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Exam 13: Corporations: Effects on Retained Earnings and the Income Statement

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Question 1

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Please refer to the following information for Peartree Company: • Common stock, $1.00 par, 100,000 issued, 95,000 outstanding • Paid-in capital in excess of par: $2,150,000 • Retained earnings: $910,000 • Treasury stock: 5,000 shares purchased at $20 per share - If Peartree resold 800 shares of treasury stock for $15 per share, what amounts would be shown for the number of shares issued and outstanding?

A) 100,800 issued; 95,000 outstanding
B) 100,000 issued; 95,800 outstanding
C) 100,000 issued; 94,200 outstanding
D) 100,000 issued; 5,800 outstanding

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Question 2

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Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. $\begin{array} { | l | r | } \hline\text { Common stock, } \$ 5 \text { par, } 100,000 \text { shares authorized, } 40,000 \text { shares } & \\\text { issued } & \$ 200,000 \\ \hline \text { Paid in capital in excess of par-common } & 120,000\\\hline \text { Retained earnings } &\underline { 290,000 } \\\hline \text { Total stockholders' equity } & \$ \underline { 610,000 }\\\hline\end{array}$ - What would the balance in Paid-in capital in excess of par be after a 2-for-1 stock split?

A) $580,000
B) $460,000
C) $380,000
D) $120,000

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D

Question 3

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A corporation has net income of $365,000 for the current year. It paid its required preferred dividend of $17,500 and had no other stock transactions during the year. The average number of common shares outstanding during the year was 69,500. What is the earnings per share?

Treasury stock is a corporation's own stock that it has issued and later reacquired.

Stock dividends have no effect on assets or liabilities.

Qdot International originally issued 50,000 shares of common stock at a price of $20 per share. A year later, they distributed a 10% stock dividend to shareholders. At the time of the stock dividend, the share price had gone up to $24 per share. Which of the following statements is TRUE?

One of the reasons for acquiring treasury stock is to avoid a hostile takeover by an outside party.

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. $\begin{array} { | l | r | } \hline\text { Common stock, } \$ 5 \text { par, } 100,000 \text { shares authorized, } 40,000 \text { shares } & \\\text { issued } & \$ 200,000 \\ \hline \text { Paid in capital in excess of par-common } & 120,000\\\hline \text { Retained earnings } &\underline { 290,000 } \\\hline \text { Total stockholders' equity } & \$ \underline { 610,000 }\\\hline\end{array}$ - Which of the following would be TRUE if the company issued a 2-for-1 stock split?

Please refer to the following information for Peartree Company: • Common stock, $1.00 par, 100,000 issued, 95,000 outstanding • Paid-in capital in excess of par: $2,150,000 • Retained earnings: $910,000 • Treasury stock: 5,000 shares purchased at $20 per share - If Peartree resold 800 shares of treasury stock for $15 per share, which of the following statements would be TRUE?

Prior period adjustments are shown as an adjustment to the beginning balance of Retained earnings, as reported on the statement of retained earnings.

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. $\begin{array} { | l | r | } \hline\text { Common stock, } \$ 5 \text { par, } 100,000 \text { shares authorized, } 40,000 \text { shares } &\\\text { issued } & \$ 200,000 \\ \hline \text { Paid in capital in excess of par-common } & 120,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total stockholders' equity } & \$ \underline { 610,000 }\\\hline\end{array}$ - What would be the balance in the Common stock account after the issuance of a 10% stock dividend?

If a company's share price is getting so high that the company thinks it might inhibit some investors from buying stock, it should consider doing a stock split.

If a company wanted to put a limit on cash dividends to ensure they would have enough retained earnings for a specific project intended to expand and grow the company, the appropriation of a portion of retained earnings would be a good strategy.

A company originally issued 10,000 shares of $5 par value common stock at $9 per share. The board of directors declares an 8% stock dividend when the market price of the stock is $10 a share. Which of the following is included in the entry to record the stock dividend?

For the year 2013, Foxmore Company reports the following items as part of their financial results: $\begin{array}{|l|r|}\hline\text { Sales revenues from regular business operations } & \$ 3,000,000 \\\hline \text { Cost of goods sold } & 900,000 \\\hline \text { Operating expenses from their regular business operations } & 600,000 \\\hline \text { Gain on disposal of several items of property, plant \& equipment } & 15,000 \\\hline \text { Income tax expense on continuing operations } & 330,000 \\\hline \text { Loss on the termination of a discontinued business segment, net of } \\\text { Lax }&120,000\\\hline\text { Losses on damage caused by earthquake, net of tax }&280,000\\\hline\end{array}$ - How much is total operating income (loss) ?

On July 31, 2013, the Archer Company reported the following information in the equity section of their balance sheet: $\begin{array} { | l | r | } \hline \text { Stockholders' equity } & \\\hline \begin{array} { l } \text { Common stock, } \$ 1.00 \text { par, } 500,000 \text { shares authorized, 20,000 shares } \\\text { issued }\end{array} & \$ 20,000 \\\hline \text { Paid-in capital in excess of par } & 1,180,000 \\\hline \text { Retained earnings } & 3,200,000 \\\hline \text { Total stockholder's equity } & \$ 4,400,000 \\\hline\end{array}$ - Assume that Archer carries out a 3-for-1 stock split. Please prepare a similar equity section showing the effects of the stock split. (Please round all numbers to the nearest cent.) $\begin{array} { | l | l | l | } \hline \text { Stockholders' equity }\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad&\quad\quad\quad\quad &\quad\quad\quad \\\hline & & \\\hline & & \\\hline\\\hline & & \\\hline\\\hline\end{array}$

Which of the following BEST describes the appropriation of retained earnings?

Which of the following statements is TRUE?

Please refer to the following information for Peartree Company: • Common stock, $1.00 par, 100,000 issued, 95,000 outstanding • Paid-in capital in excess of par: $2,150,000 • Retained earnings: $910,000 • Treasury stock: 5,000 shares purchased at $20 per share - If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?

Ross Corporation reported the following equity section on its current balance sheet: $\begin{array} { | l | r | } \hline \begin{array} { l } \text { Common stock, } \$ 5 \text { par, } 140,000 \text { shares authorized, } 50,000 \text { shares } \\\text { issued }\end{array} & \$ 250,000 \\\hline \text { Paid in capital in excess of par-common } & 200,000 \\\hline \text { Retained earnings } & 207,000 \\\hline \text { Total stockholders' equity } & \$ \underline { 657,000 } \\\hline\end{array}$ - The corporation purchases 15,000 shares of its common stock at $9.50 per share. Which of the following is the number of common shares issued and the number of common shares outstanding?