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Exam 14: Corporations: Dividends, Retained Earnings, and Income Reporting

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Question 101

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The following information is available for Richmond Hill Corporation: $\begin{array}{lr}\text { Beginning common stockholders' equity } & \$ 700,000 \\\text { Dividends paid to common stockholders } & 50,000 \\\text { Dividends paid to preferred stockholders } & 30,000 \\\text { Ending common stockholders' equity } & 1,000,000 \\\text { Net income } & 200,000\end{array}$ Instructions Based on the preceding information calculate return on common stockholders' equity.

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Question 102

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Prior period adjustments

A) may only increase retained earnings.
B) may only decrease retained earnings.
C) may either increase or decrease retained earnings.
D) do not affect retained earnings.

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Question 103

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Kramer Co. had retained earnings of $30000 on the balance sheet but disclosed in the footnotes that $6000 of retained earnings was restricted for building expansion and $2000 was restricted for bond repayments. Cash of $4000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?

Burnell Inc. has 5000 shares of 4% $50 par value cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2016 and December 31 2015. The board of directors declared and paid a $8000 dividend in 2016. In 2017 $30000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2017? $\begin{array} { l l l } & \text { Preferred } & \text { Common} \\\end{array}$ A) $\begin{array} { l l l } & \$ 18,000 && \$ 12,000 \\\end{array}$ B) $\begin{array} { l l l } & \$ 15,000 && \$ 15,000 \\\end{array}$ C) $\begin{array} { l l l } & \$ 12,000 && \$ 18,000 \\\end{array}$ D) $\begin{array} { l l l } & \$ 10,000 && \$ 20,000\end{array}$

Which of the following is not a significant date with respect to dividends?

Cooney Inc. reported net income of $540000 during 2017 and paid dividends of $52000 on common stock. It also has 20000 shares of 6% $100 par value preferred stock outstanding. Common stockholders' equity was $2400000 on January 1 2017 and $3200000 on December 31 2017. The company's return on common stockholders' equity for 2017 is:

Each of the following statements is correct except that earnings per share is reported

The date on which a cash dividend becomes a binding legal obligation is on the

Match the items below.

A corporation differs from a proprietorship and a partnership in that

The following information is available for Grey Goose Inc.: $\begin{array} { l r } \text { Beginning retained earnings } & \$ 600,000 \\\text { Cash dividends declared } & 60,000 \\\text { Net income for } 2017 & 120,000 \\\text { Stock dividend declared } & 15,000 \\\text { Understatement of last year's depreciation expense } & 30,000\end{array}$ Instructions Based on the preceding information prepare a retained earnings statement for 2017.