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Exam 10: Stockholders Equity

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Question 51

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Why doesn't stockholders' equity equal the market value of equity?

A) Stockholders' equity usually does equal the market value of equity.
B) Investors tend to incorrectly price the market value of equity.
C) It's related to the use of historical cost to report many long-term assets and the expensing of value generating costs such as research and development and advertising.
D) It's due to incorrect entries prepared by accountants.

E) A) and D)
F) None of the above

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Question 52

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California Adventures issues 5,000 shares of 8%,$100 par value preferred stock at the beginning of 2014.All remaining shares are common stock.The company was not able to pay dividends in 2014,but plans to pay dividends of $100,000 in 2015.Assuming the preferred stock is cumulative,how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015?

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Question 53

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Hayes Corporation issues 100 shares of its $1 par value common stock for $15 per share.The entry to record the issuance will not include a:

Stock repurchases reduce the number of shares outstanding,thereby increasing earnings per share.

Dividends are paid on all shares issued by the company including treasury stock.

Total assets,total liabilities,and total stockholders' equity do not change as a result of a stock dividend.

A corporation has limited liability and attracting outside investment is easier relative to sole-proprietorships and partnerships.

Which of the following statements is not true regarding earnings per share?

The Surf's Up issues 1,000 shares of 6%,$100 par value preferred stock at the beginning of 2014.All remaining shares are common stock.The company was not able to pay dividends in 2014,but plans to pay dividends of $18,000 in 2015.Assuming the preferred stock is cumulative,how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015?

The board of directors of Capstone Inc.declared a $0.60 per share cash dividend on its $1 par common stock.On the date of declaration,there were 50,000 shares authorized,20,000 shares issued,and 5,000 shares held as treasury stock.Assuming the dividends were declared on June 1,what is the entry on June 30 to record the payment of cash dividends?

When treasury stock is resold at a price above cost:

Retained Earnings is the amount stockholders have invested in the company.

Treasury Stock:

Donnie Hilfiger has the following balances in its stockholders' equity accounts on December 31,2015: Treasury Stock,$375,000;Common Stock,$350,000;Preferred Stock,$1,200,000;Retained Earnings,$1,675,000;and Additional Paid-in Capital,$3,150,000.Prepare the stockholders' equity section of the balance sheet for Donnie Hilfiger as of December 31,2015.

The statement of stockholders' equity shows how each equity account changed during the year.

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

The PE ratio:

How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity?

Limited liability means that even in the event of bankruptcy,stockholders in a corporation can lose no more than the amount they invested in the company.

Desert Apparel has 5,000 shares of common stock outstanding.On April 1,the company declares a $2 per share dividend to stockholders of record on April 15.The dividend is paid on April 30.Record all necessary entries on the appropriate dates for cash dividends.