Question 1

Retained earnings is increased by each of the following except

Accepted Answer

A)  net income. 
B)  prior period adjustments. 
C)  some disposals of treasury stock. 
D)  All of these increase retained earnings. 
A)  net income. 
B)  prior period adjustments. 
C)  some disposals of treasury stock. 
D)  All of these increase retained earnings.

Question 2

The return on common stockholders' equity is computed by dividing net income available to common stockholders by

Accepted Answer

A)  ending total stockholders' equity. 
B)  ending common stockholders' equity. 
C)  average total stockholders' equity. 
D)  average common stockholders' equity. 
A)  ending total stockholders' equity. 
B)  ending common stockholders' equity. 
C)  average total stockholders' equity. 
D)  average common stockholders' equity.

Question 3

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Accepted Answer

A) True 
 B)False

Question 4

Stock dividends and stock splits have the following effects on retained earnings:
Stock Splits Stock Dividends

Accepted Answer

A)  Increase No change 
B)  No change Decrease 
C)  Decrease Decrease 
D)  No change No change 
A)  Increase No change 
B)  No change Decrease 
C)  Decrease Decrease 
D)  No change No change

Question 5

Which of the following statements about a cash dividend is incorrect?

Accepted Answer

A)  The legality of a cash dividend depends on state corporation laws. 
B)  The legality of a dividend does not indicate a company's ability to pay a dividend. 
C)  Dividends are not a liability until declared. 
D)  Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend. 
A)  The legality of a cash dividend depends on state corporation laws. 
B)  The legality of a dividend does not indicate a company's ability to pay a dividend. 
C)  Dividends are not a liability until declared. 
D)  Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend.

Question 6

On January 1, 2010, Vannon Corporation had Retained Earnings of $378,000. During the year, Vannon had the following selected transactions:
1. Declared stock dividends of $50,000.
2. Declared cash dividends of $90,000.
3. A 2 for 1 stock split involving the issuance of 200,000 shares of $5 par value common stock for 100,000 shares of $10 par value common stock.
4. Suffered a net loss of $70,000.
5. Corrected understatement of 2009 net income because of an inventory error of $48,000.
Instructions
Prepare a retained earnings statement for the year.

Accepted Answer

The answer of On January 1, 2010, Vannon Corporation had...

Question 7

Manner, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 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 $45,000 dividend in 2010. What is the amount of dividends received by the common stockholders in 2010?

Accepted Answer

A)  $0 
B)  $25,000 
C)  $45,000 
D)  $20,000 
A)  $0 
B)  $25,000 
C)  $45,000 
D)  $20,000

Question 8

On January 1, Castagno Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 15% stock dividend. Market value of the stock was $15/share. As a result of this event,

Accepted Answer

A)  Castagno's Paid-in Capital in Excess of Par Value account increased $600,000. 
B)  Castagno's total stockholders' equity was unaffected. 
C)  Castagno's Retained Earnings account decreased $1,800,000. 
D)  All of the above. 
A)  Castagno's Paid-in Capital in Excess of Par Value account increased $600,000. 
B)  Castagno's total stockholders' equity was unaffected. 
C)  Castagno's Retained Earnings account decreased $1,800,000. 
D)  All of the above.

Question 9

The income statement for Roland Inc. shows income before income taxes $700,000, income tax expenses $210,000, and net income $490,000. If Roland declared $150,000 of cash dividends on preferred stock and has 100,000 shares of common stock outstanding throughout the year, earnings per share is:

Accepted Answer

A)  $5.50 
B)  $3.40 
C)  $1.50 
D)  $0.60 
A)  $5.50 
B)  $3.40 
C)  $1.50 
D)  $0.60

Question 10

In 2010, Worthington Corporation had net sales of $500,000 and cost of goods sold of $360,000. Operating expenses were $93,000, and interest expense was $7,500. The corporation's tax rate is 30%. The corporation declared preferred dividends of $7,000 in 2010, and its average common stockholders' equity during the year was $200,000.
Instructions
(a) Prepare an income statement for Worthington Corporation.
(b) Compute Worthington Corporation's return on common stockholders' equity for 2010.

Accepted Answer

The answer of In 2010, Worthington Corporation had net sales...

Question 11

The balance in retained earnings on January 1, 2010, for Blakely Inc., was $600,000. During the year, the corporation paid cash dividends of $70,000 and distributed a stock dividend of $15,000. In addition, the company determined that it had overstated its depreciation expense in prior years by $50,000. Net income for 2010 was $120,000.
Instructions
Prepare the retained earnings statement for 2010.

Accepted Answer

The answer of The balance in retained earnings on January...

Question 12

Income statements for corporations report _______________ in a separate section before net income.

Accepted Answer

The answer of Income statements for corporations report _______________ in...

Question 13

The following information is available for Ritter Corporation:   
Instructions
Compute the return on common stockholders' equity ratio for both years. Briefly comment on your findings.

Accepted Answer

@#IMG-DLM& Ritter's return on common stockholders'

Question 14

A dividend based on paid-in capital is termed a liquidating dividend.

Accepted Answer

A) True 
 B)False

Question 15

If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a

Accepted Answer

A)  large stock dividend. 
B)  cash dividend. 
C)  contingent dividend. 
D)  small stock dividend. 
A)  large stock dividend. 
B)  cash dividend. 
C)  contingent dividend. 
D)  small stock dividend.

Question 16

If a corporation declares a dividend based upon paid-in capital, it is known as a

Accepted Answer

A)  scrip dividend. 
B)  property dividend. 
C)  paid dividend. 
D)  liquidating dividend. 
A)  scrip dividend. 
B)  property dividend. 
C)  paid dividend. 
D)  liquidating dividend.

Question 17

The declaration of a stock dividend will

Accepted Answer

A)  increase paid-in capital. 
B)  change the total of stockholders' equity. 
C)  increase total liabilities. 
D)  increase total assets. 
A)  increase paid-in capital. 
B)  change the total of stockholders' equity. 
C)  increase total liabilities. 
D)  increase total assets.

Question 18

In the stockholders' equity section of the balance sheet,

Accepted Answer

A)  Common Stock Dividends Distributable will be classified as part of additional paid-in capital. 
B)  Common Stock Dividends Distributable will appear in its own subsection of the stock- holders' equity. 
C)  Additional Paid-in Capital appears under the subsection Paid-in Capital. 
D)  Dividends in arrears will appear as a restriction of Retained Earnings. 
A)  Common Stock Dividends Distributable will be classified as part of additional paid-in capital. 
B)  Common Stock Dividends Distributable will appear in its own subsection of the stock- holders' equity. 
C)  Additional Paid-in Capital appears under the subsection Paid-in Capital. 
D)  Dividends in arrears will appear as a restriction of Retained Earnings.

Question 19

During 2010 Silas Inc. had sales revenue $564,000, gross profit $264,000, operating expenses $99,000, cash dividends $45,000, other expenses and losses $30,000. Its corporate tax rate is 30%. What was Silas's income tax expense for the year?

Accepted Answer

A)  $27,000 
B)  $79,200 
C)  $169,200 
D)  $40,500 
A)  $27,000 
B)  $79,200 
C)  $169,200 
D)  $40,500

Question 20

Income tax expense usually appears as a separate section on a corporation income statement.

Accepted Answer

A) True 
 B)False

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

Retained earnings is increased by each of the following except

The return on common stockholders' equity is computed by dividing net income available to common stockholders by

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Stock dividends and stock splits have the following effects on retained earnings: Stock Splits Stock Dividends

Which of the following statements about a cash dividend is incorrect?

On January 1, Castagno Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 15% stock dividend. Market value of the stock was $15/share. As a result of this event,

The income statement for Roland Inc. shows income before income taxes $700,000, income tax expenses $210,000, and net income $490,000. If Roland declared $150,000 of cash dividends on preferred stock and has 100,000 shares of common stock outstanding throughout the year, earnings per share is:

Income statements for corporations report _______________ in a separate section before net income.

The following information is available for Ritter Corporation: Instructions Compute the return on common stockholders' equity ratio for both years. Briefly comment on your findings.

A dividend based on paid-in capital is termed a liquidating dividend.

If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a

If a corporation declares a dividend based upon paid-in capital, it is known as a

The declaration of a stock dividend will

In the stockholders' equity section of the balance sheet,

During 2010 Silas Inc. had sales revenue $564,000, gross profit $264,000, operating expenses $99,000, cash dividends $45,000, other expenses and losses $30,000. Its corporate tax rate is 30%. What was Silas's income tax expense for the year?

Income tax expense usually appears as a separate section on a corporation income statement.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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