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Exam 11: Corporate Reporting and Analysis

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Question 91

Multiple Choice

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A corporation issued 300 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state.The entry to record this transaction will include:

A) A $1,800 credit to Common Stock.
B) A $1,500 debit to Organization Expenses.
C) A $300 credit to Contributed Capital in Excess of Par Value, Common Stock.
D) A $1,800 debit to Legal Expenses.
E) A $1,800 credit to Cash.

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Question 92

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A corporation's minimum legal capital is often defined to be the total par value of the shares:

A) Issued
B) Authorized
C) Subscribed
D) Outstanding
E) In treasury

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Question 93

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A company has net income of $850,000.It also has 125,000 weighted-average common shares outstanding and a market value per share of $115.The company's price-earnings ratio is equal to:

___________________________ are corrections of material errors in prior period financial statements.

Duke Corporation reports the following components of stockholders' equity on December 31,2013: $\begin{array}{lr}\text { Common stock }-\$ 2.5 \text { par value, } 100,000 \text { shares authorized, } 38,000 \text { shares }\\\text { issued and outstanding } & \$1,125,000 \\ \text { Paid-in capital in excess of par value, common stock } & 60,000 \\\text { Retained earnings } & 460,000 \\ \text { Total stockholders' equity } & \$ 1,645,000\end{array}$ In 2014,the following transactions affected its stockholders' equity accounts. Jan. 1 Purchased 4,500 shares of its own stock at $\$ 27$ cash per share. Jan. 5 Directors declared a $\$ 3$ per share cash dividend payable on February 28 to the February 5 stockholders of record. Feb. 28 Paid the dividend declared on January 5 . Mar: 3 Sold 1,000 shares of treasury stock for $\$ 28$ per share. What is the journal entry required for the March 3 transaction?

The costs of bringing a corporation into existence,including legal fees,promoter fees,and amounts paid to obtain a charter,are called:

The stockholders' equity section of a corporation's balance sheet follows: $\begin{array}{|l|l|} \hline \text {Preferred stock, \$ 25 par value, \( 6 \% \), cumulative, 10,000 shares authorized, } &\\ \text {5,000 shares issued and outstanding } &\$125,000\\\hline \text { Contributed capital in excess of par value, Preferred stock} &50,000\\ \hline\text {Common stock, \( \$ 10 \) par value, 50,000 shares authorized, 10,000 shares issued } &\\ \text { and outstanding } & 100,000\\\hline \text {Contributed capital in excess of par value, common stock } & 40,000\\\hline \text { Retained earnings } & 95,000\\\hline \text {Total stockholders' equity } &\$410,000\\\hline \end{array}$ (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. (2)Assuming that the preferred stock has a call price of $30 per share and there is one year of cumulative preferred dividends is in arrears,compute the book values per preferred share and per common share.

A company reported earnings per share of $9.75,paid a $6.00 cash dividend per share to preferred shareholders,and paid a $0.54 cash dividend per share to common shareholders.There were 1,000 shares of preferred stock outstanding and 6,000 shares of common stock outstanding during the year and the market price per share of common stock was $45.Calculate the company's dividend yield for common stock.

A corporation began the current year with $250,000 of unappropriated retained earnings.During the current year it earned $120,000 of net (after-tax)income,declared $75,000 of cash dividends,paid $50,000 of the cash dividends and purchased treasury stock costing $40,000.Calculate the current year-end balance in retained earnings.

The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a:

Book value per share:

______________________________________ is the stockholders' equity applicable to common shares divided by the number of common shares outstanding.

____________________ preferred stock gives holders the option to exchange their preferred shares for common shares at a specified rate.

_______________________ generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.

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,it paid no dividends,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.

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1.Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27.The entry to record this dividend is:

For each of the following independent transactions (a)through (d),prepare the necessary journal entry: (a)Declared a $0.40 per share cash dividend on 200,000 shares of preferred stock outstanding. (b)Declared and distributed a 12% stock dividend on 800,000 shares of $5 par value common stock outstanding.Market price per common share on this date was $25. (c)Declared and distributed a 2-for-1 stock split on 500,000 shares of $10 par value common stock outstanding. (d)Declared and distributed a 30% stock dividend on 400,000 common shares of $5 par value common stock outstanding.Market price per common share on this date was $20.

Authorized stock is the total number of shares outstanding.

A company is authorized to issue 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: $\begin{array}{|c|l}\hline \text { Jan. 10 } & \text { Sold 102,000 shares of common stock for } \$ 8 \text { cash per share. } \\\hline 15 & \begin{array}{l}\text { Exchanged 10,000 shares of common stock for equipment with a market value of } \\\$ 80,000\end{array} \\\hline \text { Feb. 1 } & \begin{array}{l}\text { Exchanged } 500 \text { shares of common stock for } \$ 3,000 \text { of legal services, incurred } \\\text { during the company's organization. }\end{array} \\\hline\end{array}$

Assume Garrison Guitar Company declared a $0.28 per share cash dividend and that the company has 25,000 shares authorized,19,000 shares issued,and 12,000 shares of common stock outstanding.The general journal entry to record the dividend declaration is: