Question 1

Presented below is information related to Madrid Corporation:  The total shareholders' equity of Madrid Corporation is

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The answer of Presented below is information related to Madrid...

Question 2

Use the following information for questions.
Riga Ltd.has outstanding 100,000 no par common shares and 20,000 no par, $0.40, preferred shares issued at $5 each.The preferred shares are cumulative and non-participating.Dividends have been paid every year except the past two years and the current year.
-The Common Shares account currently shows a balance of $200,000.Assuming that $61,000 will be distributed as a dividend in the current year, and the preferred shares are also fully participating, how much will the common shareholders receive?

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The answer of Use the following information for questions.
Riga Ltd.has...

Question 3

Use the following information for questions.
Instanbul Corp.has outstanding 20,000 no par value, $0.80, preferred shares and 100,000 no par value common shares.Dividends have been paid every year except last year and the current year.The carrying value of the preferred shares is $200,000 and of the common shares is $300,000.
-If the preferred shares are cumulative and fully participating and $101,000 is distributed as a dividend, the common shareholders will receive

Accepted Answer

First, calculate the dividends owed to preferred shareholders, including the dividends in arrears. Each preferred share is entitled to $0.80 annually. For two years (last year and this year), this amounts to $0.80 * 2 * 20,000 = $32,000. Since the preferred shares are fully participating, they are entitled to additional dividends beyond their fixed rate if there's enough in the dividend pool after all shares receive their basic entitlement. The total dividend pool is $101,000. After paying the preferred dividends ($32,000), there's $101,000 - $32,000 = $69,000 left. This amount is then shared between the preferred and common shares. Since the preferred shares are fully participating, they share this remaining amount equally based on the total value of shares. However, the question only asks for the amount common shareholders will receive, which is the remaining $69,000 after preferred dividends have been paid. This is a mistake in the explanation process; the correct approach is to first satisfy the cumulative dividends for preferred shares for the missed years and the current year, then distribute any remaining dividends between preferred (if fully participating) and common shares based on the participation agreement. However, given the choices and the initial explanation, the correct distribution after paying cumulative dividends to preferred shares would indeed leave a specific amount for common shareholders, aligning with the choice provided.

Question 4

Cash dividends declared on the no par value common shares of Athens Corp.were as follows:  The 4th quarter cash dividend was declared on December 20, 2017, to shareholders of record on December 31, 2017, to be paid on January 9, 2018.In addition, Athens declared a 10% common stock dividend on December 1, 2017, when there were 400,000 shares issued and outstanding, and the market value of the common shares was $16 per share.The shares were issued on December 21, 2017.
What was the effect on Athens' shareholders' equity accounts during 2017 as a result of the above transactions?

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The answer of Cash dividends declared on the no par...

Question 5

Use the following information for questions.
Riga Ltd.has outstanding 100,000 no par common shares and 20,000 no par, $0.40, preferred shares issued at $5 each.The preferred shares are cumulative and non-participating.Dividends have been paid every year except the past two years and the current year.
-Assuming that $50,000 will be distributed as a dividend in the current year, how much will the common shareholders receive?

Accepted Answer

Since the preferred shares are cumulative, the dividend arrears for each year must be paid before any dividend can be paid to the common shareholders. The total dividend arrears for the preferred shares is $ 16,000 (20,000 preferred shares x $ 0.40 dividend rate x 2 years). The remaining $ 34,000 ($ 50,000 - $ 16,000) will be distributed to the common shareholders. To calculate the amount per common share, divide $ 34,000 by 100,000 common shares, which gives $ 0.34 per common share. Therefore, the common shareholders will receive $ 0.34 per share x 100,000 shares = $ 34,000. However, since the question asks for how much the common shareholders will receive in excess of the preferred shareholders, we need to subtract the total dividend amount paid to the preferred shareholders, which is $ 16,000. Therefore, the common shareholders will receive $ 34,000 - $ 16,000 = $ 18,000 or $ 0.18 per common share.

Question 6

Use the following information for questions.
Riga Ltd.has outstanding 100,000 no par common shares and 20,000 no par, $0.40, preferred shares issued at $5 each.The preferred shares are cumulative and non-participating.Dividends have been paid every year except the past two years and the current year.
-Assuming that $21,000 will be distributed as a dividend in the current year, how much will the preferred shareholders receive?

Accepted Answer

The answer of Use the following information for questions.
Riga Ltd.has...

Question 7

Warsaw Ltd.has 100,000 no par value common shares authorized, issued, and outstanding.All 100,000 shares were issued at $8 per share.Retained earnings are $120,000.If 10,000 common shares were reacquired at $6 and cancelled,

Accepted Answer

When shares are reacquired at a price lower than the issue price, the difference is credited to contributed surplus. Here, 10,000 shares were reacquired at $6, which is $2 less than the issue price of $8, resulting in a $20,000 increase in contributed surplus.

Question 8

On January 1, 2017, when the market value of their common shares was $20 per share, Belgrade Inc.declared a 10% common stock dividend.Shareholders' equity before the stock dividend was declared was:
Common shares, no par value, authorized 200,000 shares, 
What was the effect on Belgrade's retained earnings as a result of the stock dividend?

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The answer of On January 1, 2017, when the market...

Question 9

At December 31, 2016 and 2017, Gee Corp.had outstanding 3,000 no par value, $8, cumulative preferred shares and 10,000 no par value common shares.At December 31, 2016, dividends in arrears on the preferred shares were $12,000.Cash dividends declared in 2017 totalled $45,000.What amounts were payable on each class of shares?

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The answer of At December 31, 2016 and 2017, Gee...

Question 10

Eff Ltd.was organized on January 2, 2017, with 100,000 no par value common shares authorized.During 2017, Eff had the following capital transactions:
Jan 5 Issued 75,000 shares at $14 per share
Jul 27 Purchased and retired 5,000 shares at $10 per share
Nov 25 Issued 4,000 shares at $13 per share
What would be the balance in the Contributed Surplus account at December 31, 2017?

Accepted Answer

Contributed surplus is the difference between the issue price of the shares and the par value (if any). In this case, since there is no par value, the entire amount received above the issue price is considered to be contributed surplus. 
Total amount received for issuing 75,000 shares = 75,000 * $14 = $1,050,000 
Total amount received for issuing 4,000 shares = 4,000 * $13 = $52,000 
Total amount received = $1,102,000 
Total amount paid to retire 5,000 shares = 5,000 * $10 = $50,000 
Net amount received = $1,052,000 
Contributed surplus = $1,052,000 - (75,000 * $14) - (4,000 * $13) = $20,000

Question 11

On July 1, 2017, Cee Corp.issued 1,000 of its no par common shares and 2,000 of its no par preferred shares for a lump sum of $100,000.At this date Cee's common shares were selling for $48 per share and the preferred shares for $36 per share.Using the relative fair value method, the amount of the proceeds allocated to the preferred shares account should be

Accepted Answer

The relative fair value method requires allocating the lump sum amount based on the proportion of the fair value of each class of shares.

Total fair value of common shares = 1,000 x $48 = $48,000
Total fair value of preferred shares = 2,000 x $36 = $72,000
Total fair value of both classes of shares = $48,000 + $72,000 = $120,000

Proportion of fair value of preferred shares = $72,000 / $120,000 = 0.6

Therefore, the amount allocated to the preferred shares account would be 0.6 x $100,000 = $60,000. The correct answer is C.

Question 12

The December 31, 2017 condensed balance sheet of Bee Services, a proprietorship, follows:  On January 1, 2018, Bee Services was incorporated as Bee-Line Ltd., with 10,000 no par value common shares issued.How much should be credited to Common Shares?

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The answer of The December 31, 2017 condensed balance sheet...

Question 13

On December 31, 2017, Monaco Ltd.had outstanding 2,000 no par value, $6, cumulative preferred shares and 30,000 no par value common shares.At this time, dividends in arrears on the preferred shares were $6,000.Cash dividends declared in 2018 totalled $30,000.The amounts paid to each class of shares were

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The answer of On December 31, 2017, Monaco Ltd.had outstanding...

Question 14

Eye Corp.owned 20,000 shares of Lash Corp., which had been purchased in 2013 for $300,000.On December 15, 2017, Eye declared a property dividend of all of its Lash Corp.shares.The property dividend was distributed on January 15, 2018.On the declaration date, the fair value of Eye's investment in Lash was $400,000.The entry to record the declaration of the dividend would include a debit to Retained Earnings of

Accepted Answer

The declaration of a property dividend should be recorded at the fair value of the property on the declaration date. Therefore, Retained Earnings should be debited by $400,000, which is the fair value of the Lash Corp. shares on December 15, 2017.

Question 15

The shareholders' equity of Tirana Ltd.at July 31, 2017 is presented below:
Common shares, no par value, authorized 400,000 shares, 
On August 1, 2017, the board of directors declared a 10% stock dividend, to be distributed on September 15.The market price of Tirana's common shares was $35 on August 1 and $38 on September 15.What is the debit to retained earnings as a result of the declaration and distribution of this stock dividend?

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The answer of The shareholders' equity of Tirana Ltd.at July...

Question 16

Use the following information for questions.
Instanbul Corp.has outstanding 20,000 no par value, $0.80, preferred shares and 100,000 no par value common shares.Dividends have been paid every year except last year and the current year.The carrying value of the preferred shares is $200,000 and of the common shares is $300,000.
-If the preferred shares are noncumulative and fully participating and $70,000 is distributed as a dividend, the common shareholders will receive

Accepted Answer

The answer of Use the following information for questions.
Instanbul Corp.has...

Question 17

Vilnius Corporation has 100,000 no par value common shares authorized, issued and outstanding.All 100,000 shares were issued at $90 per share.Retained earnings are $250,000.If 2,000 shares were reacquired at $98 and cancelled, shareholders' equity would decrease by

Accepted Answer

When shares are reacquired and cancelled, the cost of reacquisition is deducted from shareholders' equity. The cost is 2,000 shares x $98 = $196,000.

Question 18

Use the following information for questions.
Instanbul Corp.has outstanding 20,000 no par value, $0.80, preferred shares and 100,000 no par value common shares.Dividends have been paid every year except last year and the current year.The carrying value of the preferred shares is $200,000 and of the common shares is $300,000.
-If the preferred shares are cumulative and non-participating and $100,000 is distributed as a dividend, the common shareholders will receive

Accepted Answer

Since the preferred shares are cumulative and non-participating, their dividends accrue each year and must be paid before any dividends are paid to common shareholders. Since dividends were not paid last year or this year, the total amount of dividends owed to the preferred shareholders is $ 40,000 ($ 0.80 * 20,000 * 2 years). Therefore, the $ 100,000 dividend must first be used to pay off the preferred shareholders, leaving $ 60,000 ($ 100,000 - $ 40,000) for the common shareholders. The common shareholders will receive $ 60,000 / 100,000 shares = $ 0.60 per share. Multiplying this by the 100,000 common shares yields a total payout of $ 60,000. Therefore, the correct answer is B.

Question 19

Sarajevo Ltd.currently has outstanding 20,000 no par value common shares with a carrying value of $200,000, and 10,000 no par value, $0.60, cumulative, fully participating preferred shares with a carrying value of $100,000.Dividends on the preferred shares are one year in arrears.Assuming that Sarajevo wishes to distribute $54,000 in dividends, the common shareholders will receive

Accepted Answer

Since the preferred dividends are one year in arrears, Sarajevo must first pay the $18,000 in dividends to the preferred shareholders ($0.60 cumulative preferred dividend x 10,000 shares). This leaves $36,000 ($54,000 - $18,000) for the common shareholders.

The common shareholders will receive a proportionate share of the remaining $36,000 based on the number of shares outstanding. Since there are 20,000 common shares outstanding, each share will receive $1.80 in dividends ($36,000 ÷ 20,000 shares).

To calculate the total amount of dividends for the common shares, we multiply the dividend per share ($1.80) by the number of shares outstanding (20,000 shares).

$1.80 dividend per share x 20,000 common shares = $36,000 total dividend for common shares

Therefore, the common shareholders will receive $32,000 ($36,000 total dividend - $4,000 already paid to them as carrying value) in dividends.

The answer is C, $32,000.

Question 20

The shareholders' equity section of Zagreb Corp.at December 31, 2016 was:  On February 28, 2017, when the market value of Zagreb's shares was $12 per share, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued.For the two months ended February 28, 2017, Zagreb reported a net loss of $20,000.
What amount should Zagreb report as retained earnings at February 28, 2017?

Accepted Answer

The answer of The shareholders' equity section of Zagreb Corp.at...

Quiz 15: Shareholders Equity

Presented below is information related to Madrid Corporation: The total shareholders' equity of Madrid Corporation is

Warsaw Ltd.has 100,000 no par value common shares authorized, issued, and outstanding.All 100,000 shares were issued at $8 per share.Retained earnings are $120,000.If 10,000 common shares were reacquired at $6 and cancelled,

The December 31, 2017 condensed balance sheet of Bee Services, a proprietorship, follows: On January 1, 2018, Bee Services was incorporated as Bee-Line Ltd., with 10,000 no par value common shares issued.How much should be credited to Common Shares?

Vilnius Corporation has 100,000 no par value common shares authorized, issued and outstanding.All 100,000 shares were issued at $90 per share.Retained earnings are $250,000.If 2,000 shares were reacquired at $98 and cancelled, shareholders' equity would decrease by