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Exam 11: Shareholders Equity

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Question 21

Multiple Choice

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Blue Star Films issues 200,000 no-par value shares for $60 per share in 2018.Three years later,it repurchases 30,000 of these shares for $80 per share.Blue Star records the repurchase in which of the following ways?

A) Debit Common Shares for $600,000 million and cash for $1.8 million and credit Contributed capital for $2.4 million.
B) Debit Common Shares for $1.8 million and retained earnings for $600,000 and credit Cash for $2.4 million.
C) Debit Common Shares for $1.8 million and contributed surplus for $600,000 and credit cash for $2.4 million.
D) Debit Cash for $2.4 million,credit Common shares for $1.8 million and credit retained earnings for $600,000.

E) B) and D)
F) B) and C)

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Question 22

Multiple Choice

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On February 16,a company declares a 34' dividend to be paid on April 5 to shareholders of record on March 9.There are 2 million shares of common shares outstanding and 100,000 shares of treasury shares.What accounting entries does the company make on April 5?

A) A debit to Dividends Payable and a credit to Cash for $714,000.
B) A debit to Dividends Declared and a credit to Dividends Payable for $680,000.
C) A debit to Dividends Payable and a credit to Cash for $646,000.
D) A debit to Dividends Declared and a credit to Dividends Payable for $646,000.

E) B) and D)
F) A) and B)

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Question 23

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Dividends Declared is a temporary account that summarizes dividends declared during the year and then is closed to retained earnings at year-end.

In its most basic form,the Earnings per Share ratio is calculated as:

When a company records a stock repurchase,it is tracking a shareholder's sale of shares to another investor.

Earnings per share (EPS)is generally reported in the balance sheet under shareholders' equity.

On February 16,a company declares a 34' dividend to be paid on April 5 to shareholders of record on March 9.There are 2 million shares of common shares outstanding and 100,000 shares of treasury shares.What accounting entries does the company record on $\bold{\text{February 16}}$ ?

Phelps,Inc.,had assets of $67,646 and liabilities of $15,466 at the close of 2018 with 10,718 shares of outstanding common shares.Net income for 2018 was $7,829.At the end of 2019,assets were $79,571 and liabilities were $18,551,and the company had 10,771 shares of outstanding stock.Net income for 2019 was $9,993. a)Calculate EPS for 2019. b)Calculate ROE for 2019.

Typically,all other things equal,a profitable company that pays little or no dividends:

In which of the following way is the presentation of changes in shareholders' equity account treated under IFRS?

Match the vocabulary items to the appropriate blanks in the following sentences. _________________ are the maximum number of shares of stock a company can sell; this is set by the company _________________._________________ are the shares the company has put in circulation; they consist of the _________________ plus the _________________,the latter of which are the result of _________________._________________ are paid when a company distributes a share of profits to shareholders based on the number of shares they own on a ________________ basis._________________ shareholders have seniority in payment over _________________ shareholders. A.treasury shares B.dividends C.pro rata D.stock repurchases E.preferred F.authorized shares of stock G.outstanding shares H.charter I.common J.issued shares of stock

Which of the following are the two financial requirements that the board of directors must consider when declaring a cash dividend? i) the retained earnings account has a positive balance greater than the dividend. Ii) the cash account has a balance greater than the amount of the dividend declared. Iii) the company's earnings have shown growth for the last two quarters. Iv) the shareholders have approved the declaration of the cash dividend.

All else equal,when companies make stock repurchases:

Equity financing never has to be repaid.

A company has outstanding 9 million shares of $2 par value common shares and 1 million shares of $4 par value preferred shares.The preferred shares have $0.32 dividend per share.The company declares $600,000 in total dividends for the year.Which of the following is true if dividends in arrears are $30,000?

All else being equal,a company concerned with incomes taxes would prefer equity financing to debt,given the associated tax benefits.

The EPS ratio is important because it signals the ability of the company to pay future dividends,which investors factor into the stock price.

The combined effect of the declaration and payment of a cash dividend on a company's financial statements is to:

All else equal,when the current price for a company's stock falls and net income falls:

Match the term and the definition.Not all definitions will be used.