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Exam 14: Corporations: Dividends, Retained Earnings, and Income Reporting

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Question 31

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Outstanding stock of the Larson Corporation included 40000 shares of $5 par common stock and 10000 shares of 5% $10 par noncumulative preferred stock. In 2016 Larson declared and paid dividends of $4000. In 2017 Larson declared and paid dividends of $12000. How much of the 2017 dividend was distributed to preferred shareholders?

A) $6000
B) $7000
C) $5000
D) None of these answer choices are correct

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Question 32

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Nola Inc. declares a 10% common stock dividend when it has 60000 shares of $10 par value common stock outstanding. If the market value of $24 per share is used the amounts debited to Stock Dividends and credited to Paid-in Capital in Excess of Par are: $\begin{array} { l c } &\text { Paid-in Capital in } \\\text { Stock Dividends } &\text { Excess of Par }\end{array}$ A) $\begin{array} { ll} & \$ 60,000 &&&&&& \$ 0 \\\end{array}$ B) $\begin{array} { l l } &\$ 144,000 &&&&& \$ 84,000 \\\end{array}$ C) $\begin{array} { l l } \$ 144,000 &&&&&& \$ 60,000 \\\end{array}$ D) $\begin{array} { l l } \$ 60,000 &&&&&& \$ 84,000\end{array}$

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Question 33

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Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

A stockholder who receives a stock dividend would

On January 1 2017 Raleish Corporation had $2000000 of $10 par value common stock outstanding that was issued at par and retained earnings of $1000000. The company issued 200000 shares of common stock at $12 per share on July 1. On December 15 the board of directors declared a 15% stock dividend to stockholders of record on December 31 2017 payable on January 15 2018. The market value of Raleish Corporation stock was $15 per share on December 15 and $16 per share on December 31. Net income for 2017 was $500000. Instructions (1) Journalize the issuance of stock on July 1 and the declaration of the stock dividend on December 15. (2) Prepare the stockholders' equity section of the balance sheet for Raleish Corporation at December 31 2017.

Three dates are important in connection with cash dividends. Identify these dates and explain their significance to the corporation and its stockholders.

Wando Company reported retained earnings at December 31 2016 of $410000. Wando had 160000 shares of common stock outstanding throughout 2017. The following transactions occurred during 2017. 1. An error was discovered in the 2015 accounting records depreciation expense was recorded at $60000 but the correct amount was $50000. 2. A cash dividend of $0.50 per share was declared and paid. 3. A 5% stock dividend was declared and distributed when the market price per share was $15 per share. 4. Net income was $225000. Instructions Prepare a retained earnings statement for 2017.

Corporations generally issue stock dividends in order to

Dixie Company reports the following amounts for 2017. $\begin{array} { l r } \text { Net income } & \$ 300,000 \\\text { Average, stockholders' equity } & 2,000,000 \\\text { Preferred dividends } & 84,000 \\\text { Par value preferred stock } & 400,000\end{array}$ The 2017 rate of return on common stockholders' equity is

On November 27 the board of directors of Beth Company declared a $.60 per share dividend. The dividend is payable to shareholders of record on December 7 on December 24. Beth has 25500 shares of $1 par common stock outstanding at November 27. Journalize the entries needed on the declaration and payment dates.

Juno Corporation's stockholders' equity section at December 31 2016 appears below: Stockholders' equity Paid-in capital $\begin{array}{ll}\text { Common stock, } \$ 10 \text { par, } 60,000 \text { outstanding } & \$ 600,000 \\\text { Paid-in capital in excess of par } & \underline{ 150,000} \\\text { Total paid-in capital } && \$ 750,000 \\\text { Retained earnings } && \underline{ 150,000} \\\text { Total stockholders' equity } & & \underline{\$ 900,000}\end{array}$ On June 30 2017 the board of directors of Juno Corporation declared a 20% stock dividend payable on July 31 2017 to stockholders of record on July 15 2017. The fair value of Juno Corporation's stock on June 30 2017 was $15. On December 1 2017 the board of directors declared a 2 for 1 stock split effective December 15 2017. Juno Corporation's stock was selling for $20 on December 1 2017 before the stock split was declared. Par value of the stock was adjusted. Net income for 2017 was $190000 and there were no cash dividends declared. Instructions (a) Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split. (b) Fill in the amount that would appear in the stockholders' equity section for Juno Corporation at December 31 2017 for the following items: $\begin{array}{c}\begin{array}{l} \text { 1. Common stock } &\\ \text { 2. Number of shares outstanding } &\\ \text { 3. Par value per share} &\\ \text {4. Paid-in capital in excess of par } &\\ \text { 5. Retained earnings} &\\ \text { 6. Total stockholders' equity } &\\\end{array}\begin{array}{r}\$ \\\hline\\\hline \$ \\\hline \$ \\\hline \$ \\\hline \$ \\\hline\end{array}\end{array}$

The return on common stockholders' equity is computed by dividing _____________ minus _______________ dividends by average common stockholders' equity.

Which of the following statements about dividends is not accurate?

Farmer Company reports the following amounts for 2017: $\begin{array} { l r } \text { Net income } & \$ 270,000 \\\text { Average, stockholders' equity } & 1,000,000 \\\text { Preferred dividends } & 70,000 \\\text { Par value preferred stock } & 200,000\end{array}$ The 2017 rate of return on common stockholders' equity is

Income tax expense and the related liability for income taxes payable are recorded when taxes are paid.

Somento Forest Inc. has 10000 shares of 6% $100 par value cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2017. What is the annual dividend on the preferred stock?

Assume that all balance sheet amounts for Hiro Company represent average balance figures. $\begin{array} { l r } \text { Stockholders' equity-common } & \$ 300,000 \\\text { Total stockholders' equity } & 400,000 \\\text { Sales revenue } & 200,000 \\\text { Net income } & 54,000 \\\text { Number of shares of common stock } & 20,000 \\\text { Common stock dividends } & 20,000 \\\text { Preferred stock dividends } & 8,000\end{array}$ What is the return on common stockholders' equity for Hiro?

Daytona Corporation had 800000 shares of common stock outstanding during the year. Daytona declared and paid cash dividends of $400000 on the common stock and $320000 on the preferred stock. Net income for the year was $1760000. What is Daytona's earnings per share?

The following accounts appear in the ledger of Rowlands Inc. after the books are closed at December 31 2017. Instructions Prepare the stockholders' equity section at December 31 2017 assuming that retained earnings is restricted for plant expansion in the amount of $200000.

The following information is available for Hildebrand Corporation: $\begin{array}{lr}\text { Dividends paid to common stockholders } & \$ 45,000 \\\text { Dividends paid to preferred stockholders } & 20,000 \\\text { Net income } & 295,000 \\\text { Weighted average common shares outstanding } & 100,000\end{array}$ Instructions Compute the earnings per share of common stock.