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Exam 11: Reporting and Interpreting Owners Equity

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Question 41

True/False

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There would be 100,000 shares of common stock outstanding when the number of shares authorized was 150,000,issued shares totaled 120,000,and 20,000 shares were being held in the treasury.

A) True
B) False

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Question 42

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When a company reissues treasury stock,it creates a cash inflow from an investing activity because treasury stock is an investment asset on the balance sheet.

A) True
B) False

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Question 43

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Which of the following statements about treasury stock transactions is correct?

Rye Company has provided the following information: Number of issued common shares,225,000; Net income,$500,000; Number of authorized common shares,400,000; Number of treasury shares,25,000. What is Rye's earnings per share?

The declaration of a common stock dividend by a corporation's board of directors creates a liability on the declaration date.

The dividend yield ratio is dividends per share divided by the number of shares outstanding.

Wendell Company provided the following pertaining to its recent year of operation: Common stock with a $10,000 par value was sold for $50,000 cash. Cash dividends totaling $20,000 were declared,of which $15,000 were paid. Net income was $70,000. A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value. Treasury stock costing $9,000 was sold for $7,000. How much did Wendell's contributed capital increase during the recent year of operation?

A company reported total stockholders' equity of $170,000 on its balance sheet dated December 31,2010.During the year ended December 31,2011,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 31,2011?

When a company issues common stock in exchange for cash,a cash inflow from a financing activity is reported.

Which of the following statements is not correct?

Which of the following statements incorrectly describes earnings per share?

Earnings per share are calculated by dividing net income by the number of outstanding shares of common stock at year-end.

A stock dividend

Atkins Company had 20,000 shares of $5 par value common stock outstanding prior to a 10% common stock dividend declaration and distribution.The market value of the common stock on the declaration date was $11.Which of the following statements correctly describes the affect of the common stock dividend and declaration?

Wendell Company provided the following pertaining to its recent year of operation: Common stock with a $10,000 par value was sold for $50,000 cash. Cash dividends totaling $20,000 were declared,of which $15,000 were paid. Net income was $70,000. A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value. Treasury stock costing $9,000 was sold for $7,000. How much did Wendell's total stockholders' equity increase during the recent year of operation?

During 2010,Thomas Corporation repurchased some shares of its own common stock.What effect did this transaction have on 2010 stockholders' equity and earnings per share,respectively? $\begin{array} { l l l } & \text { Stockholders' Equity } & \text { Earnings Per Share } \\\text { A. } & \text { Decrease } & \text { No effect } \\\text { B. } & \text { Increase } & \text { No effect } \\\text { C. } & \text { Decrease } & \text { Decrease } \\\text { D. } & \text { Decrease } & \text { Increase }\end{array}$

Which of the following doesn't correctly describe preferred stock?

Slickers,Inc.had the following capital structure during 2010: Preferred stock,7%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for 2008 and 2009. Common stock,$100 par value,2,000 shares issued and outstanding. The total dividends declared and paid during 2010 totaled $25,000.How much of the dividend is paid to the common stockholders during 2010 assuming the preferred stock is noncumulative?

Stockholders' equity decreases when a company purchases treasury stock.

Constance Corporation reported a $750,000 balance in its common stock account at the end of 2010.The company held 50,000 shares of treasury stock and had 700,000 shares outstanding.Calculate the par value per share of the company's common stock.