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

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Question 51

Multiple Choice

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If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a

A) large stock dividend.
B) cash dividend.
C) contingent dividend.
D) small stock dividend.

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Question 52

Multiple Choice

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The income statement for Roland Inc. shows income before income taxes $700,000, income tax expenses $210,000, and net income $490,000. If Roland declared $150,000 of cash dividends on preferred stock and has 100,000 shares of common stock outstanding throughout the year, earnings per share is:

A) $5.50
B) $3.40
C) $1.50
D) $0.60

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Question 53

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A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

The return on common stockholders' equity is computed by dividing net income available to common stockholders by

During 2010 Silas Inc. had sales revenue $564,000, gross profit $264,000, operating expenses $99,000, cash dividends $45,000, other expenses and losses $30,000. Its corporate tax rate is 30%. What was Silas's income tax expense for the year?

The declaration of a stock dividend will

Income tax expense usually appears as a separate section on a corporation income statement.

In 2010, Worthington Corporation had net sales of $500,000 and cost of goods sold of $360,000. Operating expenses were $93,000, and interest expense was $7,500. The corporation's tax rate is 30%. The corporation declared preferred dividends of $7,000 in 2010, and its average common stockholders' equity during the year was $200,000. Instructions (a) Prepare an income statement for Worthington Corporation. (b) Compute Worthington Corporation's return on common stockholders' equity for 2010.

On January 1, 2010, Vannon Corporation had Retained Earnings of $378,000. During the year, Vannon had the following selected transactions: 1. Declared stock dividends of $50,000. 2. Declared cash dividends of $90,000. 3. A 2 for 1 stock split involving the issuance of 200,000 shares of $5 par value common stock for 100,000 shares of $10 par value common stock. 4. Suffered a net loss of $70,000. 5. Corrected understatement of 2009 net income because of an inventory error of $48,000. Instructions Prepare a retained earnings statement for the year.

On January 1, Castagno Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 15% stock dividend. Market value of the stock was $15/share. As a result of this event,

If a corporation declares a dividend based upon paid-in capital, it is known as a

Retained earnings is increased by each of the following except

In the stockholders' equity section of the balance sheet,

Income statements for corporations report _______________ in a separate section before net income.

Manner, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2010. There were no dividends declared in 2009. The board of directors declares and pays a $45,000 dividend in 2010. What is the amount of dividends received by the common stockholders in 2010?

A dividend based on paid-in capital is termed a liquidating dividend.

The balance in retained earnings on January 1, 2010, for Blakely Inc., was $600,000. During the year, the corporation paid cash dividends of $70,000 and distributed a stock dividend of $15,000. In addition, the company determined that it had overstated its depreciation expense in prior years by $50,000. Net income for 2010 was $120,000. Instructions Prepare the retained earnings statement for 2010.

Which of the following statements about a cash dividend is incorrect?

Stock dividends and stock splits have the following effects on retained earnings: Stock Splits Stock Dividends

The following information is available for Ritter Corporation: Instructions Compute the return on common stockholders' equity ratio for both years. Briefly comment on your findings.