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Exam 11: Reporting and Interpreting Stockholders Equity

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Question 61

Multiple Choice

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Which of the following journal entries is correct when no-par common stock is initially issued for cash?

A)
B)
C)
D)

E) B) and D)
F) All of the above

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Question 62

Multiple Choice

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During 2016, Thomas Corporation repurchased some shares of its own common stock. What effect did this transaction have on 2016 stockholders' equity and earnings per share, respectively?

A) Option A
B) Option B
C) Option C
D) Option D

E) A) and B)
F) B) and D)

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Question 63

Multiple Choice

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A small stock dividend:

Which of the following is true about a sole proprietorship?

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

Irish Corporation issued (sold) 10,000 shares of common stock for $70 per share. The bylaws established a stated value of $10 per share. What is the amount of increase in the common stock account as a result of this transaction?

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.

RKJ Company has provided the following information: • 100,000 shares of $5 par value common stock are authorized • 70,000 shares have been issued • 65,000 shares are outstanding Which of the following statements is correct?

A company reported total stockholders' equity of $540,000 on its balance sheet dated December 31, 2016. During the year ended December 31, 2017, the company reported net income of $60,000, declared and paid a cash dividend of $18,000, declared and distributed a 10% stock dividend with a $15,000 total market value, issued additional common stock for $70,000, and resold treasury stock for $15,000 that it had purchased in 2016 for $12,000. What is total stockholders' equity as of December 31, 2017?

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

Kirova Company has provided the following information: • Number of issued common shares, 900,000 • Net income, $1,000,000 • Number of authorized common shares, 1,000,000 • Number of outstanding common shares, 800,000 • Number of treasury shares, 100,000 What is Kirova's earnings per share (EPS) ?

Which of the following is a correct statement about cumulative and noncumulative preferred stock?

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

Davidson Company has 10,000,000 common shares issued and 500,000 shares of treasury stock. The stock's par value is $2 per share and its current market price is $25 per share. Which of the following is correct when a 15% stock dividend is declared and distributed?

Determine the effect of the following transactions on the financial statement components identified. Code your answers as follows: A: If the transaction results in an increase in the financial statement component. B: If the transaction results in a decrease in the financial statement component. C. If the transaction does not affect the financial statement component. Transaction 1: A cash dividend was declared. Net income _____ Total assets _____ Total liabilities ______ Stockholders' equity _____ Transaction 2: A previously declared cash dividend was paid. Net income _____ Total assets _____ Total liabilities ______ Stockholders' equity _____ Transaction 3: A 2-for-1 stock split was declared and distributed. Net income _____ Total assets _____ Total liabilities _____ Stockholders' equity _____ Transaction 4: A common stock dividend was declared and distributed. Net income _____ Total assets _____ Total liabilities _____ Stockholders' equity _____

Stockholders' equity decreases when a company purchases treasury stock.

Earnings per share increases when a company purchases treasury stock.

Wendell Company provided the following pertaining to its accounting year that ended December 31, 2016: • 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 repurchased in a prior year for $9,000 was resold for $7,000 and in the journal entry to record the sale, Additional paid-in capital was debited for the amount of the difference between the repurchase price and the resale price What is the amount of increase in Wendell's common stock account during the year 2016?

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

The issue of $1 par value common stock for $10 per share results in a $9 credit to the Additional paid-in capital account for each share issued.