Exam 10: Stockholders Apos Equity

When a corporation makes a cash distribution despite having no retained earnings, this is called a

Restricted earnings are usually disclosed in the footnotes to the financial statements, but may sometimes be disclosed in a reserve account in the equity section of the balance sheet.

In the space provided, indicate whether the journal entry for the transaction described includes an entry to a stockholders' equity account and if so, whether the account(s) should be debited or credited as a result of the entry.

Match the terms to the definitions. -A measure of the proportion of common stock dividends to the stock price.

Par value is adjusted annually to reflect the current market value of the stock.

A corporation reported net income of $60,000, declared and paid cash dividends of $80,000, and issued 3,000 shares of $2 par common stock at $15 per share during the year. What total effects would these transactions have on the following stockholders' equity accounts?

The FASB's concept of comprehensive income a.allows items that are not necessarily under management's control, such as currency translation adjustments, to be shown as an appropriation of retained earnings. b.has a primary drawback because it allows management considerable flexibility in determining the net income figure. c.excludes transactions that involve the payment of dividends and other transactions affecting owners. d.requires that all transactions representing changes in asset and liability accounts must be shown on the income statement.

A corporate charter is sometimes called the articles of incorporation.

Match the terms to the definitions. -The number of issued shares actually in the hands of stockholders rather than held as treasury stock.

When a corporation issues a stock dividend, which of the following is true?

The following stockholders' equity appeared on a balance sheet at December 31: ​ A)Has the company been profitable since its inception? How do you know? B)What is the meaning of the balance in a retained earnings account? What causes this balance to change from period to period? C)Can you tell from the balance sheet whether a company paid a dividend during the current period? D)How many shares of common stock are issued and outstanding and how can these amounts be determined?

What is the primary reason for a stock split?

Outstanding shares represent the

Lending Branch, Inc. was incorporated as a new business on May 1, 2019. The company is authorized to issue 50,000 shares of $1 par common stock and 10,000 shares of 4%, $5 par cumulative, participating preferred stock. On May 1, 2019, the company issued 15,000 shares of common stock for $8 per share. Net income for the period ended December 31, 2019 ,was $115,000. Cash dividends in the amount of $30,000 were declared, but only $25,000 were paid as of year-end. ​ Prepare the stockholders' equity section of the balance sheet at December 31, 2019.

The number of shares sold to stockholders are ____________________ shares.

The stockholders' equity section of a balance sheet at December 31, is as follows: ​ A)What was the average issue price of the preferred stock? B)What was the average issue price of the common stock? C)What will be the retained earnings account balance immediately following a 2-for-1 stock split? D)If the company's board of directors declares a cash dividend consisting of the annual stated dividend rate for preferred stockholders plus $1 per share for common stockholders, what is the total amount of dividends to be paid and what would be the remaining balance in the retained earnings account immediately following the declaration of this cash dividend?

In general, retained earnings represents accumulated earnings of the corporation less dividends paid.

On June 1, the board of directors declared a $100,000 cash dividend to be distributed to common stockholders of record on June 15. The dividend will be paid on July 1. The required journal entry on June 1 includes a a.$100,000 debit to retained earnings. b.$100,000 debit to dividends payable. c.$100,000 credit to cash. d.$100,000 credit to common stock.

To compute the return on common equity ratio, the numerator includes ____________________ minus preferred dividends, and the denominator is the average common stockholders' equity.

Match the terms to the definitions. -A decrease in the par value of a class of stock brought about by the exchange of original shares for a greater number of new shares.