Exam 16: Retained Earnings and Earnings Per Share

When a corporation has contingently issuable common stock for which the conditions have not been met for issuance, the shares are included in

The Annapolis Corporation's stockholders' equity accounts have the following balances as of January 1, 2014: Annapolis engaged in the following dividend transactions during 2014, 2015, and 2016: 2014: Dividends are in arrears for 2012 and 2013. On December 1, 2014, the annual cash dividend plus the dividends in arrears were declared on the preferred stock. In addition, a $1.50 per share dividend was declared on the common stock. The dividends were paid on December 31, 2014. 2015:On December 1, 2015, the annual cash dividend on the preferred stock was declared. The dividend was paid on December 31, 2015. On December 10, a 30% stock dividend was declared on the common stock, distributable on January 25, 2016. The market price per share for the common stock on December 10, 2015, was $28. 2016:On January 25, 2016, the stock dividend declared on December 10, 2015, was issued. On December 1, the annual cash dividend on the preferred stock was declared; it is payable on January 15, 2017. In addition, on December 1, a 10% stock dividend was declared on the common stock, distributable on January 20, 2017. The market price per share for the common stock on December 1, 2016, was $23. No other stock transactions took place during 2014, 2015, or 2016. Required: Prepare the entries to record the dividend transactions for 2014, 2015, and 2016. (Do not record any transactions for 2017.)

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?

When computing diluted earnings per share, a company may use the if converted method and the treasury stock method. Required: Describe when and why a company would use each method.

Which statement best reflects the issues associated with the computation of diluted earnings per share?

As of December 31, 2015, 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 2013 and 2014 have not been paid. As of December 31, 2015, 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, 2015, under each of the following independent situations?

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

If a corporation appropriates retained earnings for treasury stock transactions, the appropriation will affect total amounts for retained earnings and stockholders' equity as

The denominator in the calculation for basic earnings per share is net income less preferred dividends.

Which one of the following would least likely result in a negative component of stockholders' equity?

"Disclosure of changes in the separate accounts comprising stockholders' equity and the changes in the number of shares of equity securities during at least the most recent annual fiscal period is required to make the financial statements sufficiently informative." is a requirement of FASB's Statement of Financial Accounting Concepts No. 6 to inform external users of financial statements.

Marco, Inc. determined the following information concerning its common stock during 2014: Required: What should Marco, Inc. use as the denominator for its basic earnings per share calculation for 2014?

List the 5 types of dividends.

On January 1, James corporation had 60,000 shares of common stock outstanding. On March 1, the company reacquired 12,000 shares, and it declared a 10% stock dividend on October 1. The denominator in the earnings per share calculation would be

Robertson Company had 40,000 shares of common stock outstanding during 2014 and compensatory share options to purchase 5,000 shares of common stock at $10 a share plus a $3 a share unrecognized compensation cost (net of tax). The average market price is $20 a share. The company also had 7% convertible preferred stock on which dividends of $9,000 were declared. Each preferred share is convertible into 6,000 common shares. Robertson's after-tax net income was $88,000, and the tax rate was 40%. Required: Compute 2014 diluted earnings per share for Robertson Company.

On January 1, a corporation had 25,000 shares of common stock outstanding. An additional 10,000 shares were issued on July 1, and on November 1, the company declared a 2-for-1 stock split. The denominator in the earnings per share calculation would be

Johnson Company has retained earnings balance of $550,000 at the end of 2014. During 2014 Johnson issued $200,000 of 10 year, 10% bonds. As part of the bond issue the each year $20,000 of retained earnings will be unavailable to pay dividends. Required: Show the proper reportinng requirements for Johnson’s retained earnings restriction.

What are the steps necessary to compute diluted earnings per share?

When a company is determining its dividend policy, the company must adhere to legal requirements. The legal requirements are determined by the

Under the treasury stock method, the number of shares of common stock assumed to be reacquired is determined by using the