Exam 16: Retained Earnings and Earnings Per Share

A simple capital structure is one that consists of common stock outstanding and possibly convertible preferred stock.

Under the if-converted method, the impact of various convertible securities on the diluted earnings per share calculation are ranked from

The Norman Corporation's stockholders' equity accounts have the following balances as of January 1, 2016: Norman engaged in the following dividend transactions during 2016: March 1: Declared a 50% stock dividend on the common stock, distributable on April 10. The market price per share for the common stock was $35 on March 1. April 10: Distributed the stock dividend declared on March 1. June 30: Declared a 10% stock dividend on the common stock, distributable on August 5. The market price for the common stock was $38 per share on June 30. August 5: Distributed the stock dividend declared on June 30. December 1: A $.60 per share cash dividend was declared on the common stock, payable on January 20, 2017. Required: Prepare the entries to record the dividend transactions for 2016. Do not record the cash dividend payment in 2017.)

Dual presentation of the basic and diluted earnings per share amounts is

As of December 31, 2017, the Russell Corporation has 10,000 shares of 10% preferred stock issued and outstanding with a total par value of $250,000. In addition, as of this date, Russell has 75,000 shares of common stock issued and outstanding with a total par value of $750,000. Dividends for 2015 and 2016 have not been paid. As of December 31, 2017, the Russell Corporation declared total cash dividends of $290,000 to be paid to both the preferred stockholders and the common stockholders. Required: How much cash will be distributed to both the preferred stockholders and the common stockholders, respectively, on December 31, 2017, under each of the following independent situations? a. The preferred stock is noncumulative and nonparticipating. b. The preferred stock is cumulative and nonparticipating. c. The preferred stock is cumulative and fully participating. d. The preferred stock is cumulative and partially participating up to 15% of its par value.

List 4 factors that management may consider prior to declaring a dividend.

Exhibit 16-1 The Zeller Corporation's stockholders' equity accounts have the following balances as of December 31, 2016: Common stock, $10 par 30,000 shares issued -Refer to Exhibit 16-1. On January 2, 2017, the board of directors of Zeller declared a 5% stock dividend to be distributed on January 31, 2017. The market price per share of Zeller's common stock was $30 on January 2 and $32 on January 31. As a result of this stock dividend, the retained earnings account should be decreased by

In calculating earnings per share, a company uses the treasury stock method when

The retained earnings statement is a required separate financial statement that discloses all changes in retained earnings during the accounting period.

On January 1, 2016, Wade Corporation had 24,000 shares of common stock outstanding. On April 1, it reacquired 2,400 shares; on July 1, it issued 10,800 shares; on October 1, it issued another 9,600 shares; and on December 1, it reacquired 900 shares. What was the weighted average number of common shares outstanding for 2016?

Reporting basic earnings per share is required for which type of corporate capital structure?

Smith Corporation had 30,000 shares of common stock outstanding during the year. In addition, there were compensatory share options to purchase 3,000 shares of common stock at $20 a share outstanding the entire year. The average market price for the common stock during the year was $36 a share. The unrecognized compensation cost net of tax) relating to these options was $4 a share. What is the denominator to compute the diluted earnings per share?

A board of directors may decide to restrict retained earnings to meet legal requirements or to meet a contractual restriction.

During 2016, Stewart, Inc. had the following convertible securities outstanding: A. $220,000 of 10%, $100 par, cumulative preferred stock. Each share is convertible into 5 shares of common stock. B. $200,000 of 9.5% convertible bonds. Each $1,000 bond is convertible into 45 shares of common stock. C. $100,000 of 8% convertible bonds. Each $1,000 bond is convertible into 32 shares of common stock. D. $150,000 of 11%, $100 par, cumulative preferred stock. Each share is convertible into 5 shares of common stock. Stewart, Inc. has an income tax rate of 40%. Its reported net income for 2016 was $88,000, and it had 22,000 shares of common stock outstanding all year. Required: Calculate basic and diluted earnings per share for Stewart.

When reporting basic and diluted earnings per share, companies are required to include a schedule or note identifying and reconciling the numerators and denominators used in their calculations. What other information must be included in the schedule or note in the financial statements?

On January 1, 2016, Samuel Company had 21,000 shares of common stock outstanding and issued an additional 4,500 shares on May 1. The company declared and paid a cash dividend of $45,000 and earned $375,000 net income. What was the basic earnings per share for the year?

In 2016, Cunningham Company determined that it did not accrue $15,000 of interest expense in 2015, which caused a material overstatement of income. Assuming a 35% tax rate, which of the following presents the journal entries that would correct the error?

Which statement best represents the relationship between date of declaration, date of record and ex-dividend date, and date of payment, for a cash dividend.

The Frank Company has issued 10%, fully participating, cumulative preferred stock with a total par value of $300,000 and common stock with a total par value of $900,000. Dividends for one previous year are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $222,000 are distributed at the end of the current year?

The following information is provided for the Jacob Company: What is the total stockholders' equity of Jacob Company?