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Exam 18: Shareholders Equity

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Question 21

Multiple Choice

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A statement of comprehensive income does not include:

A) Gains resulting from the return on assets exceeding expectations.
B) Gains and losses on unsold held-to-maturity securities.
C) Losses resulting from the return on assets falling short of expectations.
D) Prior service cost.

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Question 22

Multiple Choice

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When dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the:

A) Date the dividend is declared.
B) Last day of the fiscal year.
C) Date of record.
D) Date of payment.

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Question 23

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Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Retained earnings represents:

On December 31, 2008, Rebel Corporation's balance sheet reported the following. During 2009, Rebel decided to discontinue accounting for share buybacks as treasury shares. Instead, the shares will be treated as having been retired. Required: Prepare the appropriate journal entry to effect this change. $\begin{array} { l r } \text { Common stock, \$1 par } & \$ 1,000,000 \\\text { Paid-in capital - excess of par } & 4,000,000 \\\text { Retained earnings } & 5,280,000 \\\text { Treasury stock } ( 20,000 \text { shares at cost } ) & ( 625,000 )\end{array}$

Preferred stock is called preferred because it usually has two preferences. These preferences relate to:

Assuming that Stubblefield had Dividends Payable of $17,450 thousand at December 31, 2005, compute the balance in that account at December 31, 2007.

Roberto Corporation was organized on January 1, 2009. The firm was authorized to issue 100,000 shares of $5 par common stock. During 2009, Roberto had the following transactions relating to shareholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8) . What is total shareholders' equity at the end of 2009?

When a corporation acquires its own shares, those shares assume the same status as authorized but unissued shares, as if they never had been issued. Explain how this is reflected in the accounting records if the shares are formally retired.

What was the average price of the additional treasury shares purchased by Levi during 2009?

Under GAAP, the declaration of a property dividend may require the recognition of a gain or loss if the fair value of the property is different from its carrying value on the declaration date.

Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2009. In October, 2009, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:

Identify the three common forms of business organization and the primary difference in the way we account for them.

Despot declared a property dividend to give marketable securities to its common stockholders. The securities had cost Despot $7 million and currently have a fair value of $16 million. Which of the following would be included in recording the property dividend declaration?

When a property dividend is declared, the reduction in retained earnings is for:

The balance sheet reports the balances of shareholders' equity accounts. What additional information is provided by the statement of shareholders' equity?

In 2009, Southwestern Corporation completed the treasury stock transactions listed below. February 2: Reacquired 70,000 shares at $12. March 17: Sold 20,000 shares at $14. May 17: Sold 25,000 shares at $8. Southwestern had issued 100,000 shares of its $1 par common stock for $10 several months ago. Required: Prepare the journal entries to record the above transactions using the cost method.

The retained earnings balance reported in the balance sheet typically is not affected by:

When treasury shares are sold at a price above cost:

What is comprehensive income and how does it differ from net income? Where is it reported in the balance sheet?