Question 1

A stockholder who receives a stock dividend would
A)expect the market price per share to increase.
B)own more shares of stock.
C)expect retained earnings to increase.
D)expect the par value of the stock to change.

Accepted Answer

A stock dividend involves the company issuing additional shares of stock to its existing shareholders, so the stockholder receiving the dividend would own more shares of stock. The market price per share and the par value of the stock are not directly affected by a stock dividend. Retained earnings may increase as a result of issuing the additional shares, but this is not a guarantee.

Question 2

Watson, Inc.has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2020.There were no dividends declared in 2018.The board of directors declares and pays a $90,000 dividend in 2019 and in 2020.What is the amount of dividends received by the common stockholders in 2020?
A)$30,000.
B)$40,000.
C)$50,000.
D)$0.

Accepted Answer

The preferred stock is cumulative, which means that any dividends that are not paid in one year must be paid in a subsequent year before any dividends can be paid to the common stockholders. In this case, the preferred stock is entitled to a $5 dividend per share, or a total of $50,000 (10,000 shares x $5 per share). Since no dividends were declared in 2018, the preferred stockholders are entitled to $100,000 in dividends ($50,000 for 2018 and $50,000 for 2019). The total dividend declared in 2020 is $90,000, which is less than the amount owed to the preferred stockholders. Therefore, the common stockholders will not receive any dividends in 2020.

Question 3

Corporations generally issue stock dividends in order to
A)increase the market price per share.
B)exceed stockholders' dividend expectations.
C)increase the marketability of the stock.
D)decrease the amount of capital in the corporation.

Accepted Answer

Stock dividends are often issued to increase the marketability of the stock by increasing the number of shares available, which can make the stock more accessible to a wider range of investors due to a lower price per share. This does not directly aim to increase the market price per share, exceed dividend expectations, or decrease the corporation's capital.

Question 4

Sizemore, Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2020.If the board of directors declares a $25,000 dividend, the
A)preferred stockholders will receive 1/10th of what the common stockholders will receive.
B)preferred stockholders will receive the entire $25,000.
C)$25,000 will be held as restricted retained earnings and paid out at some future date.
D)preferred stockholders will receive $12,500 and the common stockholders will receive $12,500.

Accepted Answer

The preferred stockholders are entitled to their cumulative dividend of $40,000 (10,000 shares x $100 par x 4%). Since the declared dividend is only $25,000, it will all go to the preferred stockholders.

Question 5

Which of the following statements is not true about a 2-for-1 split? A)Par value per share is reduced to half of what it was before the split. B)Total contributed capital increases. C)The market price probably will decrease. D)A stockholder with ten shares before the split owns twenty shares after the split.

Accepted Answer

In a 2-for-1 stock split, the total contributed capital does not increase; it remains the same. The number of shares increases, but the value per share decreases proportionally, keeping the total capital unchanged.

Question 6

Berman Inc.has 6,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2019, and December 31, 2020.The board of directors declared and paid a $12,000 dividend in 2019.In 2020, $72,000 of dividends are declared and paid.What are the dividends received by the common stockholders in 2020?
A)$48,000.
B)$42,000.
C)$54,000.
D)$18,000.

Accepted Answer

The preferred stock is cumulative, which means that any dividends that are not paid in a given year must be paid in a later year before any dividends can be paid to the common stockholders. In 2019, the preferred stockholders are entitled to a dividend of $36,000 (6,000 shares x $6 per share). Since only $12,000 of dividends were paid in 2019, the preferred stockholders are entitled to an additional $24,000 of dividends in 2020. This means that the common stockholders will only receive dividends if the total dividends paid in 2020 exceed $24,000. Since $72,000 of dividends were paid in 2020, the common stockholders will receive $48,000 of dividends ($72,000 - $24,000).

Question 7

Stock dividends and stock splits have the following effects on retained earnings:

Accepted Answer

The answer of Stock dividends and stock splits have the...

Question 8

Regular dividends are declared out of
A)paid-in capital in excess of par value.
B)treasury stock.
C)common stock.
D)retained earnings.

Accepted Answer

Regular dividends are typically declared out of retained earnings, which represent the accumulated profits of a company that have not been distributed to shareholders as dividends.

Question 9

Which of the following is not a significant date with respect to dividends? A)The declaration date. B)The incorporation date. C)The record date. D)The payment date.

Accepted Answer

The incorporation date is not a significant date with respect to dividends. It refers to the date on which a company is officially registered as a legal entity, and has no bearing on the timing or amount of dividend payments. The declaration date is when the company announces its intention to pay a dividend, the record date is the date on which shareholders must be on the company's books to be eligible to receive the dividend, and the payment date is when the dividend is actually paid out to eligible shareholders.

Question 10

CAB Inc.has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?
A)$50 per share.
B)$5,000 in total.
C)$500 in total.
D)$0.50 per share.

Accepted Answer

The annual dividend on the preferred stock is calculated as 5% of the par value ($100) per share, which is $5 per share. With 1,000 shares, the total annual dividend is $5,000.

Question 11

Denson, Inc.has 10,000 shares of 5%, $100 par value, non-cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2020.There were no dividends declared in 2019.The board of directors declares and pays a $120,000 dividend in 2020.What is the amount of dividends received by the common stockholders in 2020?
A)$0.
B)$50,000.
C)$120,000.
D)$70,000.

Accepted Answer

The preferred stockholders receive their 5% dividend first, which is $50,000 (5% of $100 par value * 10,000 shares). Since the preferred stock is non-cumulative, they do not receive dividends for 2019. The remaining $70,000 ($120,000 total dividend - $50,000 preferred dividend) is distributed to the common stockholders.

Question 12

Brewer Inc.has 5,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2020, and December 31, 2019.The board of directors declared and paid a $12,000 dividend in 2019.In 2020, A total of $60,000 in dividends are declared and paid.What are the dividends received by the preferred stockholders in 2020?
A)$42,000.
B)$30,000.
C)$18,000.
D)$15,000.

Accepted Answer

The answer of Brewer Inc.has 5,000 shares of 6%, $50...

Question 13

Which of the following statements about dividends is not accurate? A)Dividends are generally reported quarterly as a dollar amount per share. B)Low dividends may mean high stock returns. C)The board of directors is obligated to declare dividends. D)Payment of dividends from legal capital is illegal in many states.

Accepted Answer

The board of directors is not obligated to declare dividends; it is at their discretion based on the company's financial situation and strategy.

Question 14

Which of the following statements regarding the date of a cash dividend declaration is not accurate? A)The dividend can be rescinded once it has been declared. B)The corporation is committed to a legal, binding obligation. C)The board of directors formally authorizes the cash dividend. D)A liability account must be increased.

Accepted Answer

Once a cash dividend has been declared, the corporation is legally committed to paying it and cannot rescind it. Therefore, statement A is not accurate. Statements B, C, and D are accurate.

Question 15

Dividends are predominantly paid in
A)scrip.
B)property.
C)cash.
D)stock.

Accepted Answer

Dividends are predominantly paid in cash.

Question 16

On the dividend record date,
A)a dividend becomes a current obligation.
B)no entry is required.
C)an entry may be required if it is a stock dividend.
D)Dividends Payable is debited.

Accepted Answer

The answer of On the dividend record date,
A)a dividend becomes...

Question 17

Ace Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?
A)$40 per share
B)$40,000 in total
C)$4,000 in total
D)$0.40 per share

Accepted Answer

The annual dividend on the preferred stock is calculated as 4% of the par value ($100) per share. Therefore, the dividend per share is $4 (4% of $100), and with 10,000 shares, the total annual dividend is $40,000.

Question 18

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

Accepted Answer

The answer of Indicate the respective effects of the declaration...

Question 19

The board of directors must assign a per share value to a stock dividend declared that is
A)greater than the par or stated value.
B)less than the par or stated value.
C)equal to the par or stated value.
D)at least equal to the par or stated value.

Accepted Answer

When a board of directors assigns a per share value to a stock dividend, it must be at least equal to the par or stated value. This ensures that the stock's value is not diluted and maintains the integrity of the existing shares' value.

Question 20

Of the four dividends types, the two most common types in practice are
A)cash and scrip.
B)cash and property.
C)cash and stock.
D)property and stock.

Accepted Answer

Cash and stock dividends are the two most common types of dividends paid by companies.

Quiz 11: Reporting and Analyzing Stockholders Equity

A stockholder who receives a stock dividend would

Corporations generally issue stock dividends in order to

Sizemore, Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2020.If the board of directors declares a $25,000 dividend, the

Which of the following statements is not true about a 2-for-1 split?

Stock dividends and stock splits have the following effects on retained earnings:

Regular dividends are declared out of

Which of the following is not a significant date with respect to dividends?

CAB Inc.has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?

Which of the following statements about dividends is not accurate?

Which of the following statements regarding the date of a cash dividend declaration is not accurate?

Dividends are predominantly paid in

On the dividend record date,

Ace Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

The board of directors must assign a per share value to a stock dividend declared that is

Of the four dividends types, the two most common types in practice are