Question 1

Mr. Seider, a shareholder in the Greenfield Corporation, owns 9000 shares of their common stock, which represents 25% of the outstanding common stock of Greenfield Corporation. Mr. Seider receives a 5% stock dividend. After the stock dividend, what is Mr. Seider's ownership in Greenfield Corporation's common stock?

Accepted Answer

A stock dividend increases the number of shares owned but does not change the percentage of ownership in the company. Mr. Seider's ownership remains at 25%.

Question 2

A stock split:

Accepted Answer

A stock split does not affect the total stockholders' equity. It simply increases the number of shares outstanding while proportionally decreasing the price per share, leaving the overall market value of the company unchanged.

Question 3

Mr. Jorgensen, a shareholder in the Best Corporation, owns 10,000 shares of its common stock. Mr. Jorgensen receives a 6% stock dividend. After the stock dividend, Mr. Jorgensen will have a:

Accepted Answer

A 6% stock dividend means Mr. Jorgensen receives 6% more shares on his existing 10,000 shares, which is 600 additional shares, totaling 10,600 shares.

Question 4

Nichols, Inc. has 8000 shares of 4%, $100 par value, cumulative preferred stock and 75,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend that will be paid to the preferred stockholders?

Accepted Answer

The annual dividend for preferred stockholders is calculated as 4% of the par value of the preferred stock. Therefore, 4% of $100 par value is $4 per share. With 8000 shares, the total annual dividend is 8000 shares * $4 = $32,000.

Question 5

An increase in the number of issued and outstanding shares of stock along with a proportional reduction in the stock's par value is a:

Accepted Answer

A stock split increases the number of shares while reducing the par value proportionally, keeping the overall value of the company the same.

Question 6

Burkert Company has 50,000 shares of $1 par value common stock issued and outstanding. The company also has 9000 shares of $100 par value, 4% cumulative preferred stock outstanding. Burkert did not pay the preferred dividends in 2016 and 2017. For the common stockholders to receive a dividend in 2018, the board of directors must declare dividends in excess of:

Accepted Answer

The preferred stock is cumulative, meaning missed dividends must be paid before common stockholders receive dividends. The annual preferred dividend is 9000 shares * $100 * 4% = $36,000. Since dividends were not paid in 2016 and 2017, $36,000 * 2 = $72,000 is owed for those years. Adding the 2018 dividend of $36,000, the total is $108,000.

Question 7

Zeman, Inc. declares and distributes a 10% common stock dividend when it has 20,000 shares of $20 par value common stock outstanding. If the market value of the common stock is $30, the journal entry to record the stock dividend would include a:

Accepted Answer

The answer of Zeman, Inc. declares and distributes a 10%...

Question 8

Corporations may choose to distribute stock dividends in order to:

Accepted Answer

Distributing stock dividends can reduce the per-share market price of its stock as it increases the number of shares outstanding. This can make the stock more affordable for investors, potentially increasing demand and driving up the price in the long run. Additionally, this allows the corporation to continue dividends without using cash reserves.

Question 9

A stock dividend is considered small when it is a dividend of:

Accepted Answer

A small stock dividend is generally considered to be 25% or less of the corporation's outstanding stock.

Question 10

Declaring and distributing stock dividends:

Accepted Answer

Declaring and distributing stock dividends do not change the total stockholders' equity. It only changes the composition of the equity by transferring a portion from retained earnings to a new account called stock dividends distributable. Therefore, choice D is correct, and the other options are incorrect.

Question 11

A small stock dividend will:

Accepted Answer

A small stock dividend does not change the total assets or total stockholders' equity of a company. It simply reallocates a portion of retained earnings to common stock, but the total equity remains the same.

Question 12

The chronological order of dates for cash dividends are:

Accepted Answer

The chronological order of dates for cash dividends is in the following order: date of declaration, date of record, and date of payment. Therefore, choice D is the correct option.

Question 13

Williamson Company declared and distributed a 10% stock dividend when it had 200,000 shares of $1 par value common stock outstanding. The market price per share of common stock was $60 per share when the dividend was declared. The journal entry to record the stock dividend would include a credit to:

Accepted Answer

The stock dividend is 10% of 200,000 shares, which is 20,000 shares. The market value of these shares is $60 each, totaling $1,200,000. The par value of the shares is $1, totaling $20,000. The excess over par ($1,200,000 - $20,000) is credited to Paid-in Capital in Excess of Par-Common.

Question 14

Corrao Foods Corporation has 5000 shares of 7%, $15 par value, cumulative preferred stock and 150,000 shares of $1 par value common stock outstanding at December 31, 2017 and December 31, 2018. In 2017, a $2000 dividend was declared and paid. In 2018, $39,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2018?

Accepted Answer

The answer of Corrao Foods Corporation has 5000 shares of...

Question 15

On December 31, 2017, Pilozzi Company has the following information available:  On December 31, 2017, can the Board of Directors declare a cash dividend of $8 million?

Accepted Answer

The answer of On December 31, 2017, Pilozzi Company has...

Question 16

How does the declaration and payment of cash dividends affect the accounting equation?

Accepted Answer

The declaration and payment of cash dividends decrease assets (cash) and stockholders' equity (retained earnings) in the accounting equation.

Question 17

Regarding the retained earnings account, which of the following statements is INCORRECT?

Accepted Answer

Retained earnings can decrease due to net losses, but they can also decrease due to dividends paid to shareholders.

Question 18

On February 1, a corporation has 50,000 shares of $1 par value common stock issued and outstanding. The corporation also has Additional Paid-in Capital of $300,000 and Retained Earnings of $300,000. On February 1, the corporation declared a 2-for-1 stock split. After the split, what is the total par value of the common stock and the total stockholders' equity, respectively?

Accepted Answer

A 2-for-1 stock split doubles the number of shares and halves the par value per share, so the total par value remains the same at $50,000. Stockholders' equity is the sum of common stock, additional paid-in capital, and retained earnings, which remains unchanged at $650,000.

Question 19

The Home Store reported the following figures: Retained Earnings, February 1, 2017...........$18 million
Retained Earnings, February 1, 2016...........$19 million
The company's fiscal year ends on February 1 each year. Net income for the fiscal year ending February 1, 2017 is $22 million. What is the amount of dividends declared for the fiscal year ending February 1, 2017?

Accepted Answer

The answer of The Home Store reported the following figures:...

Question 20

Arnold, Inc. declares and distributes a 10% common stock dividend when it has 70,000 shares of $100 par value common stock outstanding. If the market value of the common stock is $20, the journal entry to record the stock dividend would include a:

Accepted Answer

The stock dividend is recorded at market value. 10% of 70,000 shares is 7,000 shares. At $20 market value, the total is $140,000, which is debited to Retained Earnings.

Quiz 10: Stockholders Equity