Question 1

All of the following normally are found in a corporation's stockholders' equity section except

Accepted Answer

Dividends in arrears are not a component of stockholders' equity, but rather refer to dividends that have not been paid to shareholders despite being owed to them.

Question 2

Which of the following classifications represents the fewest shares of common stock?

Accepted Answer

The answer of Which of the following classifications represents the...

Question 3

Henry Corporation has 3,000 shares of $50 par value,7 percent cumulative preferred stock,and 10,000 shares of $5 par value common stock outstanding during its first five years of operation.Henry Corporation paid cash dividends as follows: 2009,$4,500; 2010,$0; 2011,$32,500; 2012,$15,000; 2013,$7,500.The amount of dividends in arrears at the end of 2010 was

Accepted Answer

The answer of Henry Corporation has 3,000 shares of $50...

Question 4

Treasury shares plus outstanding shares equal

Accepted Answer

Treasury shares are shares that a company has bought back from shareholders, but not yet retired or canceled. Outstanding shares are shares that are owned by shareholders and are available for trading on the stock exchange. When treasury shares are added to outstanding shares, the total is the number of issued shares. Issued shares are the total number of shares that a company has sold to shareholders, including both outstanding and treasury shares.

Question 5

Chambers Corporation had the following shares of stock outstanding on December 31,2013: Common stock,$100 par value,100,000 shares outstanding
Preferred stock,8 percent,$200 par value,cumulative,10,000 shares outstanding
Dividends were in arrears for 2011 and 2012.
On December 31,2013,total cash dividends of $800,000 were declared.The total amounts payable to preferred stockholders and common stockholders,respectively,are

Accepted Answer

Since the preferred stock is cumulative, it means that any missed dividends from previous years must be paid before any dividends can be paid to the common stock. Therefore, the first $160,000 of the $800,000 declared dividends must go to the preferred stockholders to cover the arrears from 2011 and 2012. The remaining $640,000 is available to pay the common stock dividend.

To calculate the specific amounts payable to each group of shareholders:

Preferred stock: 
Dividend arrears from 2011 and 2012 = $200 x 0.08 x 10,000 x 2 years = $32,000
Preferred stock dividend for 2013 = $200 x 0.08 x 10,000 = $160,000
Total payable to preferred stock = $32,000 + $160,000 = $192,000

Common stock: 
Remaining dividends after paying preferred stock = $800,000 - $192,000 = $608,000
Dividend payable per share = $608,000 / 100,000 shares = $6.08 per share
Total payable to common stock = $6.08 per share x 100,000 shares = $608,000

Therefore, the answer is C, with the preferred stockholders receiving $192,000 and the common stockholders receiving $608,000.

Question 6

Macon Corporation has 3,000 shares of $300 par value,7 percent cumulative preferred stock,and 10,000 shares of $30 par value common stock outstanding during its first five years of operation.Macon Corporation paid cash dividends as follows: 2009,$42,000; 2010,$54,000; 2011,$195,000; 2012,$90,000; 2013,$45,000.The amount of dividends received by the preferred stockholders during 2013 was

Accepted Answer

Since the preferred stock is cumulative, any dividends not paid in previous years must be paid before common stock dividends can be paid. Therefore, we must first calculate the total dividends owed to the preferred stockholders through 2013:

Preferred dividends through 2012: 
($300 par value * 0.07 annual dividend rate) * 3,000 preferred shares = $63,000

Preferred dividends owed in 2013: 
($300 par value * 0.07 annual dividend rate) * 3,000 preferred shares = $63,000

Total preferred dividends owed through 2013: 
$63,000 + $63,000 = $126,000

Since Macon Corporation only paid $45,000 in dividends in 2013, all of this amount must go towards paying the dividends owed to the preferred stockholders. Therefore, the amount of dividends received by the preferred stockholders during 2013 was $45,000. Option B is correct.

Question 7

Use the following information to answer the question below. 
The following accounts appear in the ledger of Bullock Corporation on December 31,2013:
 A balance sheet prepared on December 31,2013,would report total contributed capital of

Accepted Answer

To calculate the total contributed capital, we need to add the accounts "Common Stock" and "Paid-in Capital in Excess of Par Value." From the ledger, we can see that Common Stock has a balance of $150,000, and Paid-in Capital in Excess of Par Value has a balance of $72,000, for a total of $222,000 (150,000 + 72,000). Therefore, the correct answer is C.

Question 8

If Willis Corporation has 80,000 shares of common stock authorized,50,000 shares of common stock issued,and holds 12,000 shares of common stock as treasury stock,the total number of outstanding shares of Willis Corporation amounts to

Accepted Answer

Outstanding shares are calculated by subtracting treasury stock from issued stock. Thus, 50,000 issued shares minus 12,000 treasury shares equals 38,000 outstanding shares.

Question 9

Use the following information to answer the question below. 
The following accounts appear in the ledger of Bullock Corporation on December 31,2013:
$\begin{array}{lc}
\text { Preferred Stock } & \$ 60,000 \
\text { Common Stock } & 94,000 \
\text { Additional Paid-in Capital, Preferred } & 14,000 \
\text { Additional Paid-in Capital, Common } & 36,000 \
\text { Retained Earnings } & 80,000
\end{array}$ A balance sheet prepared on December 31,2013,would report total stockholders' equity of

Accepted Answer

The answer of Use the following information to answer the...

Question 10

The excess of the issuance price over the stated value of a no-par common stock should be credited to the

Accepted Answer

The excess of the issuance price over the stated value of a no-par common stock should be credited to the Additional Paid-in Capital account. This account represents the amount by which a company's stock has been sold above its par value, allowing the company to raise additional funds that can be used for various purposes such as research and development, expansion or debt repayment. Therefore, choice C is the best answer.

Question 11

The number of shares of issued stock equals

Accepted Answer

The answer of The number of shares of issued stock...

Question 12

Cleburne Corporation has 3,000 shares of $200 par value,7 percent cumulative preferred stock,and 10,000 shares of $20 par value common stock outstanding during its first five years of operation.Cleburne Corporation paid cash dividends as follows: 2009,$33,000; 2010,$0; 2011,$130,000; 2011,$60,000; 2013,$30,000.The amount of dividends the common stockholders received during 2009 was

Accepted Answer

The preferred stock has priority in receiving dividends, and since Cleburne paid $33,000 in dividends during 2009, all of it is allocated to the preferred stockholders. Therefore, the common stockholders did not receive any dividends in 2009.

Question 13

Lamar Corporation has 3,000 shares of $150 par value,7 percent cumulative preferred stock,and 10,000 shares of $15 par value common stock outstanding during its first five years of operation.Lamar Corporation paid cash dividends as follows: 2009,$25,500; 2010,$0; 2011,$97,500; 2012,$45,000; 2013,$22,500.The amount of dividends received by the preferred stockholders during 2011 was

Accepted Answer

The answer of Lamar Corporation has 3,000 shares of $150...

Question 14

A corporation has 10,000 shares of 8 percent cumulative preferred stock and 20,000 shares of common stock outstanding.Par value for each is $200.No dividends were paid last year,but this year a $400,000 dividend is paid.How much of this $400,000 goes to the holders of common stock?

Accepted Answer

The answer of A corporation has 10,000 shares of 8...

Question 15

Holders of common stock must be made aware of possible restrictions on common dividends when the preferred stock is

Accepted Answer

Preferred stock with cumulative dividends means that if the company does not pay the full dividend on the preferred stock, the missed dividends accumulate and must be paid later. This reduces the amount of available funds for common dividends, potentially limiting or restricting their distribution.

Question 16

Which of the following would not be an account in the general ledger of a corporation?

Accepted Answer

Dividends in Arrears is not an account in the general ledger; it is a note or disclosure indicating unpaid dividends on cumulative preferred stock.

Question 17

Par value is the minimum cushion of capital established for the protection of

Accepted Answer

Par value is the minimum amount set for a stock to protect creditors by ensuring that a company maintains a basic level of capital.

Question 18

A corporation has 5,000 shares of 8 percent noncumulative preferred stock and 10,000 shares of common stock outstanding.Par value for each is $50.No dividends were paid last year,but this year a $46,500 dividend is paid.How much of this $46,500 goes to the holders of common stock?

Accepted Answer

The preferred stockholders receive their 8% dividend first, which is 5,000 shares * $50 * 8% = $20,000. The remaining $46,500 - $20,000 = $26,500 goes to the common stockholders.

Question 19

Beckham Corporation has 3,000 shares of $100 par value,7 percent cumulative preferred stock,and 10,000 shares of $10 par value common stock outstanding during its first five years of operation.Beckham Corporation paid cash dividends as follows: 2009,$30,000; 2010,$0; 2011,$65,000; 2012,$30,000; 2013,$15,000.The amount of dividends received by the common stockholders during 2012 was

Accepted Answer

The preferred stock dividend is $21,000 annually (3,000 shares x $100 x 7%). By 2012, $63,000 in preferred dividends were in arrears (2009: $9,000, 2010: $21,000, 2011: $33,000). In 2012, $30,000 was paid, covering $21,000 for 2012 and $9,000 of arrears, leaving $9,000 for common stockholders.

Question 20

Elmore Corporation had the following shares of stock outstanding on December 31,2013: Common stock,$250 par value,200,000 shares outstanding
Preferred stock,8 percent,$50 par value,cumulative,20,000 shares outstanding
Dividends were in arrears for 2011 and 2012.On December 31,2013,total cash dividends of $400,000 were declared.The total amounts payable to preferred stockholders and common stockholders,respectively,are

Accepted Answer

The preferred stockholders are entitled to dividends for 2011, 2012, and 2013. Each year, they receive 8% of $50 par value per share, which is $4 per share. With 20,000 shares, this amounts to $80,000 per year. For three years, this totals $240,000. The remaining $160,000 of the $400,000 total dividends goes to the common stockholders.

Quiz 12: Stockholders Equity