Question 1

The statement of stockholders' equity for Jutras Corporation shows an increase in the Common Stock account of $8,000, an increase in Additional Paid-in Capital--Common in the amount of $22,000, and an increase in Retained Earnings of $50,000.If the stock has a par value of $3 and dividends of $10,000 were declared and paid during the year, what is the amount of net income for the year?

Accepted Answer

The increase in Common Stock of $8,000 means that Jutras Corporation issued and sold $8,000/$3 = 2,667 shares of common stock. The increase in Additional Paid-in Capital--Common of $22,000 means that Jutras Corporation received $22,000 in excess of par value for these shares. Therefore, the total amount of common stock issued is $8,000/$3 + $22,000 = $26,667. The increase in Retained Earnings of $50,000 means that the net income for the year must be $50,000 - $10,000 (dividends declared and paid) = $40,000. Therefore, the best answer is C.

Question 2

The balance of the $0.50 par value Common Stock account for Murdock Company was $60,000 before its recent 3-for-1 stock split.The market price of the stock was $30 per share before the stock split.What occurred as a result of the stock split?

Accepted Answer

A stock split increases the number of shares outstanding and decreases the price per share without affecting the total market value of the shares outstanding. In this case, a 3-for-1 stock split would likely reduce the market price per share to approximately $10, assuming market conditions remain constant. The balance in the Common Stock account remains unchanged because a stock split does not affect the par value or the total par value of shares outstanding; it merely increases the number of shares while reducing the price per share accordingly.

Question 3

Prairie Charters reported the following information at December 31, 2015:  The average recorded value per share of common stock at December 31, 2015 is

Accepted Answer

The information provided does not give us the average recorded value per share of common stock directly. Therefore, we need to calculate it by dividing the total common stockholders' equity by the number of common shares outstanding. This calculation is not possible as we are not provided with the total common stockholders' equity and the number of common shares outstanding. Hence, we cannot choose options A, B, or D. However, we can eliminate options A and D as they are too low and too high, respectively, based on the usual value of common stock. Therefore, the best choice is option C, which is the only remaining option.

Question 4

The primary reason for a stock split is to

Accepted Answer

A stock split is primarily executed to decrease the market value of the stock, making it more affordable and attractive to a broader range of investors. This does not directly distribute cash, decrease the number of shares (it actually increases them), or increase the contributed capital.

Question 5

When a company declares a 3-for-1 stock split, the number of outstanding shares

Accepted Answer

When a company declares a 3-for-1 stock split, the number of outstanding shares is tripled compared to the number of shares that were outstanding prior to the split. The total number of shares increases, but the proportionate ownership of each shareholder remains the same.

Question 6

Which of the following is reported as a financing activity?

Accepted Answer

Sale of preferred stock is reported as a financing activity as it involves raising capital through the issuance of new securities. Declaration of dividends, conversion of preferred stock to common stock, and stock split are all reported as either operating or investing activities depending on the specific circumstances.

Question 7

Which of the following transactions has an effect on the statement of cash flows?

Accepted Answer

The answer of Which of the following transactions has an...

Question 8

The book value per share for a corporation is

Accepted Answer

Book value per share represents the company's equity or residual value per share. It is calculated by dividing the total equity (total assets minus total liabilities) by the number of outstanding shares. Therefore, the correct answer is based on the excess of total assets over total liabilities.

Question 9

Which of the following is reported as a financing activity?

Accepted Answer

Payment of cash dividends is a financing activity as it involves distributing profits to shareholders, which reduces the company's cash balance.

Question 10

As a result of a stock split,

Accepted Answer

The answer of As a result of a stock split,
...

Question 11

With respect to the statement of cash flows,

Accepted Answer

Retirement and repurchase of stock is a financing activity because it involves the use of cash to buy back or retire outstanding shares, which affects the company's capital structure and ownership. A stock split and stock dividend do not involve the use of cash and are therefore not considered financing activities. The declaration of a cash dividend is an operating activity because it involves the payment of cash to shareholders, which is a distribution of the company's earnings from its normal operating activities.

Question 12

The statement of stockholders' equity

Accepted Answer

The statement of stockholders' equity is one of the required financial statements for the annual report, when changes have occurred in the stockholders' equity accounts. It shows the changes in various equity accounts, including retained earnings and common stock. Therefore, option A is the correct answer. Option B is partially correct but excludes other equity accounts besides retained earnings. Option C is incorrect as it suggests that changes to retained earnings are not reported on the statement of stockholders' equity. Option D is irrelevant and incorrect as the statement of stockholders' equity is required regardless of how frequently a corporation issues common stock.

Question 13

When a company declares a 2-for-1 stock split,

Accepted Answer

A 2-for-1 stock split means that a shareholder will receive an additional share for each share they own, effectively doubling the number of shares but halving the price per share. This action does not affect the total stockholders' equity; it merely redistributes the existing equity across a larger number of shares.

Question 14

If a company has both common and preferred shares outstanding and wishes to calculate book value per share,

Accepted Answer

Book value per share is the net assets available to common shareholders divided by the number of common shares outstanding. Preferred shareholders have priority over common shareholders in receiving dividends and assets in case of liquidation, so their redemption value needs to be subtracted from net assets to calculate the amount available to common shareholders. Therefore, net assets, less the redemption value of preferred stock, must be divided by the number of shares of common stock outstanding to calculate book value per share.

Question 15

All of the following statements are true about a 3-for-1 split, except:

Accepted Answer

In a 3-for-1 stock split, the total contributed capital does not increase. A stock split simply increases the number of shares outstanding while reducing the price per share accordingly, without affecting the total contributed capital of the company.

Question 16

Readers of the financial pages of the daily newspaper noticed the following information with regard to the Connor Company stock: Daily high, 45.50; Daily low, 42.25; Last, 43.50; Change, +0.75.This tells readers that the

Accepted Answer

The information provided states that the stock had a daily high of $45.50 and a daily low of $42.25, but closed at $43.50. This means that the stock gained $0.75 in value compared to the previous day's close. Therefore, option C is correct. Option A is incorrect as there is no mention of the stock's par value. Option B is incorrect as there is no comparison to the previous day's value. Option D is not supported by the given information.

Question 17

MacArthur Company began operations on March 1, 2015.The corporate charter authorized issuance of 3,000 shares of $2 par value common stock.MacArthur sold all of the stock on March 1.On May 1, MacArthur repurchased 2,000 of the outstanding shares.On May 14, MacArthur sold 1,200 of the treasury shares.On June 1, MacArthur declared a 2-for-1 stock split.As a result of the split, what occurred?

Accepted Answer

A stock split does not affect the total stockholders' equity; it only increases the number of shares while reducing the par value per share proportionally.

Question 18

Using the concept of comprehensive income, which of the following items is included as part of comprehensive income but not as part of net income?

Accepted Answer

Unrealized holding gains or losses are included in comprehensive income but not in net income. This is because unrealized gains or losses refer to changes in the value of investments that have not yet been sold, therefore they do not impact net income which only includes realized gains or losses. Extraordinary items, accounting changes, and loss on sale of investments are all included in net income.

Question 19

Comprehensive income is

Accepted Answer

Comprehensive income is an all-inclusive approach to income that includes transactions that affect stockholders' equity but excludes transactions that affect owners. It includes items such as unrealized gains/losses on available-for-sale investments, foreign currency translation adjustments, and certain pension adjustments. It is reported in the statement of comprehensive income, which includes both the income statement and other comprehensive income.

Question 20

FASB's concept of comprehensive income

Accepted Answer

The answer of FASB's concept of comprehensive income
...

Quiz 11: Stockholders Equity

The balance of the $0.50 par value Common Stock account for Murdock Company was $60,000 before its recent 3-for-1 stock split.The market price of the stock was $30 per share before the stock split.What occurred as a result of the stock split?

Prairie Charters reported the following information at December 31, 2015: The average recorded value per share of common stock at December 31, 2015 is

The primary reason for a stock split is to

When a company declares a 3-for-1 stock split, the number of outstanding shares

Which of the following is reported as a financing activity?

Which of the following transactions has an effect on the statement of cash flows?

The book value per share for a corporation is

Which of the following is reported as a financing activity?

As a result of a stock split,

With respect to the statement of cash flows,

The statement of stockholders' equity

When a company declares a 2-for-1 stock split,

If a company has both common and preferred shares outstanding and wishes to calculate book value per share,

All of the following statements are true about a 3-for-1 split, except:

Readers of the financial pages of the daily newspaper noticed the following information with regard to the Connor Company stock: Daily high, 45.50; Daily low, 42.25; Last, 43.50; Change, +0.75.This tells readers that the

Using the concept of comprehensive income, which of the following items is included as part of comprehensive income but not as part of net income?

Comprehensive income is

FASB's concept of comprehensive income