal entry for Retro to record?

Alt Corp. issues 3,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Which of the following statements concerning taxation is accurate?

Cash dividends are not a liability of the corporation until they are declared by the board of directors.

The corporate charter of Torres Corporation allows the issuance of a maximum of 4,000,000 shares of $1 par value common stock. During its first three years of operation, Torres issued 2,080,000 shares at $15 per share. It later acquired 80,000 of these shares as treasury stock for $25 per share. Instructions Based on the above information, answer the following questions: (a) How many shares were authorized? (b) How many shares were issued? (c) How many shares are outstanding? (d) What is the balance of the Common Stock account? (e) What is the balance of the Treasury Stock account?

The effect of a stock dividend is to

Patrick Corporation is authorized to issue 1,000,000 shares of $1 par value common stock. During 2014, the company has the following stock transactions. Jan. 15 Issued 700,000 shares of stock at $7 per share. Sept. 5 Purchased 20,000 shares of common stock for the treasury at $8 per share. Dec. 6 Declared a $0.50 per share dividend to stockholders of record on December 20, payable January 3, 2015. Instructions Journalize the transactions for Patrick Corporation.

Which of the following factors does not affect the initial market price of a stock?