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Exam 18: Shareholders Equity Key

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Question 31

Multiple Choice

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The preemptive right refers to the shareholder's right to:

A) Maintain a proportional ownership interest in the corporation.
B) Vote for members of the board of directors.
C) Receive a share of dividends.
D) Share in profits proportionally with all other stockholders.

E) A) and B)
F) None of the above

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Question 32

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During its first year of operations, Cole's Electronics Inc. completed the following transactions relating to shareholders' equity. January 5: Issued 1,000,000 shares of common stock for $25 per share. February 12: Issued 20,000 shares of common stock to accountants for $500,000 of professional services. The articles of incorporation authorize 5,000,000 shares of common stock with a par value of $1 per share and 1,000,000 preferred shares with a par value of $100 per share. Required: Record the above transactions in general journal form.

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Question 33

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A statement of comprehensive income does not include:

Paid-in capital in excess of par is reported:

Investors should be wary of stock buybacks during down times because the resulting decrease in shares and increase in earnings per share can be used to mask a slowdown in earnings growth.

The declaration and issuance of a stock dividend on shares of common stock:

Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?

Cash dividends become a binding liability as of the record date.

The shareholders' equity of Tru Corporation includes $600,000 of $1 par common stock and $1,200,000 par value of 6% cumulative preferred stock. The board of directors of Tru declared cash dividends of $150,000 in 2013 after paying $60,000 cash dividends in each of 2012 and 2011. Required: What is the amount of dividends common shareholders will receive in 2013?

The December 31, 2013, balance sheet of Springer Company included the following: Springer completed the following transactions in 2013 relating to treasury stock: March 17: Reacquired 5 million shares at $10. May 17: Reacquired 3 million shares at $9. August 10: Sold 6 million shares at $12. Required: Assuming Springer uses the cost method, prepare journal entries to record the foregoing transactions on a FIFO basis.

The shareholders' equity of Crystal Company includes the items shown below. The board of directors of Crystal declared cash dividends of $3 million, $6 million, and $50 million in each of its first three years of operation: 2011, 2012, 2013, respectively. Common stock, $1 par, 50,000,000 shares outstanding Preferred stock, 6%, $100 par, 1,000,000 shares outstanding Required: Determine the amount of dividends per share on preferred and common stock for each of the three years. The preferred stock is cumulative and nonparticipating.

Outstanding common stock is:

Heidi Aurora Imports issued shares of the company's Class B stock. Heidi Aurora Imports should report the stock in the company's statement of financial position:

How many of Levi's common shares were outstanding on 12/31/2012?

The Model Business Corporation Act:

Cal Cookie Company (CCC) has 100 million shares of $1 par common stock authorized. The transactions below caused changes in CCC's outstanding shares. January 4, 2013: Repurchased and retired 1 million shares at $8 per share. June 25, 2013: Repurchased and retired 2 million shares at $2 per share. Prior to the transactions, CCC's shareholders' equity included the following: Required: Record entries for the above transactions.

The December 31, 2013, balance sheet of MBI Company included the following: MBI completed the following transactions in 2013 relating to treasury stock: March 17: Reacquired 2 million shares at $10. May 17: Reacquired 2 million shares at $9. August 10: Issued 3 million shares at $12. Required: Assuming MBI uses the cost method, prepare journal entries to record the foregoing transactions on a weighted average basis.

The common stock account in a company's balance sheet is measured as:

Heidi Aurora Imports applies International Financial Reporting Standards. The company issued shares of the company's Class B stock. Heidi Aurora Imports should report the stock in the company's statement of financial position:

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