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Exam 13: Accounting for Corporations

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Question 111

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Which of the following is true of a stock dividend?

A) Transfers a portion of equity from retained earnings to a cash reserve account.
B) The decision to declare a stock dividend resides with the shareholders.
C) Reduces a corporation's assets and stockholders' equity.
D) It is a liability on the balance sheet.
E) Does not affect total equity, but transfer amounts between the components of equity.

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Question 112

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What are the rights generally granted to common stockholders?

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Common stockholders generally have the r...

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Question 113

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The price-earnings ratio is calculated by dividing:

All stock dividends are recorded at par value so there would never be a credit to the paid-in capital in excess of par value account.

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 the dividend declaration is:

Paid and declared preferred dividends are called dividends in arrears.

A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80. Its price-earnings ratio equals 13.

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

Torino Company has 10,000 shares of $5 par value, 4% cumulative and nonparticipating preferred stock and 100,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $1,000 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

Par value of a stock refers to the:

The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.

Given the following information about a corporation's current year activities, compute the retained earnings for the current year. $\begin{array} { l | l } \text { Retained earnings, January 1 } & \$ 342,000 \\\hline \text { Cash dividends } & \$ 51,700 \\\hline \text { Stock dividends } & \$ 40,000 \\\hline \text { Net income } & \$ 141,000\end{array}$

A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

On June 30, a company declared a cash dividend of $0.35 per common share to the shareholders of record on July 15. The cash dividend will be paid on July 31. This company has 500,000 shares authorized and 100,000 shares outstanding. Prepare the journal entries required on June 30, July 15 and July 31.

Explain how to calculate the price-earnings ratio and describe how it is used in analysis of a company's financial condition and performance.

Stockholders' equity consists of which of the following?

A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

Dividend yield is the percent of cash dividends paid to common shareholders relative to the: