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

On January 1, Swanson Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17, the company declared a 15% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The entry to record the transaction of March 17 would include a

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

Henson Corporation gathered the following information for the fiscal year ended December 31, 2010: Henson Corporation is subject to a 30% income tax rate. Instructions Prepare a partial income statement, beginning with income from operations.

Match the items below by entering the appropriate code letter in the space provided. A. Deficit F. Return on common stockholders' equity B. Prior period adjustment G. Cash dividend C. Liquidating dividend H. Declaration date D. Retained earnings restrictions I. Stock dividend E. Earnings per share J. Stock split ____ 1. A dividend declared out of paid-in capital. ____ 2. Retained earnings currently unavailable for dividends. ____ 3. The correction of an error in previously issued financial statements. ____ 4. A pro rata distribution of cash to stockholders. ____ 5. A debit balance in retained earnings. ____ 6. A pro rata distribution of the corporation's own stock to stockholders. ____ 7. Shows how many dollars of net income were earned for each dollar invested by the owners. ____ 8. The date the board of directors formally declares the dividend and announces it to stockholders. ____ 9. The issuance of additional shares of stock to stockholders accompanied by a reduction in the par or stated value per share. ____ 10. Widely used by stockholders and potential investors in evaluating the profitability of a company.

Most companies are required to report earnings per share on the face of the income statement.

The declaration and distribution of a stock dividend will

Record the following transactions for Grogan Corporation on the dates indicated. 1. On March 31, 2010, Grogan Corporation discovered that Depreciation Expense on factory equipment for the year ended December 31, 2009, had been recorded twice, for a total amount of $70,000 instead of the correct amount of $35,000. 2. On June 30, 2010, the company's internal auditors discovered that the April 2010 telephone bill for $2,500 had erroneously been charged to the Interest Expense account. 3. On August 14, 2010, cash dividends on preferred stock of $110,000 declared on July 1, 2010, were paid.

Which of the following statements about retained earnings restrictions is incorrect?

On November 27, the board of directors of Henderson Company declared a $.40 per share dividend. The dividend is payable to shareholders of record on December 7 on December 24. Henderson has 25,500 shares of $1 par common stock outstanding at November 27. Journalize the entries needed on the declaration and payment dates.

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

Irwin, Inc. had 300,000 shares of common stock outstanding before a stock split occurred, and 900,000 shares outstanding after the stock split. The stock split was

The effect of the declaration of a cash dividend by the board of directors is to

Wheeler Company reports the following amounts for 2010. The 2010 rate of return on common stockholders' equity is

Assume that all balance sheet amounts for Remington Company represent average balance figures. What is the return on common stockholders' equity ratio for Remington?

Prior period adjustments

A corporation incurs income tax expense only if it pays dividends to stockholders.

Identify the effect the declaration and distribution of a stock dividend has on the par value per share. Par Value per Share

Earnings per share is reported only for ________________.

Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision of the stockholders' equity section of the balance sheet.

The entry to record the declaration of a stock dividend increases _______________, and decreases ________________.