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Exam 11: Reporting and Interpreting Owners Equity

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Question 31

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The dividend yield ratio increases when a cash dividend is paid.

A) True
B) False

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Question 32

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DORA Company declared and distributed a 10% stock dividend on 20,000 shares of issued and outstanding $5 par value common stock.The market price per share on the declaration date was $9 and was $10 on the distribution date.Which of the following correctly describes the accounting for the declaration and distribution of the stock dividend?

A) Retained earnings decreased $20,000.
B) Capital in excess of par increased $10,000.
C) Common stock increased $18,000.
D) Retained earnings decreased $18,000.

E) A) and B)
F) A) and C)

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Question 33

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Kirova Company has provided the following information: Number of issued common shares,900,000; Net income,$1,000,000; Number of authorized common shares,1,000,000; Number of outstanding common shares,800,000 Number of treasury shares,100,000. What is Kirova's earnings per share?

Total stockholders' equity of Grasse Company is not affected when a stockholder sells shares of Grasse Company stock to another stockholder.

A company's assets and stockholders' equity decrease when a cash dividend is declared by its board of directors.

Which of the following statements regarding earnings per share (EPS) is correct?

Which of the following entries would be recorded when a company reissues 1,000 shares of treasury stock for $50 per share when they were repurchased at a cost of $47 per share and have a $1 par value? $\begin{array}{lr}\text { A. Cash } & 50,000 \\\text { Treasury Stock } & &47,000 \\\text { Capital in excess of par value } && 3,000\end{array}$ $\begin{array}{lr}\text { B. Cash } & 50,000 \\\text { Treasury Stock } & &47,000 \\\text { Retained earnings \quad \( \quad \) \( \quad \) \( \quad \) \( \quad \) } && 3,000\end{array}$ $\begin{array}{lrr}\text { C. Cash } & 50,000 & \\\text { Common Stock } & &1,000 \\\text { Capital in excess of par value } && 49,000\end{array}$ $\begin{array}{lrr}\text { D. Cash } & 50,000 & \\\text { Treasury Stock } & &47,000 \\\text { Gain on sale of treasury stock } && 3,000\end{array}$

Net income increases when treasury stock is sold for an amount in excess of its cost.

CBA Company reported total stockholders' equity of $85,000 on its balance sheet dated December 31,2010.During the year ended December 31,2011,CBA reported net income of $10,000,declared and paid a cash dividend of $2,000,and issued additional common stock for $20,000.What is total stockholders' equity as of December 31,2011?

A company purchased 1,000 shares of treasury stock for $38,000 cash; the treasury stock was initially issued for $24,000 and had a $9,000 par value.Which of the following statements incorrectly describes the effect of treasury stock purchase?

The dividend yield ratio increases when the market price per share increases.

Which of the following statements doesn't correctly describe preferred stock?

Which of the following statements correctly describes either the dividend yield or earnings per share?

Katie Company had 40,000 shares of $2 par value common stock outstanding prior to a 40% common stock dividend declaration and distribution.The market value of the common stock on the declaration date was $10.Which of the following statements incorrectly describes the affect of the common stock dividend and declaration?

A company has 4 million common shares authorized,2.5 million shares issued and 100,000 treasury shares.The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split.Which of the following is correct?

Preferred stockholders don't have voting rights but do have a preference with respect to dividend payments.

The declaration and distribution of a 2-for-1 stock split results in a reduction of retained earnings.

Preferred stock often has a preference in the distribution of assets over common stock in the event of dissolution of the corporation.

Which of the following transactions doesn't result in an increase in stockholders' equity?

Slickers,Inc.had the following capital structure during 2010: Preferred stock,7%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for 2008 and 2009. Common stock,$100 par value,2,000 shares issued and outstanding. The total dividends declared and paid during 2010 totaled $25,000.How much of the dividend is paid to the preferred stockholders during 2010 assuming the preferred stock is cumulative?