Exam 14: Corporations: Dividends, Retained Earnings, and Income Reporting

When a corporation has both preferred and common stock outstanding, earnings per share is computed by dividing net income

Archer, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2010. There were no dividends declared in 2009. The board of directors declares and pays a $120,000 dividend in 2010. What is the amount of dividends received by the common stockholders in 2010?

Turquoise and Topaz Sisters had retained earnings of $15,000 on the balance sheet but disclosed in the footnotes that $2,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?

Income tax expense and the related liability for income taxes payable are recorded when taxes are paid.

Which of the following statements about dividends is not accurate?

The following information is available for Piper Corporation: The company accountant, in preparing financial statements for the year ending December 31, 2011, has discovered the following information: The company's previous bookkeeper, who has been fired, had recorded depreciation expense on a machine in 2009 and 2010 using the double-declining-balance method of depreciation. The bookkeeper neglected to use the straight-line method of depreciation which is the company's policy. The cumulative effects of the error on prior years was $20,000, ignoring income taxes. Depreciation was computed by the straight-line method in 2011. Instructions (a) Prepare the entry for the prior period adjustment. (b) Prepare the retained earnings statement for 2011.

Kenner Corporation's stockholders' equity section at December 31, 2009 appears below: On June 30, 2010, the board of directors of Kenner Corporation declared a 20% stock dividend, payable on July 31, 2010, to stockholders of record on July 15, 2010. The fair market value of Kenner Corporation's stock on June 30, 2010, was $15. On December 1, 2010, the board of directors declared a 2 for 1 stock split effective December 15, 2010. Kenner Corporation's stock was selling for $20 on December 1, 2010, before the stock split was declared. Par value of the stock was adjusted. Net income for 2010 was $190,000 and there were no cash dividends declared. Instructions (a) Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split. (b) Fill in the amount that would appear in the stockholders' equity section for Kenner Corporation at December 31, 2010, for the following items: 1. Common stock $____________ 2. Number of shares outstanding _____________ 3. Par value per share $____________ 4. Paid-in capital in excess of par $____________ 5. Retained earnings $____________ 6. Total stockholders' equity $____________

Both a stock split and a stock dividend will _________________ the number of shares outstanding and have _________________ on total stockholders' equity.

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Each of the following statements is correct except that earnings per share is reported

Restricting retained earnings for the cost of treasury stock purchased is a

Outstanding stock of the Colt Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 5%, $10 par noncumulative preferred stock. In 2009, Colt declared and paid dividends of $2,000. In 2010, Colt declared and paid dividends of $6,000. How much of the 2010 dividend was distributed to preferred shareholders?

Ludwick Inc. has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 200,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Ludwick declares a 10% stock dividend on its common stock:

Harrington Company reported the following balances at December 31, 2009: common stock $500,000; paid-in capital in excess of par value $100,000; retained earnings $250,000. During 2010, the following transactions affected stockholders' equity. 1. Issued preferred stock with a par value of $150,000 for $200,000. 2. Purchased treasury stock (common) for $40,000. 3. Earned net income of $140,000. 4. Declared and paid cash dividends of $75,000. Instructions Prepare the stockholders' equity section of Harrington Company's December 31, 2010, balance sheet.

During 2010, Pine Corporation had the following transactions and events: 1. Issued par value preferred stock for cash at par value. 2. Issued par value common stock for cash at an amount greater than par value. 3. Completed a 2 for 1 stock split in which the $10 par value common stock was changed to $5 par value stock. 4. Declared a small stock dividend when the market value was higher than the par value. 5. Declared a cash dividend. 6. Made a prior period adjustment for understatement of net income. 7. Issued par value common stock for cash at par value. 8. Paid the cash dividend. 9. Issued the shares of common stock required by the stock dividend declaration in 4. above. Instructions Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders' equity. Present your answers in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect.

The effect of a stock dividend is to

Which of the following statements regarding the date of a cash dividend declaration is not accurate?

Norman Corporation had 250,000 shares of common stock outstanding during the year. Norman declared and paid cash dividends of $200,000 on the common stock and $160,000 on the preferred stock. Net income for the year was $880,000. What is Norman's earnings per share?

Which of the following is not a significant date with respect to dividends?

The following information is available for Ellis Corporation: A 15% stock dividend is declared and paid when the market value was $15 per share. Instructions Compute each of the following after the stock dividend. (a) Total stockholders' equity. (b) Number of shares outstanding.