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

Match each item/event pair below with the indicated change in the item. An individual classification may be used more than once, or not at all. For each dividend, assume that both declaration and payment or distribution has occurred. Classifications A. Item increases B. Item decreases C. Item is unchanged D. Direction of change cannot be determined

The following accounts appear in the ledger of Milroy Inc. after the books are closed at December 31, 2010. Instructions Prepare the stockholders' equity section at December 31, 2010, assuming that retained earnings is restricted for plant expansion in the amount of $200,000.

On November 1, 2010, Norris Corporation's stockholders' equity section is as follows: On November 1, Norris declares and distributes a 10% stock dividend when the market value of the stock is $13 per share. Instructions Indicate the balances in the stockholders' equity accounts after the stock dividend has been distributed.

On January 1, Sanford Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 15% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The stock was distributed on June 30. The entry to record the transaction of June 30 would include a

The return on common stockholders' equity is computed by dividing

A retained earnings statement shows the same information as a corporation income statement.

Retained earnings represents the amount of cash available for dividends.

Many companies prepare a stockholders' equity statement instead of presenting a detailed stockholders' equity section in the balance sheet.

When computing earnings per share,

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Of the various dividends types, the two most common types in practice are

Prepare a 2010 income statement for Eaton Corporation based on the following information:

The per share amount normally assigned by the board of directors to a small stock dividend is

On January 1, 2010, Dolan Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued 25,000 shares of common stock for $400,000. June 1 Declared a cash dividend of $2.00 per share to stockholders of record on June 15. June 30 Paid the $2.00 cash dividend. Dec. 1 Purchased 5,000 shares of common stock for the treasury for $22 per share. Dec. 15 Declared a cash dividend on outstanding shares of $2.25 per share to stockholders of record on December 31. Instructions Prepare journal entries to record the above transactions.

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

Lang Inc. reported net income of $270,000 during 2010 and paid dividends of $26,000 on common stock. It also has 10,000 shares of 6%, $100 par value preferred stock outstanding. Common stockholders' equity was $1,200,000 on January 1, 2010, and $1,600,000 on December 31, 2010. The company's return on common stockholders' equity for 2010 is:

The stockholders' equity section of Foley Corporation at December 31, 2009, included the following: 5% preferred stock, $100 par value, cumulative, 10,000 shares authorized, 8,000 shares issued and outstanding $ 800,000 Common stock, $10 par value, 250,000 shares authorized, 200,000 shares issued and outstanding $2,000,000 Dividends were not declared on the preferred stock in 2009 and are in arrears. On September 15, 2010, the board of directors of Foley Corporation declared dividends on the preferred stock for 2009 and 2010, to stockholders of record on October 1, 2010, payable on October 15, 2010. On November 1, 2010, the board of directors declared a $.75 per share dividend on the common stock, payable November 30, 2010, to stockholders of record on November 15, 2010. Instructions Prepare the journal entries that should be made by Foley Corporation on the dates indicated below:

Luther Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2010, and December 31, 2009. The board of directors declared and paid a $5,000 dividend in 2009. In 2010, $24,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2010?

A small stock dividend is defined as

A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.