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Exam 11: Reporting and Interpreting Stockholders Equity

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Question 71

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A company reported the following asset and liability balances at the end of 2015 and 2016: If the company paid dividends totaling $5,000, what is the amount of net income for 2016?

A) $20,000.
B) $105,000.
C) $80,000.
D) $25,000.

E) C) and D)
F) A) and B)

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Question 72

Multiple Choice

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The payment of a previously declared cash dividend has an overall effect of:

A) Reducing retained earnings and reducing liabilities by the amount of the dividend.
B) Reducing retained earnings and increasing contributed capital by the same amount.
C) Reducing assets and reducing liabilities by the amount of the dividend.
D) Reducing assets and reducing retained earnings by the amount of the dividenD.The payment of a previously declared dividend decreases the asset, Cash, and decreases the liability, Dividends payable.

E) A) and B)
F) None of the above

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Question 73

Multiple Choice

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Which of the following statements about earnings per share (EPS) is correct?

At the end of 2016, Washington Corporation reported a $40,000 balance in its common stock account (par value $1 per share). The treasury stock account balance was $720 (cost $6 per share). During 2016, the company declared and paid a cash dividend of $1.50 per share. Required: Calculate the total amount of the 2016 cash dividend.

On December 15, 2016, the board of directors of Cross Corporation declared a cash dividend, payable on January 8, 2017, of $.80 per share on the 2,000,000 common shares outstanding. On December 15, 2016, Cross Corporation should:

DRP, Inc. issued 50,000 shares of its own $50 par value preferred stock for cash of $110 per share, and issued 200,000 shares of its no-par common stock for cash of $40 per share. Required: Prepare the required journal entries for the issuance of each class of stock.

Bob Jones is a sole proprietor who began his business in 2016 with $20,000 cash. During the year 2016, he earned revenues of $180,000, incurred expenses of $75,000, and withdrew $120,000. Which of the following is true for the sole proprietorship?

The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding • Common stock, $100 par value, 2,000 shares issued and outstanding • Dividends in arrears for three prior years (2014­­-2016) • Total dividends declared and paid in 2017 were $50,000. How much of the 2017 dividend payment was paid to the preferred stockholders assuming the preferred stock is noncumulative?

Which of the following statements correctly describes either the dividend yield or the earnings per share?

A company's assets and liabilities both decrease when a previously declared cash dividend is paid.

Which of the following does not represent a description of shares of stock presented on the balance sheet?

Wendell Company provided the following pertaining to its accounting year that ended December 31, 2016: • Common stock with a $10,000 par value was sold for $50,000 cash • Cash dividends totaling $20,000 were declared, of which $15,000 were paid • Net income was $70,000 • A 5% stock dividend resulted in a common stock distribution, which had a $5,000 par value and a $23,000 market value • Treasury stock repurchased in a prior year for $9,000 was resold for $7,000 and in the journal entry to record the sale, Additional paid-in capital was debited for the amount of the difference between the repurchase price and the resale price What is the amount of the increase in Wendell's retained earnings for the year ended December 31, 2016?

Determine the effect of the following transactions on the financial statement components identified. Code your answers as follows: A: If the transaction results in an increase in the financial statement component. B: If the transaction results in a decrease in the financial statement component. C. If the transaction does not affect the financial statement component. Transaction 1: Common stock was sold at a price in excess of par value. Net income _____ Total assets _____ Stockholders' equity _____ Transaction 2: Treasury stock was purchased using cash. Net income _____ Total assets _____ Stockholders' equity _____ Transaction 3: Treasury stock was resold for cash at a price less than the treasury stock's cost. Net income _____ Total assets _____ Stockholders' equity _____ Transaction 4: Treasury stock was resold for cash at a price greater than the treasury stock's cost. Net income _____ Total assets _____ Stockholders' equity _____