Question 1

A company has 1,000 shares of $50 par value, 4.5% cumulative and nonparticipating preferred stock and 10,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $1,000 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

Accepted Answer

Preferred stock dividend: 1,000 shares * $50/share * 4.5% = $2,250
Prior year: Dividend Paid = $1,000; $1,250 in arrears
Current year: $1,250 in arrears + $2,250 current dividend = $3,500

Question 2

On August 31, 2010 Victory Corporation's common stock is priced at $30 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows. Assume that the company declares and immediately distributes a 100% stock dividend.

What is the total amount in the Retained Earnings account immediately after the stock dividend?

Accepted Answer

The answer of On August 31, 2010 Victory Corporation's common...

Question 3

Treasury stock is classified as:

Accepted Answer

Treasury stock is a contra equity account because it represents a reduction in the total amount of equity in a company. It is created when a company buys back its own shares from existing shareholders. The cost of the treasury stock is subtracted from the total amount of equity, reducing the company's total equity balance.

Question 4

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is called:

Accepted Answer

The answer of Preferred stock on which the right to...

Question 5

On August 31, 2010 Victory Corporation's common stock is priced at $30 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows. Assume that the company declares and immediately distributes a 15% stock dividend.

What is the total amount in the Paid in Capital account immediately after the stock dividend?

Accepted Answer

The answer of On August 31, 2010 Victory Corporation's common...

Question 6

Prior to June 1, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 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 Contributed Capital, Treasury Stock account on August 2?

Accepted Answer

The answer of Prior to June 1, a company has...

Question 7

On August 31, 2010 Victory Corporation's common stock is priced at $30 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows. Assume that the company declares and immediately distributes a 15% stock dividend.

What is the total amount in the Retained Earnings account immediately after the stock dividend?

Accepted Answer

The answer of On August 31, 2010 Victory Corporation's common...

Question 8

A company's board of directors' votes to declare a total cash dividend of $25,000. The company has 2,500 shares of $1 par common stock and 400 shares of 4%, $200 par preferred stock outstanding. What is the total amount that will be paid to preferred shareholders?

Accepted Answer

To calculate the total amount that will be paid to preferred shareholders, we need to determine how many shares of preferred stock are outstanding and then multiply that number by the dividend rate.

Number of shares of preferred stock outstanding: 400
Dividend rate on preferred stock: 4% of $200 par value = $8 per share

Total amount to be paid to preferred shareholders: 
400 shares x $8 per share = $3,200

Therefore, the correct answer is D, $3,200.

Question 9

Preferred stock that the issuing corporation at its option may retire by paying a specified amount to the preferred stockholders plus any dividends in arrears is called:

Accepted Answer

Callable preferred stock allows the issuing corporation to retire the stock at its option by paying a specified amount to the preferred stockholders plus any dividends in arrears. The other options listed do not have a mandatory retirement feature. Convertible preferred stock allows the holder the option to convert the preferred stock into common stock. Premium stock is not a common term used for preferred stock. Cumulative preferred stock guarantees that any unpaid dividends will accumulate and must be paid before any dividends are paid to common shareholders. Participating preferred stock gives the holder the right to share in any additional profits above the stated dividend rate.

Question 10

Xtreme Sports has $100,000 of 8% noncumulative, nonparticipating, preferred stock outstanding. Xtreme Sports also has $500,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of $30,000. This dividend should be distributed as follows:

Accepted Answer

Preferred stock dividend: $100,000 * 8% = $8,000;
Common stock dividend: $30,000 - $8,000 = $22,000

Question 11

Stock that was reacquired by the company and is still held by the issuing corporation is called:

Accepted Answer

Treasury stock is stock that has been bought back by the issuing corporation and is still held by that corporation. It is often used for various purposes such as increasing earnings per share, providing shares for employee stock option plans, or reducing the number of outstanding shares to make the company look more attractive to potential investors. Capital stock is the total amount of shares that a company can issue, including both outstanding and treasury shares. Redeemed stock refers to stock that has been repurchased and retired by the issuing corporation. Preferred stock is a type of stock that usually pays a fixed dividend and has priority over common stockholders in the event of liquidation. Callable stock refers to stock that can be redeemed by the issuing corporation at a predetermined price under certain conditions.

Question 12

A corporation had 40,000 shares of $10 par value common stock outstanding on August 1. Later that day, the board of directors declared a 9% stock dividend when the market value of each share was $72. The entry to record this dividend is:

Accepted Answer

The answer of A corporation had 40,000 shares of $10...

Question 13

Pete's outstanding stock consists of (a) 17,000 shares of noncumulative 7.50% preferred stock with a $10 par value and (b) 42,500 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.

What is the amount of dividends that the Common Stockholders receive in 2011?

Accepted Answer

The answer of Pete's outstanding stock consists of (a) 17,000...

Question 14

A company has 200,000 shares of $1 par value common stock and 20,000 shares of 7%, $100 par, cumulative preferred stock outstanding. The balance in Retained Earnings account at the beginning of the year was $1,500,000 and one year's dividends were in arrears. Net income for the current year was $2,000,000. If the company paid a dividend of $3 per share on its common stock, what is the balance in Retained Earnings account at the end of the year?

Accepted Answer

The answer of A company has 200,000 shares of $1...

Question 15

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

Accepted Answer

The answer of The following data were reported by a...

Question 16

On August 31, 2010 Victory Corporation's common stock is priced at $30 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows. Assume that the company declares and immediately distributes a 100% stock dividend.

What is the total amount in the Common Stock account immediately after the stock dividend?

Accepted Answer

A 100% stock dividend means that the number of shares outstanding will double. Therefore, after the dividend, Victory Corporation will have 40,000 shares outstanding (20,000 x 2). The par value of the stock remains the same, so the total Common Stock account will be $1,040,000 ($20 par x 40,000 shares). Adding this to the Additional Paid-in Capital account already on the balance sheet gives a total Common Stockholders' Equity of $1,572,000 ($1,040,000 + $532,000).

Question 17

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

Accepted Answer

Participating preferred stock allows preferred stockholders to share in any dividends in excess of the percent or dollar amount stated on the preferred stock.

Question 18

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

Accepted Answer

This situation is known as financial leverage, where the company is using borrowed funds (preferred stock issuance) to earn a higher return on their common stock. By paying a lower rate of return on preferred stock than the return earned on the assets invested from that issuance, the company is essentially using the difference to increase the return on their common stock.

Question 19

The following data has been collected about a company's stockholders' equity accounts:

The treasury shares were all purchased at the same price.
The cost per share of the treasury stock is:

Accepted Answer

The answer of The following data has been collected about...

Question 20

On August 31, 2010 Victory Corporation's common stock is priced at $30 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows. Assume that the company declares and immediately distributes a 35% stock dividend.

What is the total amount in the Paid in Capital account immediately after the stock dividend?

Accepted Answer

The answer of On August 31, 2010 Victory Corporation's common...

Quiz 11: Corporate Reporting and Analysis

Treasury stock is classified as:

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is called:

A company's board of directors' votes to declare a total cash dividend of $25,000. The company has 2,500 shares of $1 par common stock and 400 shares of 4%, $200 par preferred stock outstanding. What is the total amount that will be paid to preferred shareholders?

Preferred stock that the issuing corporation at its option may retire by paying a specified amount to the preferred stockholders plus any dividends in arrears is called:

Stock that was reacquired by the company and is still held by the issuing corporation is called:

A corporation had 40,000 shares of $10 par value common stock outstanding on August 1. Later that day, the board of directors declared a 9% stock dividend when the market value of each share was $72. The entry to record this dividend is:

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

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

The following data has been collected about a company's stockholders' equity accounts: The treasury shares were all purchased at the same price. The cost per share of the treasury stock is: