Question 1

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?

Accepted Answer

The balance in the Treasury Stock account on August 2 would be $1,200. This is calculated by considering the cost to repurchase the shares (100 shares * $40 = $4,000) and subtracting the cost basis of the shares reissued (70 shares * $40 = $2,800), leaving a balance of $1,200 in the Treasury Stock account.

Question 2

Prior to June 30,a company has never had any treasury stock transactions.A company repurchased 100 shares of its $1 par 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 journal entry necessary to record the reissuance of treasury stock on July 20?

Accepted Answer

When reissuing treasury stock above its repurchase price, the entry includes debiting Cash for the proceeds, crediting Treasury Stock for its cost, and crediting any excess to Paid-in Capital, Treasury Stock.

Question 3

Fetzer Company declared a $0.55 per share cash dividend.The company has 200,000 shares authorized,190,000 shares issued,and 8,000 shares in treasury stock.The journal entry to record the dividend declaration is:

Accepted Answer

The formula to calculate the dividend amount is (number of issued shares - treasury stock) x dividend per share, which is (190,000 - 8,000) x $0.55 = $100,100. The journal entry to record the dividend declaration is to debit Retained Earnings for the amount of the dividend, which reduces the amount of earnings available for distribution, and credit Common Dividends Payable, which is a liability account that represents the amount owed to shareholders. Therefore, the correct entry is Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.

Question 4

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 Year 2 is:

Accepted Answer

The answer of Fargo Company's outstanding stock consists of 400...

Question 5

Explain how to calculate the price-earnings ratio and describe how it is used in analysis of a company's financial condition and performance.

Accepted Answer

The answer of Explain how to calculate the price-earnings ratio...

Question 6

Prior to May 1,Fortune Company has never had any treasury stock transactions.A company repurchased 100 shares of its common stock on May 1 for $5,000.On July 1,it reissued 50 of these shares at $52 per share.On August 1,it reissued the remaining treasury shares at $49 per share.What is the balance in the Paid-in Capital,Treasury Stock account on August 2?

Accepted Answer

The answer of Prior to May 1,Fortune Company has never...

Question 7

What are the rights generally granted to common stockholders?

Accepted Answer

The answer of What are the rights generally granted to...

Question 8

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 total amount of dividends paid to preferred and common shareholders over the three-year period is:

Accepted Answer

The answer of Fargo Company's outstanding stock consists of 400...

Question 9

Fetzer Company declared a $0.55 per share cash dividend.The company has 200,000 shares authorized,190,000 shares issued,and 8,000 shares in treasury stock.The journal entry to record the payment of the dividend is:

Accepted Answer

The journal entry to record the payment of the dividend should debit Common Dividends Payable for the total amount of the dividend to be paid, and credit Cash for the same amount. Therefore, the correct option is D, which debits Common Dividends Payable for $100,100 and credits Cash for $100,100 ($0.

Question 10

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 year 3 is:

Accepted Answer

The correct choice is based on the allocation of dividends to preferred and common shareholders, where $7,000 is allocated to preferred shareholders and $25,000 to common shareholders.

Question 11

A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share.The issue price was $10 per share.The entry to record this transaction would be:

Accepted Answer

The entry to record the issuance of common stock with a stated value involves two components: the par value component (Common Stock) and the excess of issue price over par value component (Paid-in Capital in Excess of Stated Value, Common Stock). In this case, since the stated value is $1 and the issue price is $10, the excess is $9 per share. Therefore, the entry would be Debit Cash $50,000; credit Paid-in Capital in Excess of Stated Value, Common Stock $45,000; credit Common Stock $5,000.

Question 12

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 year 1 is:

Accepted Answer

Preferred shareholders receive a fixed dividend of $100 per share, and there are 200 preferred shares outstanding. So, the total dividends paid to preferred shareholders in year 1 is $200 * 100 = $20,000. Common shareholders receive a dividend of $1 per share, and there are 19,800 common shares outstanding. So, the total dividends paid to common shareholders in year 1 is $1 * 19,800 = $19,800.

Question 13

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

Accepted Answer

The answer of Explain how to compute dividend yield and...

Question 14

What is a corporation? Identify the key advantages and disadvantages of corporations.

Accepted Answer

The answer of What is a corporation? Identify the key...

Question 15

Prior to June 30,a company has never had any treasury stock transactions.A company repurchased 100 shares of its $1 par 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 journal entry necessary to record the repurchase of stock on June 30?

Accepted Answer

The answer of Prior to June 30,a company has never...

Question 16

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 total amount of dividends paid to preferred and common shareholders over the three-year period is:

Accepted Answer

To solve this problem, we need to calculate the dividends paid to the preferred and common shareholders separately for each year.

For the preferred stock, the yearly dividend is calculated as follows:
$10 par value x 5% dividend rate = $0.50 dividend per share
$0.50 dividend per share x 400 shares = $200 total dividend paid to preferred shareholders each year

For the common stock, the total dividend paid each year is given in the table.

Year 1:
$0.50 per share x 1,500 shares = $750 total dividend paid to common shareholders

Year 2:
$0.60 per share x 1,500 shares = $900 total dividend paid to common shareholders

Year 3:
$0.70 per share x 1,500 shares = $1,050 total dividend paid to common shareholders

Adding up the total dividends paid over the three years, we get:

Preferred stock: $200 x 3 years = $600 total dividend paid to preferred shareholders
Common stock: $750 + $900 + $1,050 = $2,700 total dividend paid to common shareholders

Therefore, the total amount of dividends paid to preferred and common shareholders over the three-year period is $600 for preferred shareholders and $2,700 for common shareholders, which corresponds to choice D.

Question 17

A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share.The entry to record this transaction would be:

Accepted Answer

The entry to record the issuance of no par common stock is a debit to Cash and a credit to Common Stock for the total amount received. There is no par value to record in excess of the stated value, so options A and E are incorrect. Option C is incorrect because it records the transaction in reverse order. Option D is incorrect because it records the transaction as if the corporation is buying back its own stock instead of issuing new stock. Therefore, the best choice is B.

Question 18

West Company declared a $0.50 per share cash dividend.The company has 190,000 shares issued,and 10,000 shares in treasury stock.The journal entry to record the payment of the dividend is:

Accepted Answer

The journal entry to record the payment of the dividend is to debit Common Dividends Payable for the total amount of dividends declared and credit Cash for the same amount. Since the company has 10,000 shares in treasury stock, they are not eligible for the dividend, and the dividend is only paid on the 190,000 outstanding shares. Therefore, the total amount of dividends to be paid is $90,000 (190,000 shares x $0.50 per share). Therefore, the correct journal entry is Debit Common Dividends Payable $90,000; Credit Cash $90,000.

Question 19

All of the following regarding accounting for Treasury Stock are true except:

Accepted Answer

Treasury Stock does not receive any dividends, whether in cash or stock form. All other statements are true.

Question 20

West Company declared a $0.50 per share cash dividend.The company has 190,000 shares issued,and 10,000 shares in treasury stock.The journal entry to record the dividend declaration is:

Accepted Answer

EThe correct journal entry to record the dividend declaration involves debiting Retained Earnings and crediting Common Dividends Payable for the total amount of dividends to be paid. The total amount is calculated by multiplying the dividend per share ($0.50) by the number of shares issued and outstanding (190,000 issued - 10,000 treasury = 180,000 shares). Thus, $0.50 * 180,000 = $90,000. This calculation supports choice A. Choice E incorrectly calculates the total dividends as if they were based on the total shares issued without subtracting the treasury stock, which is not the correct approach for calculating dividends payable.

Quiz 11: Corporate Reporting and Analysis