Question

1-The statement of changes in stockholders' equity:

Multiple Choice

Is part of the statement of retained earnings.

Shows only the ending balances in stockholders' equity.

Describes changes in paid-in capital and retained earnings subcategories.

Does not include changes in treasury stock.

Is reported by very few companies.

2- Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

Multiple Choice

$5,050.

$2,600.

$100.

$1,200.

$0.

3- Which of the following is true of a stock dividend?

Multiple Choice

It is a liability on the balance sheet.

The decision to declare a stock dividend resides with the shareholders.

Transfers a portion of equity from retained earnings to a cash reserve account.

Does not affect total equity, but transfer amounts between the components of equity.

Reduces a corporation's assets and stockholders' equity.

4- All of the following statements regarding stock dividends are true except:

Multiple Choice

Directors can use stock dividends to keep the market price of the stock affordable.

Stock dividends provide evidence of management's confidence that the company is doing well.

Stock dividends do not reduce assets or equity.

Stock dividends decrease the number of shares outstanding.

Stock dividends transfer a portion of equity from retained earnings to contributed capital.

5- Alto Company issued 7% preferred stock with a $100 par value. This means that:

Multiple Choice

Preferred shareholders have a guaranteed dividend.

The amount of the potential dividend is $7 per year per preferred share.

Preferred shareholders are entitled to 7% of the annual income.

The market price per share will approximate $100 per share.

Only 7% of the total paid-in capital can be preferred stock.

6- Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company declared a $27,000 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

Multiple Choice

$1.65.

$1.99.

$1.31.

$0.34.

$4.89.

7- The following data has been collected about Keller Company's stockholders' equity accounts:

Common stock $10 par value 20,000 shares authorized and 10,000 shares issued, 9,000 shares outstanding	$100,000
Paid-in capital in excess of par value, common stock	50,000
Retained earnings	25,000
Treasury stock	11,500

Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:

Multiple Choice

1,150.

1,000.

575.

11,000.

21,000.

8- A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

Multiple Choice

$100.

$600.

$1,000.

$6,000.

$7,000.

9- Sweet Company’s outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 5,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

	Dividend Declared
Year 1	$	2,000
Year 2	$	6,000
Year 3	$	32,000

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Multiple Choice

$15,000 preferred; $25,000 common.

$11,000 preferred; $29,000 common.

$5,000 preferred; $35,000 common.

$12,000 preferred; $28,000 common.

$10,000 preferred; $30,000 common.

10- Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

Multiple Choice

Financial leverage.

Discount on stock.

Premium on stock.

Preemptive right.

Capital gain.

Answer 1

1) Answer: Describes changes in Paid in capital and retained earning subcategorise.

Statement of change in stockholders equity is prepared to find the total balance of stockholders equity which include change taken place in paid in capital, treasury stock, and retained earning components like bonus share, capital reserve etc.

2) Answer: $1,200

Total share repurchased	100 x 40	4,000
Less: share reissued on 20th july	50 x 40	2,000
Share reissued on 1st August	20 x 40	800
Remaining balance in treasury stock		1,200

3) Answer: Does not affect total equity, but transfer amount between the components of equity.

Stock dividend issued from the balance of retained earning that means amount of stock dividend just transfer from retained earning to common stock. Retained earning and common stock are the components of total equity so the total equity does not affected by issue of stock dividend. It is also called capitalization of profit.

4) Answer: Stock dividend decrease the share outstanding

Above statement regarding stock dividend is incorrect because by issue of stock dividend number of share also increased. By mean of stock dividend company convert its profit into capital so the capital of comapny as well as outstanding shares are increased by issue of stock dividend.