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Exam 11: Reporting and Analyzing Equity

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Question 91

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If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.

A) True
B) False

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Question 92

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Gershwin Company reported net income of $428,000 and paid $8,500 in preferred cash dividends during the current year. The company had 110,000 common shares issued, and 10,000 common shares in treasury during the year. The year-end market price per common share was $41.05. Calculate the company's price-earnings ratio.

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Price-Earnings Ratio = Market ...

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Question 93

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Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock.

A proxy is a document that gives a designated agent the right to vote a shareholder's stock.

Retained earnings are part of the stockholders' claims on the company's net assets.

Fargo Company's outstanding stock consists of 400 shares of noncumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. The amount of dividends paid to preferred and common shareholders in 2016 is:

Preferred stock that confers rights to prior periods' unpaid dividends even if they were not declared is called:

A company has earnings per share net income of $90,000; its weighted-average common shares outstanding are 18,000. Its dividend per share is $0.45, its market price per share is $88, and its book value per share is $76. Its price-earnings ratio equals:

What is treasury stock? What reasons might a company hold treasury stock?

The declaration of cash dividends increases retained earnings.

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

Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

Purchasing treasury stock reduces the corporation's assets and stockholders' equity by unequal amounts.

A corporation paid a cash dividend of $0.85 per share during the current year. It had 1,550,000 common shares outstanding at year-end, its current year earnings per share was $3.45, and the stock's year-end market price was $10.63 per share. Calculate the company's dividend yield.

The following data were reported by a corporation: The number of outstanding shares is:

A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company sold 3,000 shares before the end of the year. There were no other stock transactions. The company's earnings per share 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 300,000 shares of preferred stock outstanding. (b) Declared and distributed an 8% 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 400,000 shares of $10 par value common stock outstanding. (d) Declared and distributed a 35% stock dividend on 700,000 common shares of $1 par value common stock outstanding. Market price per common share on this date was $20.

Explain where each of the following items should appear in the financial statements of a corporation: (1) The accounting department discovered that an entry was made last year to Insurance Expense instead of to Prepaid Insurance. The after-tax effect of the charge to Insurance Expense was $5,000. (2) The company grants five of its employees the option to purchase 100 shares of its $5 par value common stock at its current market price of $20 per share anytime with the next five years. None of the employees exercised the options in the current year.

Preferred stock that the issuing corporation has the option to retire by paying a specified amount to the preferred stockholders is called: