Exam 13: Accounting for Corporations

Special rights often granted to preferred stock include a preference for receiving dividends and for the distribution of assets if the corporation is liquidated.

The stockholders' equity section of a corporation's balance sheet follows: (1) Assuming that the preferred stock is not callable and no dividends are in arrears, compute the book values per preferred share and per common share. Book value per preferred share ____________________ Book value per common share ____________________ (2) Assuming that the preferred stock has a call price of $30 per share and one year of cumulative preferred dividends is in arrears, compute the book values per preferred share and per common share Book value per preferred share ____________________ Book value per common share ____________________

A stock dividend:

A company is authorized to issue 50,000 shares of $50 par value, 8%, cumulative, fully participating preferred stock, and 750,000 shares of $5 par value common stock. Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:

Stated value stock is par stock that is assigned a value per share by the corporation's board of directors.

A corporation has $1,750,000 in stockholders' equity and 350,000 weighted-average shares of common stock outstanding. Calculate the book value per common share.

A company has a market value per share of $73.00. Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000. The company's price-earnings ratio equals:

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

Owners of preferred stock often do not have:

A company's stock is selling for $35 per share at year-end. This current year it paid shareholders a $2.45 per share cash dividend, reported earnings per share of $12.00, and had 750,000 common shares outstanding at year-end. Calculate the company's dividend yield.

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

A company has $100,000 of 10% noncumulative, nonparticipating, preferred stock outstanding, and $150,000 of common stock outstanding. In the company's first year of operation, no dividends were paid, but during the second year, it paid cash dividends of $25,000. Compute the dividends to be distributed to (1) preferred shares and (2) common shares.

The only way that a shareholder can affect the management of a corporation is to get elected to the corporation's board of directors.

The main limitation in using book value per share for stock valuation models is the potential difference between recorded value and market value for both assets and liabilities.

On January 10, a corporation purchased 5,000 shares of its own common stock at $17.50 per share. On August 4, a total of 1,000 treasury shares were sold at $19.00 per share. These are the only treasury stock transactions ever made by the corporation. Prepare the journal entries required on January 10 and August 4.

A company has $595,000 in total stockholders' equity. Preferred stock outstanding is valued at $150,000, and 75,000 shares of common stock are outstanding. Its book value per common share is $7.93. ($595,000 - $150,000)/75,000 shares = $5.93/share

The retirement of stock:

If a corporation is authorized to issue 1,000 shares of $50 common stock, it is said to have $50,000 of stock outstanding.

Book value per share reflects the value per share if a company is liquidated at balance sheet amounts.

________________________ is the number of shares that a corporation's charter allows it to sell.