Question 1

What is an extraordinary gain or loss? How is it presented on a complete income statement? Be sure to include examples of extraordinary items.

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Question 2

A newly formed company sold stock for $545,000.The shares had a par value of $5 each.After the transaction,the paid in capital,common stock account had a balance of $215,000.How many shares did the company sell?
A)62,000
B)152,000
C)43,000
D)109,000
E)66,000

Accepted Answer

545,000- 215,000 = 330,000/5 = 66,000

Question 3

Duke Corporation reports the following components of stockholders' equity on December 31,2010. $\begin{array}{lr} \text {Common stock- $ \$ 25 $ par value, 100,000 shares authorized, 45,000 shares issued}\ \text { and outstandino}&\$1,125,000\ \text { Paid-in capital in excess of par value, common stock } & 60,000 \ \text { Retained earnings } & 460,000 \ \text { Total stockholders' equity } & \$ 1,645,000 \ \end{array}$ In year 2011, the following transactions affected its stockholders' equity accounts. Jan. 1 Purchased 4,500 shares of its own stock at $ \$ 27 $ cash per share. Jan. 5 Directors declared a $ \$ 3 $ per share cash dividend payable on Feb. 28 to the Feb. stockholders of record. Feb. 28 Paid the dividend declared on January 5 Mar. 3 Sold 1,000 shares of treasury stock for $ \$ 28 $ per share May 25 Sold 1,000 shares of treasury stock for $ \$ 16 $ per share What is the amount in the Retained Earnings account immediately after the May 25^th sale? A)$460,000 B)$328,500 C)$444,000 D)$433,000 E)$338,500

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Question 4

The entrepreneurs who founded Medsite,Inc.experienced problems as they had limited capital.What were some of the serious corporate accounting-related issues they had to face?

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Question 5

Explain how both a stock split and a stock dividend affect the computation of the weighted average number of shares outstanding.

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Question 6

Identify and discuss the key differences between common and preferred stock.

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Question 7

Duke Corporation reports the following components of stockholders' equity on December 31,2010.
$\begin{array}{lr}
 \text {Common stock- $ \$ 25 $ par value, 100,000 shares authorized, 45,000 shares issued}\
 \text { and outstandino}&\$1,125,000\
 \text { Paid-in capital in excess of par value, common stock } & 60,000 \
 \text { Retained earnings } & 460,000 \
 \text { Total stockholders' equity } & \$ 1,645,000 \
\end{array}$
In year 2011, the following transactions affected its stockholders' equity accounts.
Jan. 1 Purchased 4,500 shares of its own stock at $ \$ 27 $ cash per share
Jan. 5 Directors declared a $ \$ 3 $ per share cash dividend payable on Feb. 28 to the Feb. stockholders of record.

Feb. 28 Paid the dividend declared on January 5

What is the amount of the dividend declared?
A)$177,000
B)$135,000
C)$121,500
D)$326,000
E)$338,500

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Question 8

Identify and describe the two main components of stockholders' equity.

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Question 9

Duke Corporation reports the following components of stockholders' equity on December 31,2010.
$\begin{array}{lr}
 \text {Common stock- $ \$ 25 $ par value, 100,000 shares authorized, 45,000 shares issued}\
 \text { and outstandino}&\$1,125,000\
 \text { Paid-in capital in excess of par value, common stock } & 60,000 \
 \text { Retained earnings } & 460,000 \
 \text { Total stockholders' equity } & \$ 1,645,000 \
\end{array}$

In year 2011, the following transactions affected its stockholder's' equity accounts.
Jan. 1 Purchased 4,500 shares of its own stock at $ \$ 27 $ cash per share.
Jan. 5 Directors declared a $ \$ 3 $ per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

Feb. 28 Paid the dividend declared on January 5.
Mar. 3 Sold 1,000 shares of treasury stock for $ \$ 28 $ per share
May 25 Sold 1,000 shares of treasury stock for $ \$ 16 $ per share
June 15 Directors declared a $ \$ 1.50 $ per share cash dividend payable on July 15 to the June 30 stockholders of record

July 15 Paid the dividend declared on June 15

What is the amount in the Retained Earnings account immediately after the dividend on July 15?
A)$264,750
B)$392,500
C)$460,000
D)$338,500
E)$470,000

Accepted Answer

The retained earnings account is decreased by the amount of dividends paid. The total dividends paid in 2011 are $3 per share * 45,000 shares = $135,000 (January 5 dividend) + $1.50 per share * 45,000 shares = $67,500 (June 15 dividend) = $202,500. Therefore, the retained earnings account immediately after the dividend on July 15 is $460,000 - $202,500 = $264,750.

Question 10

What are the rights generally granted to common stockholders?

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Question 11

Victory Corporation issues 17,000 shares of its $2 par value common stock for $152,025 cash on February 20.What is the appropriate journal entry to record this transaction?
A)
$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 152,025 & \
\hline \text { Preferred Stock } & & 34,000 \
\hline \text { Paid in Capital, Common Stock } & & 118,025 \
\hline
\end{array}$$
B)
$$\begin{array} { | c | r | r | } 
\hline \text { Common Stock } & 152,025 & \
\hline \text { Cash } & & 152,025 \
\hline
\end{array}$$
C)
$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 152,025 & \
\hline \text { Common Stock } & & 34,000 \
\hline \text { Paid in Capital, Common Stock } & & 118,025 \
\hline
\end{array}$$
D)
$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 152,025 & \
\hline \text { Common Stock } & & 152,025 \
\hline
\end{array}$$
E)
$$\begin{array} { |l | r | r | } 
\hline \text { Cash } & 118,025 & \
\hline \text { Paid in Capital, Common Stock } & & 34,000 \
\hline \text { Common Stock } & & 152,025 \
\hline
\end{array}$$

Accepted Answer

The cash received is debited, common stock is credited at par value (17,000 shares x $2 = $34,000), and the excess is credited to Paid in Capital, Common Stock ($152,025 - $34,000 = $118,025).

Question 12

Duke Corporation reports the following components of stockholders' equity on December 31,2010. $\begin{array}{lr} \text {Common stock- $ \$ 25 $ par value, 100,000 shares authorized, 45,000 shares issued}\ \text { and outstandino}&\$1,125,000\ \text { Paid-in capital in excess of par value, common stock } & 60,000 \ \text { Retained earnings } & 460,000 \ \text { Total stockholders' equity } & \$ 1,645,000 \ \end{array}$ In year 2011,the following transactions affected its stockholders' equity accounts. Jan. 1 Purchased 4,500 shares of its own stock at $ \$ 27 $ cash per share. Jan. 5 Directors declared a $ \$ 3 $ per share cash dividend payable on Feb. 28 to the Feb. stockholders of record. Feb. 28 Paid the dividend declared on January 5. Mar. 3 Sold 1,000 shares of treasury stock for $ \$ 28 $ per share What is the journal entry required for the March 3^rd transaction? A) $$\begin{array} { |l| r | r | } \hline \text { Cash } & 28,000 & \ \hline \text { Treasury Stock } & & 25,000 \ \hline \text { Paid in Capital, Treasury Stock } & & 3,000 \ \hline \end{array}$$ B) $\begin{array}{|l|r|r|} \hline \text { Cash } & 28,000 & \ \hline \text { Treasury Stock } & & 28,000 \ \hline \end{array}$ C) $$\begin{array} { |l | r | r | } \hline \text { Cash } & 28,000 & \ \hline \text { Treasury Stock } & & 27,000 \ \hline \text { Paid in Capital, Treasury Stock } & & 1,000 \ \hline \end{array}$$ D) $$\begin{array} { | l | r | r | } \hline \text { Cash } & 28,000 & \ \hline \text { Common Stock } & & 25,000 \ \hline \text { Paid in Capital, Common Stock } & & 3,000 \ \hline \end{array}$$ E) $$\begin{array} { | l | r | r | } \hline \text { Cash } & 28,000 & \ \hline \text { Retained Earnings } & &2 8 , 0 0 0 \ \hline \end{array}$$

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Question 13

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

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Question 14

Explain the components of the statements retained earnings and identify the special items that are reported in it.

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Question 15

Premier's outstanding stock consists of (a)57,000 shares of cumulative 4.25% preferred stock with a $18 par value and (b)75,000 shares of common stock with a $1 par value.During its first four years of operation,the corporation declared and paid the following total cash dividends.
$$\begin{array} { c c } 
2010 & \$ 0 \
2011 & 38,000 \
2012 & 150,000 \
2013 & 175,000
\end{array}$$
What is the amount of dividends that the Common Stockholders receive for all years presented?
A)$177,000
B)$188,580
C)$214,250
D)$326,000
E)$363,000

Accepted Answer

To find the amount of dividends that the Common Stockholders receive, we need to subtract the dividends paid to the preferred stockholders from the total dividends paid.

Total dividends paid = $20,000 + $52,700 + $82,125 + $135,755 = $290,580

Dividends paid to preferred stockholders = 57,000 shares x $18 par value x 4.25% dividend rate = $43,110 per year

Total dividends paid to preferred stockholders for four years = $43,110 x 4 = $172,440

Dividends paid to common stockholders = $290,580 - $172,440 = $118,140

Since there are 75,000 shares of common stock outstanding, the dividend per share is:

Dividend per share = $118,140 ÷ 75,000 = $1.5752

Rounded to the nearest cent, the dividend per share is $1.58.

Therefore, the amount of dividends that the Common Stockholders receive for all years presented is $118,140 or $188,580 rounded to the nearest cent. The best choice is B.

Question 16

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

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Question 17

A corporation had current year net income of $2,375,000.It paid preferred dividends of $80,000 cash and had 500,000 weighted-average shares of common stock outstanding.Calculate the corporation's earnings per share.

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Question 18

A company is authorized to issue 50,000 shares of $50 par value,8%,cumulative,fully participating preferred stock and 750,000 shares of $5 par value common stock.Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:
May 5 Exchanged 2,000 shares of preferred stock for a building with a market value of
$135,000.
July 20 Sold 1,550 shares of preferred stock for $50 cash per share.
Dec.20 Sold 1,000 shares of preferred stock at $55 cash per share.

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Question 19

Explain how to compute book value per share and discuss how it can be used to analyze the financial condition of a corporation.

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Question 20

Marble Corporation had the following balances in its stockholders' equity accounts at December 31,2009:
 $\begin{array}{|l|r|}
\hline \text { Common Stock, } \$ 10 \text { par, } 50,000 \text { shares authorized, } 20,000 \text { shares issued } & \$ 200,000 \
\hline \text { Contributed Capital in Excess of Par Value, Common } & 250,000 \
\hline \text { Retained Earnings } & 500,000 \
\hline \text { Treasury Stock, 1,000 shares } & (20,000) \
\hline \text { Total stockholders' equity } & \$ 930,000\
\hline
\end{array}$
 
The following transactions occurred during 2010:
 $\begin{array}{|l|l|}
\hline \text { February } 3 & \text { Sold and issued 3,000 shares of common stock for } \$ 22 \text { per share. } \
\hline \text { May 10 } & \text { Declared a } \$ 0.50 \text { per share dividend on common stock. } \
\hline \text { October } 12 & \text { Sold } 500 \text { shares of the treasury stock for } \$ 20 \text { per share. } \
\hline \text { December } 31 & \text { Net income for the year was determined to be } \$ 75,000\
\hline
\end{array}$
 
Based on the above information,prepare a statement of stockholders' equity for 2010.Use the form below.

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The answer of Marble Corporation had the following balances in...

Quiz 11: Reporting and Analyzing Equity

What is an extraordinary gain or loss? How is it presented on a complete income statement? Be sure to include examples of extraordinary items.

A newly formed company sold stock for $545,000.The shares had a par value of $5 each.After the transaction,the paid in capital,common stock account had a balance of $215,000.How many shares did the company sell?

The entrepreneurs who founded Medsite,Inc.experienced problems as they had limited capital.What were some of the serious corporate accounting-related issues they had to face?

Explain how both a stock split and a stock dividend affect the computation of the weighted average number of shares outstanding.

Identify and discuss the key differences between common and preferred stock.

Identify and describe the two main components of stockholders' equity.

What are the rights generally granted to common stockholders?

Victory Corporation issues 17,000 shares of its $2 par value common stock for $152,025 cash on February 20.What is the appropriate journal entry to record this transaction?

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

Explain the components of the statements retained earnings and identify the special items that are reported in it.

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

A corporation had current year net income of $2,375,000.It paid preferred dividends of $80,000 cash and had 500,000 weighted-average shares of common stock outstanding.Calculate the corporation's earnings per share.

Explain how to compute book value per share and discuss how it can be used to analyze the financial condition of a corporation.