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Exam 11: Corporate Reporting and Analysis

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Question 1

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Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:

A) Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000.
B) Debit Retained Earnings $135,000; credit Cash $135,000.
C) Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.
D) Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000.
E) No entry is made until the stock is issued.Common Stock Dividend Distributable: 50,000 shares * 10% × $20 = $100,000

F) A) and E)
G) All of the above

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Question 2

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Dividing stockholders' equity applicable to common shares by the number of common shares outstanding yields the book value per common share.

A) True
B) False

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Question 3

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A stock dividend does not reduce a corporation's assets or its stockholders' equity.

On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

Retained earnings are part of the stockholders' claims on the company's net assets.

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital is:

A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.

Treasury stock is stock that has been authorized, issued, and is outstanding.

Treasury stock is classified as:

A company reported $1,050,000 in net income for the current year. Earnings per common share is $1.75 and the year-end market price of the shares is $31.50. Calculate the company's price earnings ratio.

A corporation is responsible for its own acts and debts because it is considered a ____________________________________.

Robin Company had net income of $67,000. The company had 9,000 weighted average common shares outstanding. The basic earnings per share equal $7.44 per share.

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Beagle Company earned $90,000 in income and paid cash dividends of $7,000 to preferred shareholders during the current year. Beagle had 15,500 weighted-average shares of common stock outstanding for the year. Calculate the company's earnings per share.

In many states, the minimum amount that stockholders must contribute to the corporation, and which is intended to protect the creditors of the corporation, is called the:

A corporation had current year net income of $237,500. It paid preferred dividends of $40,000 cash and had 480,000 weighted-average shares of common stock outstanding. Calculate the corporation's earnings per share.

What is a stock split? How is a stock split different from a stock dividend?

Corporations may buy back their own stock for any of the following reasons except to:

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.