Exam 15: Stockholders Equity

A "secret reserve" will be created if

Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2014, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a

Farmer Corp. owned 20,000 shares of Eaton Corp. purchased in 2011 for $450,000. On December 15, 2014, Farmer declared a property dividend of all of its Eaton Corp. shares on the basis of one share of Eaton for every 10 shares of Farmer common stock held by its stockholders. The property dividend was distributed on January 15, 2015. On the declaration date, the aggregate market price of the Eaton shares held by Farmer was $750,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

Participating preferred stock requires that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any common dividends.

Anders, Inc., has 15,000 shares of 5%, $100 par value, cumulative preferred stock and 60,000 shares of $1 par value common stock outstanding at December 31, 2015. There were no dividends declared in 2013. The board of directors declares and pays a $135,000 dividend in 2014 and in 2015. What is the amount of dividends received by the common stockholders in 2015?

On July 1, 2014, Nall Co. issued 2,500 shares of its $10 par common stock and 5,000 shares of its $10 par convertible preferred stock for a lump sum of $130,000. At this date Nall's common stock was selling for $24 per share and the convertible preferred stock for $18 per share. The amount of the proceeds allocated to Nall's preferred stock should be

Mays, Inc. had net income for 2014 of $1,060,000 and earnings per share on common stock of $5. Included in the net income was $150,000 of bond interest expense related to its long-term debt. The income tax rate for 2014 was 30%. Dividends on preferred stock were $200,000. The payout ratio on common stock was 25%. What were the dividends on common stock in 2014?

On January 1, 2014, Culver Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $10, the corporation declared a 15% stock dividend to be issued to stockholders of record on December 16, 2014. What was the impact of the 15% stock dividend on the balance of the retained earnings account?

The pre-emptive right of a common stockholder is the right to

How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the fair value of the shares exceeds the par value of the stock?

Under IFRS true no-par shares should be carried in the accounts at issue price without any share premium reported.

The cost method records all transactions in treasury shares at their cost and reports the treasury stock as a deduction from capital stock only.

Which of the following is not a legal restriction related to profit distributions by a corporation?

Winger Corporation owned 600,000 shares of Fegan Corporation stock. On December 31, 2014, when Winger's account "Equity Investments (Fegan Corporation") had a carrying value of $5 per share, Winger distributed these shares to its stockholders as a dividend. Winger originally paid $8 for each share. Fegan has 2,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Fegan share was $7 on the declaration date and $9 on the distribution date.What would be the reduction in Winger's stockholders' equity as a result of the above transactions?

The payout ratio can be calculated by dividing

Foley Corporation has the following capital structure at the beginning of the year:4% Preferred stock, $50 par value, 20,000 shares authorized, Instructions (a) Record the following transactions which occurred consecutively (show all calculations).1. A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts.2. A 15% common stock dividend was declared. The average fair value of the common stock is $22 a share."3. Assume that net income for the year was $140,000 (record the closing entry) and the board of directors appropriated $70,000 of retained earnings for plant expansion. (b) Construct the stockholders' equity section incorporating all the above information."

The Revaluation Surplus of IFRS is

Under IFRS companies report preference shares at par value as the last item in the equity section.

The accounting for treasury stock retirements under IFRS requires