Question 1

Coy, Inc. initially issued 200,000 shares of $1 par stock for $1,000,000 in 2016. In 2017, the company repurchased 20,000 shares for $200,000. In 2018, 10,000 of the repurchased shares were resold for $160,000. In its balance sheet dated December 31, 2018, Coy, Inc.'s treasury stock account shows a balance of:

Accepted Answer

A)   $0.
B)   $40,000.
C)   $100,000.
D)   $200,000.E) A) and D)
F) B) and C)

Question 2

The shareholders' equity of Red Corporation includes $200,000 of $1 par common stock and $400,000 par of 6% cumulative preferred stock. The board of directors of Red declared cash dividends of $50,000 in 2018 after paying $20,000 cash dividends in 2017 and $40,000 in 2016. What is the amount of dividends common shareholders will receive in 2018?

Accepted Answer

A)   $18,000.
B)   $22,000.
C)   $26,000.
D)   $28,000.E) None of the above
F) A) and D)

Question 3

Beasley Crossing prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) . The company issued shares of the company's Class B stock. Beasley Crossing should report the stock in the company's statement of financial position:

Accepted Answer

A)   among liabilities unless the shares are mandatorily redeemable.
B)   among liabilities if the shares are mandatorily redeemable or redeemable at the option of the shareholder.
C)   as equity unless the shares are mandatorily redeemable.
D)   as equity unless the shares are redeemable at the option of the issuer.E) A) and C)
F) C) and D)

Question 4

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

Accepted Answer

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) A) and C)

Question 5

Preferred stock is called preferred because it usually has two preferences. These preferences relate to:

Accepted Answer

A)   Dividends and voting rights.
B)   Par and dividends
C)   The preemptive right and voting rights.
D)   Assets at liquidation and dividends.E) B) and D)
F) B) and C)

Question 6

Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Accepted Answer

If preferred shares are noncumulative, d...

Question 7

What is the effect of a stock split (not effected in the form of a stock dividend)  on each of the following?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) B) and C)
F) A) and D)

Question 8

A stock split:

Accepted Answer

A)   increases the debt to equity ratio.
B)   decreases the debt to equity ratio.
C)   decreases the size of the firm.
D)   decreases future earnings per share.E) A) and C)
F) None of the above

Question 9

The balance sheet reports the balances of shareholders' equity accounts. What additional information is provided by the statement of shareholders' equity?

Accepted Answer

The statement of shareholders' equity re...

Question 10

When preferred stock carries a redemption privilege, the shareholders may:

Accepted Answer

A)   Purchase new shares as they become available.
B)   Exchange their preferred shares for common shares.
C)   Surrender the preferred shares for a specified amount of cash.
D)   Purchase treasury shares ahead of common shareholders.E) A) and D)
F) A) and C)

Question 11

The December 31, 2018, balance sheet of Springer Company included the following:  Springer completed the following transactions in 2018 relating to treasury stock:  Required:
Assuming Springer uses the cost method, prepare journal entries to record the foregoing transactions on a FIFO basis.

Accepted Answer

(in millio...

Question 12

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Earnings-price ratio

Accepted Answer

A)  Similar to an S corporation, but no limit on number of owners.
B)  Net income as a percentage of average book value.
C)  Paid-in capital and/or retained earnings affected when sold.
D)  Preferred practice is to disclose in the notes to the financial statements.
E)  Used in evaluating stock performance.F) D) and E)
G) C) and D)

Question 13

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

Accepted Answer

A)   Has no effect on assets, liabilities, or total shareholders' equity.
B)   Decreases total shareholders' equity and increases common stock.
C)   Decreases assets and decreases total shareholders' equity.
D)   Does not change retained earnings or paid-in capital.E) A) and B)
F) A) and C)

Question 14

Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?

Accepted Answer

A)   The shareholders must be allowed to convert their shares to common stock.
B)   The unpaid dividends are accrued as a liability.
C)   The unpaid dividends are reported in a note to the financial statements.
D)   The unpaid dividends accrue interest until paid.E) All of the above
F) A) and B)

Question 15

As of December 31, 2018, Warner Corporation reported the following:  During 2019, half of the treasury stock was resold for $240,000; net income was $600,000; cash dividends declared were $1,500,000; and stock dividends declared were $500,000. 
-The 2019 sale of half of the treasury stock would:

Accepted Answer

A)   Reduce income before tax by $60,000.
B)   Reduce retained earnings by $60,000.
C)   Increase total shareholders' equity by $300,000.
D)   Reduce retained earnings by $40,000.E) B) and D)
F) A) and C)

Question 16

Yellow Enterprises reported the following ($ in 000s)  as of December 31, 2018. All accounts have normal balances.  During 2019 ($ in 000s) , net income was $9,000; 25% of the treasury stock was resold for $450; cash dividends declared were $600; cash dividends paid were $500.
- What ($ in 000s)  was shareholders' equity as of December 31, 2019?

Accepted Answer

A)   $38,100.
B)   $37,450.
C)   $38,450.
D)   $38,350.E) A) and D)
F) A) and C)

Question 17

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Cumulative

Accepted Answer

A)  May be increased when net income increases.
B)  A feature of preferred stock.
C)  May be reduced when shares are retired.
D)  Designed to increase the market value of stock.
E)  Reduces the net proceeds from selling shares.F) A) and E)
G) A) and C)

Question 18

Any dividend that is considered to be a liquidating dividend will:

Accepted Answer

A)   Reduce retained earnings.
B)   Reduce paid-in capital.
C)   Increase paid-in capital.
D)   Reduce the common stock account.E) C) and D)
F) All of the above

Question 19

Mandatorily redeemable preferred stock is reported as a liability.

Accepted Answer

A) True 
 B)False

Question 20

Boxer Company owned 20,000 shares of King Company that were purchased in 2016 for $500,000. On May 1, 2018, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was $30 per share on the date of declaration and $32 per share on the date of distribution. By how much is retained earnings reduced by the property dividend?

Accepted Answer

A)   $0.
B)   $150,000.
C)   $160,000.
D)   $300,000.E) A) and B)
F) None of the above

Exam 18: Shareholders Equity

Mandatorily redeemable preferred stock is reported as a liability.

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Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?

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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Cumulative

Correct Answer
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Beasley Crossing prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) . The company issued shares of the company's Class B stock. Beasley Crossing should report the stock in the company's statement of financial position:

Correct Answer
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What is the effect of a stock split (not effected in the form of a stock dividend) on each of the following?

Correct Answer
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The December 31, 2018, balance sheet of Springer Company included the following: Springer completed the following transactions in 2018 relating to treasury stock: Required: Assuming Springer uses the cost method, prepare journal entries to record the foregoing transactions on a FIFO basis.

Correct Answer
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(in millio...
View Answer

When preferred stock carries a redemption privilege, the shareholders may:

Correct Answer
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Preferred stock is called preferred because it usually has two preferences. These preferences relate to:

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

Correct Answer
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Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Correct Answer
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If preferred shares are noncumulative, d...
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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Earnings-price ratio

Correct Answer
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A stock split:

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The balance sheet reports the balances of shareholders' equity accounts. What additional information is provided by the statement of shareholders' equity?

Correct Answer
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The statement of shareholders' equity re...
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Any dividend that is considered to be a liquidating dividend will:

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

Correct Answer
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As of December 31, 2018, Warner Corporation reported the following: During 2019, half of the treasury stock was resold for $240,000; net income was $600,000; cash dividends declared were $1,500,000; and stock dividends declared were $500,000. -The 2019 sale of half of the treasury stock would:

Correct Answer
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Exam 18: Shareholders Equity

Mandatorily redeemable preferred stock is reported as a liability.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Cumulative

Correct AnswerverifiedShow Answer

Beasley Crossing prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) . The company issued shares of the company's Class B stock. Beasley Crossing should report the stock in the company's statement of financial position:

Correct AnswerverifiedShow Answer

What is the effect of a stock split (not effected in the form of a stock dividend) on each of the following?

Correct AnswerverifiedShow Answer

The December 31, 2018, balance sheet of Springer Company included the following: Springer completed the following transactions in 2018 relating to treasury stock: Required: Assuming Springer uses the cost method, prepare journal entries to record the foregoing transactions on a FIFO basis.

Correct Answerverified(in millio...View AnswerShow Answer

When preferred stock carries a redemption privilege, the shareholders may:

Correct AnswerverifiedShow Answer

Preferred stock is called preferred because it usually has two preferences. These preferences relate to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Correct AnswerverifiedIf preferred shares are noncumulative, d...View AnswerShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Earnings-price ratio

Correct AnswerverifiedShow Answer

A stock split:

Correct AnswerverifiedShow Answer

The balance sheet reports the balances of shareholders' equity accounts. What additional information is provided by the statement of shareholders' equity?

Correct AnswerverifiedThe statement of shareholders' equity re...View AnswerShow Answer

Any dividend that is considered to be a liquidating dividend will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As of December 31, 2018, Warner Corporation reported the following: During 2019, half of the treasury stock was resold for $240,000; net income was $600,000; cash dividends declared were $1,500,000; and stock dividends declared were $500,000. -The 2019 sale of half of the treasury stock would:

Correct AnswerverifiedShow Answer

Correct Answer
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(in millio...
View Answer

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If preferred shares are noncumulative, d...
View Answer

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The statement of shareholders' equity re...
View Answer

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Correct Answer
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