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Exam 13: Accounting for Corporations

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Question 1

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A company declared a $0.55 per share cash dividend.The company has 200,000 shares authorized,190,000 shares issued,and 8,000 shares in treasury stock.The journal entry to record the payment of the dividend is:

A) Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
B) Debit Common Dividends Payable $104,500; credit Cash $104,500.
C) Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
D) Debit Common Dividends Payable $100,100; credit Cash $100,100.
E) Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.

F) A) and B)
G) A) and C)

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Question 2

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All of the following regarding accounting for Treasury Stock under U.S.GAAP and IRFS is true except:

A) U.S.GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock.
B) Only gains are recognized on retirements of treasury stock under IFRS.
C) IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock.
D) Gains are not recognized on retirements of treasury stock under U.S.GAAP.
E) A company's assets and equity are always reduced by the amount paid for the retiring stock.

F) A) and D)
G) A) and E)

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B

Question 3

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Stockholders' equity consists of paid-in capital and retained earnings.

A corporation can issue two kinds of stock - common and preferred.

A company has 1,000 shares of $50 par value,4.5% cumulative and nonparticipating preferred stock and 10,000 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:

A corporation had stockholders' equity on January 1 as follows: Common Stock,$5 par value,1,000,000 shares authorized,500,000 shares issued; Paid-in Capital in Excess of Par Value,Common Stock,$1,000,000; Retained Earnings,$3,000,000.Prepare journal entries to record the following transactions:

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

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

Quark Company earned $90,000 in income and paid cash dividends of $10,000 to preferred shareholders during the current year.Quark had 12,500 weighted-average shares of common stock outstanding for the year.Calculate the company's earnings per share.

The amount of income earned per share of a company's outstanding common stock is known as:

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

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.

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average)common stock.

A stock dividend transfers:

The price-earnings ratio is calculated by dividing:

A company has earnings per share of $9.60.Its dividend per share is $0.50,its market price per share is $120,and its book value per share is $96.Its price-earnings ratio equals:

Stockholders' equity consists of:

If a corporation is authorized to issue 1,000 shares of $50 common stock,it is said to have $50,000 of stock outstanding.

Sparrow Company had net income of $63,000.The company had 9,000 weighted average common shares outstanding.The basic earnings per share equal $7.00 per share.

A company's board of directors votes to declare a cash dividend of $.75 per share.The company has 15,000 shares authorized,10,000 issued,and 9,500 shares outstanding.The total amount of the cash dividend is: