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Exam 11: Reporting and Analyzing Equity

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Question 31

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

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The price-earnings ratio of a common sto...

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Question 32

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A company's stock is selling for $35 per share at year-end.This current year it paid shareholders a $2.45 per share cash dividend,reported earnings per share of $12.00 and had 750,000 common shares outstanding at year-end.Calculate the company's dividend yield.

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Question 33

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Authorized stock is the total number of shares outstanding.

A corporation had the following stock outstanding when the company's board of directors declared a $95,000 cash dividend in the current year: $\begin{array}{|l|r|}\hline \text { Preferred stock, } \$ 100 \text { par, } 6 \%, 5,000 \text { shares issued } & \$ 500,000 \\\hline \text { Common stock, } \$ 10 \text { par, } 70,000 \text { shares issued } & 700,000 \\\hline \text { Total } & \$ 1,200,000 \\\hline\end{array}$ Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is noncumulative and nonparticipating.

Duke Corporation reports the following components of stockholders' equity on December 31,2010. $\begin{array}{lr} \text {Common stock- \$ 25 par value, 100,000 shares authorized, 45,000 shares issued}\\ \text { and outstandino}&\$1,125,000\\ \text { Paid-in capital in excess of par value, common stock } & 60,000 \\ \text { Retained earnings } & 460,000 \\ \text { Total stockholders' equity } & \$ 1,645,000 \\\end{array}$ In year 2011, the following transactions affected its stockholders' equity accounts. Jan. 1 Purchased 4,500 shares of its own stock at $\$ 27$ cash per share. Jan. 5 Directors declared a $\$ 3$ per share cash dividend payable on Feb. 28 to the Feb. stockholders of record. Feb. 28 Paid the dividend declared on January 5 Mar. 3 Sold 1,000 shares of treasury stock for $\$ 28$ per share May 25 Sold 1,000 shares of treasury stock for $\$ 16$ per share What is the amount in the Retained Earnings account immediately after the May 25^th sale?

Explain the components of the statements retained earnings and identify the special items that are reported in it.

A company has a market value per share of $73.00.Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000.The company's price-earnings ratio is equal to:

A corporation has 200,000 shares of $10 par value common stock outstanding.The following selected transactions related to the company's stock took place during the current year: $\begin{array}{|l|l|}\hline\text { Apr. 15 } & \begin{array}{l}\text { Declared a 40\% stock dividend to stockholders of record on May 1, to be } \\\text { issued May 10. The current market valued is } \$ 15 \text { per common share. }\end{array} \\\hline \text { May 1 } & \text { Date of record. } \\\hline \text { May 10 } & \text { Issued the common stock dividend. }\\\hline\end{array}$ Prepare the journal entries to record these transactions.

What is treasury stock? How is the purchase and sale of treasury stock recorded?

When a company declares cash dividends; retained earnings is reduced.

A company had a beginning balance in retained earnings of $43,000.It had net income of $6,000 and paid out cash dividends of $5,625 in the current period.The ending balance in retained earnings account is equal to:

A company declared a $0.50 per share cash dividend.The company has 20,000 shares authorized,9,000 shares issued and 8,000 shares of common stock outstanding.The journal entry to record the dividend declaration is:

Prior period adjustments to financial statements can result from:

The costs of bringing a corporation into existence,including legal fees,promoter fees and amounts paid to obtain a charter are called:

Explain the difference between a large stock dividend and a small stock dividend.In addition,explain how to record these two types of stock dividends.

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings,dividends and economic opportunities.

On August 31,2010 Victory Corporation's common stock is priced at $30 per share before any stock dividend or split,and the stockholders' equity section of its balance sheet appears as follows.Assume that the company declares and immediately distributes a 15% stock dividend. Common stock- $\$ 7$ par value, 95,000 shares authorized, 38,000 shares $\begin{array}{lr}\text { issued and outstanding } & \$ 266,000 \\\text { Paid-in capital in excess of par value, common stock } & 100,000 \\ \text { Retained earnings } & 366,000 \\ \text { Total stockholders' equity } & \$ 732,000 \\\end{array}$ What is the total amount in the Retained Earnings account immediately after the stock dividend?

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

A company's board of directors' votes to declare a total cash dividend of $25,000.The company has 2,500 shares of $1 par common stock and 400 shares of 4%,$200 par preferred stock outstanding.What is the total amount that will be paid to preferred shareholders?

Stock that is not assigned a value per share by the corporate charter is called __________________.