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Exam 18: Shareholders Equity Key

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Question 61

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Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the listed transactions. ____ A net loss for the year. ____ A stock split effected in the form of a stock dividend. ____ A stock split in which the par per share is reduced (but not effected in the form of a stock dividend). ____ Declaration of a 5% stock dividend. ____ Declaration of a cash dividend. ____ Issue stock for noncash assets. ____ Payment of previously declared cash dividend. ____ Retirement of common stock at a cost greater than the original issue price. ____ Retirement of common stock at a cost less than the original issue price. ____ Resale of treasury stock for less than carrying value assuming no previous treasury stock sales.

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Question 62

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When treasury shares are resold at a price below cost:

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 taken on the income statement.

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Question 63

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Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?

Retained earnings represent a company's:

At the beginning of 2011, 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 2013 if Emily pays $1,000,000 in dividends?

The shareholders' equity of Red Corporation includes $200,000 of $1 par common stock and $400,000 par value of 6% cumulative preferred stock. The board of directors of Red declared cash dividends of $50,000 in 2013 after paying $20,000 cash dividends in 2012 and $40,000 in 2011. What is the amount of dividends common shareholders will receive in 2013?

The prescribed accounting treatment for stock dividends implicitly assumes that shareholders are fooled by "small" stock dividends and benefit by the market value of their additional shares. Explain this statement. Is it logical?

In January 2013, Despot recorded a transaction with this journal entry: The transaction was for the:

Boxer Company owned 20,000 shares of King Company that were purchased in 2011 for $500,000. On May 1, 2013, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was $30 per share on the date of declaration and $32 per share on the date of distribution. By how much is retained earnings reduced by the property dividend?

Which of the following statements is true with regard to preferred stock (preference shares) ?

Accumulated other comprehensive income is reported:

When stock traded on an active exchange is issued for a machine:

A statement of comprehensive income does not include:

Corporations are formed in accordance with:

On June 1, 2013, Blue Co. distributed to its common stockholders 200,000 outstanding common shares of its investment in Red, Inc., an unrelated party. The carrying amount on Blue's books of Red's $1 par common stock was $2 per share. Immediately after the declaration, the market price of Red's stock was $2.50 per share. In its income statement for the year ended June 30, 2013, what amount should Blue report as gain before income taxes on disposal of the stock?

Stock splits are issued primarily to:

In 2013, Southwestern Corporation completed the treasury stock transactions listed below. February 2: Reacquired 70,000 shares at $12. March 17: Sold 20,000 shares at $14. May 17: Sold 25,000 shares at $8. Southwestern had issued 100,000 shares of its $1 par common stock for $10 several months ago. Required: Prepare the journal entries to record the above transactions using the cost method.

The corporate charter sometimes is known as (a) :

What was shareholders' equity as of December 31, 2013?

What was the amount of net income earned by Levi during 2013?