Question 1

Identify the three common forms of business organization and the primary difference in the way we account for them.

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Question 2

Some preferred stock is cumulative while other preferred stock is noncumulative.What does this mean?

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Question 3

What is the difference between a stock split and a stock split effected in the form of a stock dividend?

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Question 4

What is comprehensive income and how does it differ from net income? Where is it reported in the balance sheet?

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Question 5

On October 15,2016,a 5% stock dividend was declared and distributed.The market value of the common stock on this date was $32 per share.Fractional share rights represented 100,000 shares.Cash was paid in lieu of issuing fractional share rights.On the date of declaration and payment,the company had 10 million shares of common stock outstanding.The par value of the common shares was $5.
Required:
Prepare any necessary journal entries to record the above events.

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Question 6

The shareholders' equity of Crystal Company includes the items shown below.The board of directors of Crystal declared cash dividends of $3 million,$6 million,and $50 million in each of its first three years of operation: 2014,2015,and 2016,respectively.
Common stock,$1 par,50,000,000 shares outstanding
Preferred stock,6%,$100 par,1,000,000 shares outstanding
Required:
Determine the amount of dividends per share on preferred and common stock for each of the three years.The preferred stock is cumulative and nonparticipating.

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Question 7

The costs of legal,promotional,and accounting services necessary to effect the sale of shares are referred to as share issue costs.How are these costs recorded? Compare this approach to the way debt issue costs are recorded.

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Question 8

The December 31,2016,balance sheet of MBI Company included the following:
  
MBI completed the following transactions in 2016 relating to treasury stock:
March 17: Reacquired 2 million shares at $10.
May 17: Reacquired 2 million shares at $9.
August 10: Issued 3 million shares at $12.
Required:
Assuming MBI uses the cost method,prepare journal entries to record the foregoing transactions on a weighted average basis.

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Question 9

The December 31,2016,balance sheet of Springer Company included the following:
  
Springer completed the following transactions in 2016 relating to treasury stock:
March 17: Reacquired 5 million shares at $10.
May 17: Reacquired 3 million shares at $9.
August 10: Sold 6 million shares at $12.
Required:
Assuming Springer uses the cost method,prepare journal entries to record the foregoing transactions on a FIFO basis.

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Question 10

When a corporation acquires its own shares,those shares assume the same status as authorized but unissued shares,as if they never had been issued.Explain how this is reflected in the accounting records if the shares are formally retired.

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Question 11

On January 1,2016,Gerlach Inc.had the following account balances in its shareholders' equity accounts.
  
During 2016,Gerlach Inc.had several transactions relating to common stock.
  
Required:
Record the above transactions and events in journal entry format.

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Question 12

The balance sheet reports the balances of shareholders' equity accounts.What additional information is provided by the statement of shareholders' equity?

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Question 13

When stock is issued for consideration other than cash,what is the measurement objective?

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Question 14

In 2016,Poe's Products completed the treasury stock transactions described below.
January 2: Reacquired 10 million shares at $16 per share.
February 15: Sold 3 million shares at $20 per share.
September 20: Sold 3 million treasury shares at $15 per share.
Poe had issued 50 million shares of its $1 par common stock for $18 several years ago.
Required:
Record the above transactions,assuming that Poe's Products uses the cost method.

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Question 15

Fowler Co.'s balance sheet showed the following at December 31,2016:
  
A cash dividend is declared on December 31,2016,and is payable on January 20,2017,to shareholders of record on January 10,2017.
Required:
(1. )Prepare all appropriate journal entries,assuming a cash dividend in the amount of $1.00 per share.
(2. )Prepare all appropriate journal entries,assuming a cash dividend in the amount of $5.00 per share.

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Question 16

ZIP Company owns 40,000 shares of the common stock of PIK Company.ZIP decided to divest itself of this investment by distributing the PIK shares in the form of a property dividend.The dividend ratio is one share of PIK for every four shares of ZIP common held by shareholders.ZIP has 160,000 common shares outstanding.On April 15,2016,the date of declaration,PIK stock had a par value of $5 per share,a book value of $12 per share,and a market value of $17 per share.
Required:
Prepare any necessary journal entries.The shares were distributed on May 15,2016,to stockholders of record on May 1,2016.

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Question 17

In 2016,Southwestern Corporation completed the treasury stock transactions listed below.
February 2: Reacquired 70,000 shares at $12.
March 17: Sold 20,000 shares at $14.
May 17: Sold 25,000 shares at $8.
Southwestern had issued 100,000 shares of its $1 par common stock for $10 several months ago.
Required:
Prepare the journal entries to record the above transactions using the cost method.

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Question 18

On January 1,2016,Fascom had the following account balances in its shareholders' equity accounts.
  
During 2016,Fascom Inc.had several transactions relating to common stock.
  
Required:
Without preparing journal entries,prepare the shareholders' equity section of Fascom's balance sheet as of December 31,2016.Assume net income is $500,000 for 2016.

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Question 19

The shareholders' equity of Nick Co.includes the items shown below.The board of directors of Nick declared cash dividends of $4 million,$8 million,and $50 million in each of its first 3 years of operation: 2014,2015,and 2016,respectively.
Common stock,$1 par,50,000,000 shares outstanding
Preferred stock,6%,$100 par,1,000,000 shares outstanding
Required:
Determine the amount of dividends per share on preferred and common stock for each of the three years.The preferred stock is noncumulative and nonparticipating.

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Question 20

On September 15,2016,the Scottie Company board of directors declared a 10% stock dividend on common shares.The shares are to be distributed on October 10,2016,to shareholders of record on October 1,2016.The market price per share on the date of declaration was $24 while the market price on the date of distribution was $26.The common stock has a par value of $5 per share and there were 1,000,000 shares outstanding prior to the declaration of the stock dividend.
Required:
Prepare any necessary journal entries to record the above transactions.

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Quiz 18: Shareholders Equity