Question 1

Racer Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {40,000 shares authorized; 25,000 shares issued }&\$500,000\
\text { Common stock, $ \$ 10 $ par value, $ 4,000,000 $ shares authorized; }&\
\text {  $ 2,600,000 $ shares issued, $ 2,560,000 $ shares outstanding}&26,000,000\
\text {Paid-in capital in excess of par value - preferred stock  }&80,000\
\text {Paid-in capital in excess of par value - common stock  }&37,000,000\
\text { Retained earnings}&12,200,000\
\text { Treasury stock (40,000  shares)}&840,000\
\end{array}$
 Racer's total paid-in capital was

Accepted Answer

Total paid-in capital = Preferred stock + Common stock + Paid-in capital in excess of par value - preferred stock + Paid-in capital in excess of par value - common stock= 500,000 + 26,000,000 + 80,000 + 37,000,000= $63,580,000

Question 2

What is the total stockholders' equity based on the following account balances? $\begin{array}{lr}
\text { Common Stock } & \$ 2,300,000 \
\text { Paid-In Capital in Excess of Par } & 120,000 \
\text { Retained Earnings } & 570,000 \
\text { Treasury Stock } & 60,000
\end{array}$

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The answer of What is the total stockholders' equity based...

Question 3

Sizemore Inc.has 10000 shares of 4% $100 par value cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2021.If the board of directors declares a $25000 dividend the

Accepted Answer

The preferred stockholders are entitled to their cumulative dividend first, which is 4% of $100 par value per share, totaling $40,000. Since the declared dividend is only $25,000, the entire amount will go to the preferred stockholders.

Question 4

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections: $$\begin{array} { c c c } 
&\text { Total Assets } & \text { Total Liabilities } & \text { Total Stockholders' Equity } \
\hline a.& \text { Increase } & \text { Decrease } & \text { No change } \
b.&\text { No change } & \text { Increase } & \text { Decrease } \
c.&\text { Decrease } & \text { Increase } & \text { Decrease } \
d.&\text { Decrease } & \text { No change } & \text { Increase }
\end{array}$$

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Question 5

What is the total stockholders' equity based on the following account balances? $$\begin{array} { l r } 
\text { Common Stock } & \$ 950,000 \
\text { Paid-In Capital in Excess of Par } & 50,000 \
\text { Retained Earnings } & 175,000 \
\text { Treasury Stock } & 25,000
\end{array}$$

Accepted Answer

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Question 6

Two classifications appearing in the paid-in capital section of the balance sheet are

Accepted Answer

Capital stock represents the par value of the issued shares, while additional paid-in capital is the amount received in excess of par value from the sale of those shares. Therefore, these two classifications are commonly used in the paid-in capital section of the balance sheet. Option A is incorrect as it only includes stock type and not the amount paid. Option B is incorrect as retained earnings do not belong to paid-in capital. Option D is incorrect as treasury stock is a contra-equity account and is not included in paid-in capital.

Question 7

Nance Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {30,000 shares authorized; 20,000 shares issued  }&\$400,000\
 \text {Common stock, $ \$ 10 $ par value, $ 3,000,000 $ shares authorized; }&\
 \text { $ 1,950,000 $ shares issued, $ 1,920,000 $ shares outstanding  }&19,500,000\
 \text { Paid-in capital in excess of par value - preferred stock }&60,000\
 \text {Paid-in capital in excess of par value - common stock  }&28,000,000\
 \text {Retained earnings }&9,650,000\
 \text {Treasury stock (30,000 ) shares }&630,000\
\end{array}$
 Nance declared and paid an $85000 cash dividend on December 15 2021.If the company's dividends in arrears prior to that date were $24000 Nance's common stockholders received

Accepted Answer

The answer of Nance Corporation's December 31 2021 balance sheet...

Question 8

Nance Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {30,000 shares authorized; 20,000 shares issued  }&\$400,000\
 \text {Common stock, $ \$ 10 $ par value, $ 3,000,000 $ shares authorized; }&\
 \text { $ 1,950,000 $ shares issued, $ 1,920,000 $ shares outstanding  }&19,500,000\
 \text { Paid-in capital in excess of par value - preferred stock }&60,000\
 \text {Paid-in capital in excess of par value - common stock  }&28,000,000\
 \text {Retained earnings }&9,650,000\
 \text {Treasury stock (30,000 ) shares }&630,000\
\end{array}$
 Nance's total paid-in capital was

Accepted Answer

Total paid-in capital is the sum of the par value of the preferred stock, the par value of the common stock, the paid-in capital in excess of par value for the preferred stock, the paid-in capital in excess of par value for the common stock, and the treasury stock.Preferred stock: 20,000 shares * $20 par value = $400,000Common stock: 1,950,000 shares * $10 par value = $19,500,000Paid-in capital in excess of par value - preferred stock = $60,000Paid-in capital in excess of par value - common stock = $28,000,000Treasury stock: (30,000 shares * $10 par value) = $630,000Total paid-in capital = $400,000 + $19,500,000 + $60,000 + $28,000,000 - $630,000 = $47,960,000

Question 9

Watson Inc.has 10000 shares of 5% $100 par value cumulative preferred stock and 20000 shares of $1 par value common stock outstanding at December 31 2022.There were no dividends declared in 2020.The board of directors declares and pays a $90000 dividend in 2021 and in 2022.What is the amount of dividends received by the common stockholders in 2022?

Accepted Answer

The preferred stock is cumulative, which means that any dividends that are not paid in one year must be paid in a later year before any dividends can be paid to the common stockholders. In this case, the preferred stock has a 5% dividend rate, which means that the preferred stockholders are entitled to receive $5 per share in dividends each year. Since there were no dividends declared in 2020, the preferred stockholders are entitled to receive $50,000 in dividends in 2021 and 2022. This leaves $40,000 of the dividend to be paid to the common stockholders.

Question 10

Berman Inc.has 6000 shares of 6% $50 par value cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31 2021 and December 31 2022.The board of directors declared and paid a $12000 dividend in 2021.In 2022 $72000 of dividends are declared and paid.What are the dividends received by the common stockholders in 2022?

Accepted Answer

The preferred stock dividend is 6% of $50 par value, which is $3 per share. With 6000 shares, the annual preferred dividend is $18,000. In 2021, only $12,000 was paid, leaving $6,000 in arrears. In 2022, $18,000 is due for the current year, plus the $6,000 in arrears, totaling $24,000 for preferred dividends. The remaining $72,000 - $24,000 = $48,000 is for common stockholders.

Question 11

CAB Inc.has 1000 shares of 5% $100 par value cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31 2021.What is the annual dividend on the preferred stock?

Accepted Answer

The annual dividend on the preferred stock is calculated as 5% of the $100 par value per share. Therefore, 5% of $100 is $5 per share. With 1000 shares, the total annual dividend is $5 * 1000 = $5000.

Question 12

Nance Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {30,000 shares authorized; 20,000 shares issued  }&\$400,000\
 \text {Common stock, $ \$ 10 $ par value, $ 3,000,000 $ shares authorized; }&\
 \text { $ 1,950,000 $ shares issued, $ 1,920,000 $ shares outstanding  }&19,500,000\
 \text { Paid-in capital in excess of par value - preferred stock }&60,000\
 \text {Paid-in capital in excess of par value - common stock  }&28,000,000\
 \text {Retained earnings }&9,650,000\
 \text {Treasury stock (30,000 ) shares }&630,000\
\end{array}$
 Nance's total stockholders' equity was

Accepted Answer

The answer of Nance Corporation's December 31 2021 balance sheet...

Question 13

What is the total stockholders' equity based on the following account balances? $\begin{array}{lr}
\text { Common Stock } & \$ 1,800,000 \
\text { Paid-In Capital in Excess of Par } & 100,000 \
\text { Retained Earnings } & 360,000 \
\text { Treasury Stock } & 60,000
\end{array}$

Accepted Answer

The answer of What is the total stockholders' equity based...

Question 14

Brewer Inc.has 5000 shares of 6% $50 par value cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2022 and December 31 2021.The board of directors declared and paid a $12000 dividend in 2021.In 2022 $60000 of dividends are declared and paid.What are the dividends received by the preferred stockholders in 2022?

Accepted Answer

The preferred stockholders are entitled to receive a cumulative dividend of 6% on their par value before any dividend is paid to the common stockholders.

In 2021, a dividend of $12,000 was declared and paid. Since the preferred stock is cumulative, any unpaid dividend from previous years must be paid before paying a dividend on common stock. Since there was no previous year's unpaid dividend, the entire $12,000 dividend in 2021 was paid to common stockholders.

In 2022, a dividend of $60,000 is declared and paid. The preferred stockholders are entitled to the full 6% dividend on their par value before any dividend is paid to the common stockholders.

Dividend for preferred stock = 6% x $50 x 5000 shares = $15,000.

Therefore, the dividends received by the preferred stockholders in 2022 is $15,000. Option C is the correct answer.

Question 15

Racer Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {40,000 shares authorized; 25,000 shares issued }&\$500,000\
\text { Common stock, $ \$ 10 $ par value, $ 4,000,000 $ shares authorized; }&\
\text {  $ 2,600,000 $ shares issued, $ 2,560,000 $ shares outstanding}&26,000,000\
\text {Paid-in capital in excess of par value - preferred stock  }&80,000\
\text {Paid-in capital in excess of par value - common stock  }&37,000,000\
\text { Retained earnings}&12,200,000\
\text { Treasury stock (40,000  shares)}&840,000\
\end{array}$
 Racer declared and paid a $100000 cash dividend on December 15 2021.If the company's dividends in arrears prior to that date were $30000 Racer's common stockholders received

Accepted Answer

The preferred stockholders must first receive their dividends, including any arrears. The preferred dividend is 6% of $500,000, which is $30,000 annually. With $30,000 in arrears, $60,000 goes to preferred stockholders, leaving $40,000 for common stockholders.

Question 16

Denson Inc.has 10000 shares of 5% $100 par value non-cumulative preferred stock and 40000 shares of $1 par value common stock outstanding at December 31 2022.There were no dividends declared in 2021.The board of directors declares and pays a $120000 dividend in 2021.What is the amount of dividends received by the common stockholders in 2021?

Accepted Answer

Non-cumulative preferred stocks do not accumulate any unpaid dividends. So, the $120,000 dividend declared in 2021 will be paid only to the preferred stockholders. The common stockholders will not receive any dividend as there were no dividends declared in 2021 to be distributed to them. Therefore, the amount of dividends received by the common stockholders in 2021 is $0.

Question 17

Racer Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {40,000 shares authorized; 25,000 shares issued }&\$500,000\
\text { Common stock, $ \$ 10 $ par value, $ 4,000,000 $ shares authorized; }&\
\text {  $ 2,600,000 $ shares issued, $ 2,560,000 $ shares outstanding}&26,000,000\
\text {Paid-in capital in excess of par value - preferred stock  }&80,000\
\text {Paid-in capital in excess of par value - common stock  }&37,000,000\
\text { Retained earnings}&12,200,000\
\text { Treasury stock (40,000  shares)}&840,000\
\end{array}$
 Racer's total stockholders' equity was

Accepted Answer

The answer of Racer Corporation's December 31 2021 balance sheet...

Question 18

Paid-in capital in excess of stated value would appear on a balance sheet under the category

Accepted Answer

Paid-in capital in excess of stated value is a component of additional paid-in capital, which is typically shown as a separate line item on the balance sheet under stockholders' equity. Therefore, the correct choice is C - additional paid-in capital.

Question 19

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

Accepted Answer

Once a cash dividend has been declared, the corporation is legally obligated to pay it, and it cannot be rescinded. Therefore, statement A is not accurate. Statements B, C, and D are accurate, as the declaration of a cash dividend involves a formal authorization by the board of directors, creates a legal binding obligation for the corporation, and increases a liability account.

Question 20

Ace Inc.has 10000 shares of 4% $100 par value cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31 2021.What is the annual dividend on the preferred stock?

Accepted Answer

The annual dividend on the preferred stock is calculated as 4% of the $100 par value per share. Therefore, the total annual dividend is 4% of $100, which is $4 per share. With 10,000 shares, the total dividend is $4 x 10,000 = $40,000.

Quiz 8: Financial Analysis: the Big Picture

What is the total stockholders' equity based on the following account balances? $\begin{array}{lr}\text { Common Stock } & \$ 2,300,000 \\\text { Paid-In Capital in Excess of Par } & 120,000 \\\text { Retained Earnings } & 570,000 \\\text { Treasury Stock } & 60,000\end{array}$

Sizemore Inc.has 10000 shares of 4% $100 par value cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2021.If the board of directors declares a $25000 dividend the

What is the total stockholders' equity based on the following account balances? $\begin{array} { l r } \text { Common Stock } & \$ 950,000 \\\text { Paid-In Capital in Excess of Par } & 50,000 \\\text { Retained Earnings } & 175,000 \\\text { Treasury Stock } & 25,000\end{array}$

Two classifications appearing in the paid-in capital section of the balance sheet are

CAB Inc.has 1000 shares of 5% $100 par value cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31 2021.What is the annual dividend on the preferred stock?

What is the total stockholders' equity based on the following account balances? $\begin{array}{lr}\text { Common Stock } & \$ 1,800,000 \\\text { Paid-In Capital in Excess of Par } & 100,000 \\\text { Retained Earnings } & 360,000 \\\text { Treasury Stock } & 60,000\end{array}$

Paid-in capital in excess of stated value would appear on a balance sheet under the category

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

Ace Inc.has 10000 shares of 4% $100 par value cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31 2021.What is the annual dividend on the preferred stock?