Exam 8: Accounting for Shareholders Equity

Team Shirts had net income of $23,000.The balance sheet showed beginning and ending balances in shareholders' equity of $100,000 and $110,000,respectively.There were no preferred shares and 20,000 common shares outstanding throughout the year.Calculate earnings per share.

When a company buys shares of its own stock and holds them as treasury stock,________.

A monetary value assigned to and printed on each share of stock is called ________.

Kim Brother Fitness Center had average common shareholders' equity of $546,890.The company had net income during the year of $359,000.There were 378,000 shares of common stock outstanding throughout the year and no preferred stock at any time.Calculate return on equity (round to the nearest tenth of a percent).

Corporations repurchase their own stock to ________.

Treasury stock is a contra-equity account.

Dividends decrease net income.

Albatross Shipping had 100,000 shares of common stock outstanding on January 1.On September 1,Albatross issued an additional 30,000 common shares.Albatross has no treasury stock.The weighted average number of common shares outstanding for the year was ________.

The declaration date is the date ________.

State charters allow corporations to issue an unlimited number of shares of common stock.

Team Instructions: Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final correct copy of the problem.Each team should turn in only one copy of the problem for grading,along with a copy of the annual report that it used.All team members will receive the same grade. Provide students with copies of real merchandising companies' annual reports,or give students the Web addresses of real merchandising companies and ask them to print out the annual reports.All team members should work with the same company's annual report. Answer the following questions using the annual report assigned to your team:

Team Shirts declared and paid cash dividends of $40,000.There were 1,000 shares of 6%,$10 par value,noncumulative preferred stock outstanding.How much of the cash dividends were paid to COMMON shareholders?

DM Company had beginning retained earnings of $80,000.During the year the company earned net income of $200,000 and declared dividends of $70,000.The Company sold 1,000 shares of stock for $45 each during the year.What is the ending balance in retained earnings?

Cartier,Inc.'s corporate charter authorizes it to sell 1 million shares of $0.50 par value common stock.As of December 31,2011,the company had sold 500,000 shares for $4 each.Cartier has 20,000 shares of treasury stock that cost $100,000.On the December 31,2011 balance sheet,the number of shares outstanding is ________ shares.

Team Instructions: Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final correct copy of the problem.All team members will receive the same grade. Use the July and August transactions and financial statements for Team Shirts in your textbook to answer these questions:

Cartier,Inc.'s corporate charter allows it to sell 1 million shares of $0.50 par value common stock.As of December 31,2011,the company had sold 500,000 shares for $4 each.Cartier has 20,000 shares of treasury stock that cost $100,000.On the December 31,2011 balance sheet,the number of shares authorized is ________ shares.

________ is the stock sold to the public.

A measure of how well a company produces income with the amount of investment that common shareholders have made in the company is the ________.

B & B Company had beginning retained earnings of $45,000.During the year the company had net income of $139,000,and declared and paid dividends of $9,500.B & B Company sold 2,500 shares of stock for $30 per share.What is the net effect of these transactions on the following accounts?

Team Shirts issued a 2-for-1 stock split.The balance in retained earnings just before the split was $45,000.There were 15,000 shares outstanding on the day of the split.The $1 par value stock had a market price of $17.25 on the day of the split.Retained earnings will increase (decrease)after the split by ________.