Question 1

Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively?

Accepted Answer

A)  $6; $12. 
B)  $18; $6. 
C)  $6; $6. 
D)  None of these answer choices are correct.

Question 2

The December 31, 2018, balance sheet of MBI Company included the following: $\begin{array}{|l|l|}
\hline\text { Common stock, 20 million shares outstanding at } \$ 1 \text { par } & \$ 20,000,000 \
\hline \text { Paid-in capital-excess of par } & 100,000,000 \
\hline \text { Retained earnings } & 115,000,000\\hline
\end{array}$ MBI completed the following transactions in 2018 relating to treasury stock: $\begin{array}{|l|l|}
\hline \text { March 17: } & \text { Reacquired } 2 \text { million shares at } \$ 10 \
\hline \text { May 17: } & \text { Reacquired 2 million shares at } \$ 9 \
\hline \text { August 10: } & \text { Issued 3 million shares at } \$ 12 \
\hline
\end{array}$ Required:
Prepare journal entries to record the foregoing transactions on a weighted average basis.

Accepted Answer

The answer of The December 31, 2018, balance sheet of...

Question 3

During its first year of operations, Cole's Electronics Inc. completed the following transactions relating to shareholders' equity.  The articles of incorporation authorize 5,000,000 shares of common stock with a par of $1 per share and 1,000,000 preferred shares with a par of $100 per share.
Required:
Record the above transactions in general journal form.

Accepted Answer

The answer of During its first year of operations, Cole's...

Question 4

When a corporation acquires its own shares, those shares assume the same status as authorized but unissued shares, as if they never had been issued. Explain how this is reflected in the accounting records if the shares are formally retired.

Accepted Answer

The answer of When a corporation acquires its own shares,...

Question 5

At the beginning of 2016, Emily Corporation issued 10,000 shares of $100 par, 5%, cumulative, preferred stock for $110 per share. No dividends have been paid to preferred or common shareholders. What amount of dividends will a preferred shareholder owning 100 shares receive in 2018 if Emily pays $1,000,000 in dividends?

Accepted Answer

A)  $500. 
B)  $1,500. 
C)  $1,650. 
D)  $10,000.

Question 6

How do U.S. GAAP and International Financial Reporting Standards (IFRS) differ with respect to debt and equity for preferred stock?

Accepted Answer

The answer of How do U.S. GAAP and International Financial...

Question 7

When treasury stock is purchased for an amount greater than its par, what is the effect on total shareholders' equity?

Accepted Answer

A)  Increase. 
B)  Decrease. 
C)  No effect. 
D)  Cannot tell from the given information.

Question 8

Retained earnings might be reduced by each of the following except:

Accepted Answer

A)  stock split not effected in the form of a stock dividend. 
B)  property dividend. 
C)  treasury stock. 
D)  cash dividend.

Question 9

The 12/31/2018 balance sheet of Despot Inc. included the following:  In January 2018, Despot recorded a transaction with this journal entry: 
- In February 2018, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts?

Accepted Answer

A)  Decreased assets and liabilities. 
B)  Decreased assets and shareholders' equity. 
C)  Increased liabilities and decreased shareholders' equity. 
D)  None of these answer choices are correct

Question 10

Dan Druff Shampoo has 1,000,000 shares of common stock authorized with a par value of $1 per share, of which 500,000 shares are outstanding. When the market value was $9 per share, Druff issued a stock dividend by which for each ten shares held, one share was issued as a stock dividend. The par per share did not change. What entry did Druff record for this transaction?

Accepted Answer

A)   
B)   
C)   
D)

Question 11

The changes in account balances for Allen Inc. for 2018 are as follows:  Assuming the only changes in retained earnings in 2018 were for net income and a $25,000 dividend, what was net income for 2018?

Accepted Answer

A)  $30,000. 
B)  $20,000. 
C)  $15,000. 
D)  $5,000.

Question 12

The following partial information is taken from the comparative balance sheet of Levi Corporation: 
- How many of Levi's common shares were outstanding on 12/31/2017?

Accepted Answer

A)  14 million. 
B)  9 million. 
C)  5 million. 
D)  None of these answer choices are correct.

Question 13

When treasury shares are resold at a price below cost:

Accepted Answer

A)  Paid-in capital and/or retained earnings is reduced. 
B)  Paid-in capital and/or retained earnings is increased. 
C)  Retained earnings is always reduced. 
D)  A loss is reported on the income statement

Question 14

When stock is issued in exchange for property, the best evidence of fair value might be any of the following except:

Accepted Answer

A)  The appraised value of the property received. 
B)  The selling price of the stock in a recent transaction. 
C)  The price of the stock quoted on the stock exchange. 
D)  The average book value of outstanding stock.

Question 15

Outstanding common stock is:

Accepted Answer

A)  Stock that is performing well on the New York Stock Exchange. 
B)  Stock that has been authorized by the state for issue. 
C)  Stock held in the corporate treasury. 
D)  Stock owned by shareholders.

Question 16

Investors should be wary of stock buybacks during down times because the resulting decrease in shares and increase in earnings per share can be used to mask a slowdown in earnings growth.

Accepted Answer

A) True 
 B)False

Question 17

The par amount of shares issued is normally recorded in the:

Accepted Answer

A)  Paid-in capital in excess of par account. 
B)  Common stock account. 
C)  Retained earnings account. 
D)  Appropriated retained earnings account.

Question 18

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Share issue cost

Accepted Answer

A) May be increased when net income increases. 
B) A feature of preferred stock. 
C) May be reduced when shares are retired. 
D) Designed to increase the market value of stock. 
E) Reduces the net proceeds from selling shares.

Question 19

Heidi Aurora Imports applies International Financial Reporting Standards (IFRS) in preparing its financial statements. The company issued shares of the company's Class B stock. Heidi Aurora Imports should report the stock in the company's statement of financial position:

Accepted Answer

A)  Among liabilities if the shares are mandatorily redeemable or redeemable at the option of the shareholder. 
B)  As equity unless the shares are mandatorily redeemable. 
C)  As equity unless the shares are redeemable at the option of the issuer. 
D)  Among liabilities unless the shares are mandatorily redeemable.

Exam 18: Shareholders Equity