Question 1

Saturn Corporation has 13,000 shares of 14%,$84 par noncumulative preferred stock outstanding and 20,000 shares of no-par common stock outstanding.At the end of the current year,the corporation declares a dividend of $180,000.How is the dividend allocated between preferred and common stockholders?

Accepted Answer

B)Dividend allocated to preferred stockholders: $84 × 14% × 13,000 shares = $152,880
Dividend allocated to common stockholders: $180,000 - $152,880 = $27,120

Question 2

Lafayette,Inc.was incorporated on January 1,2014.Lafayette issued 15,000 shares of common stock and 800 shares of preferred stock on that date.The preferred stock is cumulative,$100 par,with an 12% dividend rate.Lafayette has not paid any dividends yet.In 2017,Lafayette had its first profitable year,and on November 1,2017,Lafayette declared a total dividend of $44,000.What is the total amount that will be paid to common stockholders?

Accepted Answer

C)
 11ea86d6_83de_c793_92b6_1be81662c3ce_TB2804_00 Cumulative payment = [($100 × 12%)× 800] × 4 = $38,400
Amount paid to preferred stockholders = [($100 × 12%)× 800] × 4 = $38,400
The total amount that will be paid out to common stockholders =
 11ea86d6_83de_c794_92b6_c7803d14ec9b_TB2804_00

Question 3

A corporation has 20,000 shares of 17%,$50 par cumulative preferred stock outstanding and 25,000 shares of no-par common stock outstanding.Dividends of $36,000 are in arrears.At the end of the current year,the corporation declares a dividend of $208,000.How is the dividend allocated between preferred and common stockholders?

Accepted Answer

B)Dividend to preferred stockholders = ($50 × 17% × 20,000 shares)= $170,000 current year + $36,000 in arrears = $206,000
Dividend to common stockholders = $208,000 - $206,000 = $2,000

Question 4

On November 1,2017,McEwing,Inc.declared a dividend of $5.00 per share.McEwing,Inc.has 20,000 shares of common stock outstanding and no preferred stock.The date of record is November 15,and the payment date is November 30,2017.Which of the following is the journal entry needed on November 30,2017?

Accepted Answer

B)Dividends Payable = Dividends per share × No.of shares = $5.00 × 20,000 = $100,000

Question 5

Which of the following is the correct description of dividends in arrears?

Accepted Answer

Dividends in arrears refer to the cumulative amount of dividends that were not paid in previous years. This means that these dividends were declared by the company but were not paid out to shareholders at the time they were due. Instead, they accumulated and are now considered to be in arrears.

Question 6

Which of the following occurs when a cash dividend is declared?

Accepted Answer

When a cash dividend is declared, the company pays out a portion of their profits to the shareholders. This decreases the retained earnings (part of stockholders' equity), resulting in a decrease in stockholders' equity. Liabilities and assets are not directly affected by the declaration of a cash dividend.

Question 7

On November 1,2017,Roosevelt,Inc.declared a dividend of $3.00 per share.Roosevelt,Inc.has 20,000 shares of common stock outstanding and no preferred stock.Prepare the journal entry to record this transaction.

Accepted Answer

The answer of On November 1,2017,Roosevelt,Inc.declared a dividend of $3.00...

Question 8

Occidental Produce,Inc.has 49,000 shares of common stock outstanding and 6,000 shares of preferred stock outstanding.The common stock is $0.08 par value; the preferred stock is 4% noncumulative with a $100.00 par value.On October 15,2017,the company declares a total dividend payment of $56,000.How much dividend will be paid to the preferred stockholders?

Accepted Answer

C)Dividend paid to the preferred stockholders = ($100.00 × 4%)× 6,000 = $24,000

Question 9

On November 1,2017,Oster,Inc.declared a dividend of $4.50 per share.Oster,Inc.has 23,000 shares of common stock outstanding and no preferred stock.Which of the following is the journal entry needed to record the declaration of the dividend?

Accepted Answer

C)Dividends Payable = Dividends per share × No.of shares = $4.50 × 23,000 = $103,500

Question 10

Greg's Grocery,Inc.has 45,000 shares of common stock outstanding and 8,000 shares of preferred stock outstanding.The common stock is $0.10 par value; the preferred stock is 7% noncumulative with a $100.00 par value.On October 15,2017,the company declares a total dividend payment of $51,000.What is the amount of dividend that will be paid for each share of common stock? (Round your answer to the nearest cent. )

Accepted Answer

A)Dividend paid to the common stockholders = $51,000.00 - [($100.00 × 7%)× 8,000] =
 11ea86d6_83de_2b51_92b6_3d9f4c032e2c_TB2804_00 Dividends per common share = -$5,000.00 / 45,000 = $(0.11)

Question 11

Pearland,Inc.has 9,000 shares of preferred stock outstanding.The preferred stock has a $90 par value,a 14% dividend rate,and is noncumulative.If Pearland has sufficient funds to pay dividends,what is the total amount of dividends that will be paid out to preferred stockholders?

Accepted Answer

B)The total amount of dividends paid out to preferred stockholders =
 11ea86d6_83dd_b620_92b6_33085273ed5a_TB2804_00

Question 12

On November 1,2017,President,Inc.declared a dividend of $3.00 per share.President,Inc.has 10,000 shares of common stock outstanding and 20,000 of preferred stock.The date of record is November 15,and the payment date is November 30,2017.Regarding the date of record,which of the following statements is true?

Accepted Answer

The date of record is the date on which shareholders are identified and entitled to receive the dividend. This information is important for the company to prepare the list of shareholders who will receive the dividend payment. No journal entry is made on the date of record as no cash is disbursed, and liabilities are not recorded until the payment date.

Question 13

Happy Farmer,Inc.has 44,000 shares of common stock outstanding and 3,000 shares of preferred stock outstanding.The common stock is $0.08 par value; the preferred stock is 8% noncumulative with a $100.00 par value.On October 15,2017,the company declares a total dividend payment of $56,000.What is the total amount of dividends that will be paid to the common stockholders?

Accepted Answer

B)Dividend paid to the common stockholders = $56,000 - [($100.00 × 8%)× 3,000] = $32,000

Question 14

On November 1,2017,Pink Rose,Inc.declared a dividend of $3.00 per share.Pink Rose,Inc.has 20,000 shares of common stock outstanding and no preferred stock.The date of record is November 15,and the payment date is November 30,2017.Provide the journal entry needed on November 30.

Accepted Answer

The answer of On November 1,2017,Pink Rose,Inc.declared a dividend of...

Question 15

On the date of record for a dividend,the company ________.

Accepted Answer

On the date of record for a dividend, the company determines who owns the shares of stock on that date. This is important because only those shareholders who own the stock on the date of record are entitled to receive the dividend. The company does not issue new shares or disburse dividend payments on the date of record, but it does record the dividend payable amount on that date for future distribution to eligible shareholders.

Question 16

Dividends in arrears are ________.

Accepted Answer

Dividends in arrears refer to the unpaid dividends on cumulative preferred stock. Noncumulative preferred stock dividends do not accumulate if they are not declared, while cumulative preferred stock dividends accumulate and must be paid in full before any common stock dividends can be paid. Dividends in arrears are not considered a liability on the balance sheet.

Question 17

From its inception through the year of 2016,Quicksales,Inc.was profitable and made strong dividend payments each year.In the year 2017,Quicksales had major losses and paid no dividends.In 2018,the company started making large profits again,and they were able to pay dividends to all shareholders-both common and preferred.There are 2,000 shares of cumulative,10% preferred stock outstanding.The preferred stock has a par value of $100.What is the total amount of dividends that should be paid to the preferred stockholders in December,2018?

Accepted Answer

D)
 11ea86d6_83df_15b5_92b6_570513ae63db_TB2804_00 The total amount of dividends which should be paid to the preferred stockholders = $20,000 × 2 = $40,000

Question 18

Orleans,Inc.was incorporated on January 1,2014.Orleans issued 4,000 shares of common stock and 1,200 shares of preferred stock on that date.The preferred stock is cumulative,$100 par,with an 12% dividend rate.Orleans has not paid any dividends yet.In 2017,Orleans had its first profitable year,and on November 1,2017,Orleans declared a total dividend of $63,000.What is the total amount that will be paid to preferred shareholders?

Accepted Answer

B)
 11ea86d6_83de_7972_92b6_054a6be86377_TB2804_00 Cumulative payment = [($100 × 12%)× 1,200] × 4 = $57,600

Question 19

A corporation has 18,000 shares of 13%,$50 par cumulative preferred stock outstanding and 34,000 shares of no-par common stock outstanding.Dividends of $22,000 are in arrears.At the end of the current year,the corporation declares a dividend of $208,000.What is the dividend per share for preferred stock and for common stock? (Round your answer to the nearest cent. )

Accepted Answer

B)
C)Total amount paid to preferred shareholders: ($50 × 13% × 18,000 shares current year)+ $22,000 in arrears = $139,000
Dividend per preferred share = $139,000 / 18,000 shares = $7.72
Dividend per common share: $208,000 - $139,000 = $69,000.00 / 34,000 shares = $2.03

Question 20

A corporation has 14,000 shares of 13%,$104 par noncumulative preferred stock outstanding and 22,000 shares of no-par common stock outstanding.At the end of the current year,the corporation declares a dividend of $220,000.What is the dividend per share for preferred stock and for common stock? (Round your answer to the nearest cent. )

Accepted Answer

A)The dividend per share of preferred stock = $104 × 13% = $13.52 per share × 14,000
 11ea86d6_83dc_f2cf_92b6_1fc4690b1286_TB2804_00 The dividend per share of common stock = ($220,000 - $189,280)= $30,720 / 22,000 shares = $1.40

Quiz 13: Stockholders Equity