Question 1

On which of the following dates should the dividends payable account be recorded in the company records for a stock dividend?

Accepted Answer

A stock dividend does not create a liability as it involves issuing additional shares rather than paying cash, so no dividends payable account is recorded.

Question 2

Dunbar Inc. has 10,000 $2, non-cumulative preferred shares and 150,000 common shares issued at December 31, 2012. What is the annual total dividend on the preferred shares?

Accepted Answer

The annual dividend on preferred shares is calculated by multiplying the number of preferred shares by the dividend per share. Therefore, 10,000 shares x $2 per share = $20,000.

Question 3

All of the following are normally found in a corporation's shareholders' equity section except

Accepted Answer

Dividends in arrears are not included in shareholders' equity section as they represent a liability to the company and not an equity. Common shares, retained earnings, and share capital are all commonly found in a corporation's shareholders' equity section.

Question 4

Slow, Inc., reported the following asset and liability balances at the ends of 20A and 20B:  During 20B, cash dividends of $5,000 were declared and paid. Additional shares were issued for $15,000. What was the profit (or loss) for 20B?

Accepted Answer

The answer of Slow, Inc., reported the following asset and...

Question 5

Assume the following shares outstanding: (1) Preferred shares, $3, cumulative, 1,000 shares with dividends in arrears 3 years, for 20A, 20B, and 20C.
(2) Common shares, 2,000 shares.
Total dividends declared in 20D were $30,000. What is the total amount of dividends to which common shareholders are entitled?

Accepted Answer

The answer of Assume the following shares outstanding: (1) Preferred...

Question 6

Which of the following accounts would appear in the general ledger of a partnership?

Accepted Answer

Drawings accounts are used to track the withdrawals made by each partner from the partnership's equity. Therefore, this would be the only account that would appear in the general ledger of a partnership. Alternatively, all of the other accounts listed (Dividends paid, Retained earnings, and Common share) would be more commonly found on the general ledger of a corporation.

Question 7

On December 15, 20B, the board of directors of Home Corporation declared a cash dividend, payable on January 8, 20C, of $2 per share on the 100,000 common shares outstanding. The accounting period ends December 31. Because of this action, on December 15, 20B, Home Corporation should do which of the following?

Accepted Answer

On December 15, 20B, when the dividend is declared, Home Corporation should decrease retained earnings by $200,000 and increase liabilities (dividends payable) by $200,000. This reflects the obligation to pay the dividend in the future.

Question 8

A shareholder who receives a stock dividend would

Accepted Answer

A stock dividend involves the distribution of additional shares of stock to existing shareholders, rather than a cash payment. Thus, the shareholder who receives a stock dividend would own more shares of the company. The market price per share may or may not increase, depending on factors such as the company's financial performance and investors' reactions to the stock dividend. Retained earnings may increase if the company chooses to pay the dividend out of its earnings rather than issuing new shares. The legal capital of the shares would not change as a result of a stock dividend.

Question 9

The statement of financial position of Warner Company showed the following data about its common shares: authorized shares, 100,000; outstanding shares, 55,000; and issued shares 60,000. What was the number of treasury shares?

Accepted Answer

The number of treasury shares is the difference between the issued shares and the outstanding shares. Therefore, 60,000 issued shares minus 55,000 outstanding shares equals 5,000 treasury shares.

Question 10

Igor Corp declared a two-for-one stock split. Tina Sother owned 500 shares of Igor that were trading for $20 each before the split. Which of the following is true?

Accepted Answer

A two-for-one stock split means each share will be split into two, effectively doubling the number of shares outstanding. In this case, Tina Sother's 500 shares will become 1000 shares, but the market price per share will be cut in half. Therefore, the total market value of Tina's shares will remain the same, but the market price per share will drop by 50%.

Question 11

Slick Willie Inc. had the following shares outstanding during 20C: (1) Preferred shares, $3, cumulative, 1,000 shares with dividends in arrears for 20A and 20B.
(2) Common shares, 2,000 shares.
The total dividends declared for the current year were $21,000. What is the total amount o dividends to which the preferred shareholders are entitled?

Accepted Answer

The preferred shares are cumulative, meaning that any dividends not paid in a year accumulate and must be paid before any dividends can be paid to common shareholders. In this case, there are two years of dividends in arrears, so the preferred shareholders are entitled to $6 per share ($3 per share per year in arrears). There are 1,000 preferred shares outstanding, so the total amount of dividends to which the preferred shareholders are entitled is $9,000 (1,000 shares x $6 per share).

Question 12

In 2014, P Co declared dividends totalling $.52 per common share when earnings per share were $1.31 and its market price was 40 7/16. In 2013, its dividends totalled $.46 per share, its earnings per share were $1.36 and its market price was 34 11/16. What was the computed dividend yield ratio for 2014 and 2013 respectively? (Rounded to nearest 1 decimal)

Accepted Answer

The answer of In 2014, P Co declared dividends totalling...

Question 13

The conversion feature on convertible preferred shares enables the shareholder to convert them to which of the following?

Accepted Answer

The conversion feature on convertible preferred shares enables the shareholder to convert them to common shares of the company at a predetermined conversion rate. This allows the investor to participate in potential future appreciation of the company's stock price.

Question 14

Dividends in arrears on cumulative preferred shares

Accepted Answer

Dividends in arrears on cumulative preferred shares must be paid before any dividends can be paid to common shareholders.

Question 15

With respect to a corporation, select the statement that is false:

Accepted Answer

A corporation can both sue others and be sued. It is a legal entity that has the ability to enter into contracts and engage in legal actions like any individual person, but with limited liability for its owners.

Question 16

At the end of 20E, the total assets of Dole Corporation were $90,000 and total liabilities were $50,000. The company has been in business five years and has earned an average profit of $4,000 per year during the five years. Total cash dividends of $8,000 were declared and paid. What was the total amount received for the shares issued by the company?

Accepted Answer

The answer of At the end of 20E, the total...

Question 17

Spot Corporation declared a cash dividend on December 30, 20A, payable on January 10, 20B. A journal entry for the dividend was not made in December 20A. What were the effects on the 20A financial statements?

Accepted Answer

Since the declaration of dividend took place before the end of the year and a journal entry was not made in the same period, the retained earnings balance will be overstated in the 20A financial statements. As the dividend is payable on January 10, 20B, a liability should have been recorded in the 20A financial statements, which was not done, leading to an understatement of liabilities. Therefore, the correct option is D.

Question 18

In 2014, W Co had a dividend yield ratio of 0.3% and J.C. Co. reported a yield of 6.9%. What is the most likely reason for W Co's relatively low dividend yield in comparison to J.C. Co's ratio?

Accepted Answer

The fact that W Co has a low dividend yield ratio suggests that the company is likely choosing to reinvest its earnings back into the business rather than paying out a dividend. Option B suggests that W Co is not generating sufficient operating profit to support declaring a dividend, but this cannot be determined from the given information. Option A and C are also not supported by the information given. Therefore, the best answer is D, as it offers a plausible explanation for why W Co's dividend yield ratio is lower than J.C. Co's.

Question 19

Which of the following is false about the dividend yield ratio?

Accepted Answer

The formula for the dividend yield ratio is Dividends per share/Market price per share, not Market price per share/Dividends per share.

Question 20

The declaration and payment of a cash dividend does which of the following?

Accepted Answer

The declaration and payment of a cash dividend reduces both assets (cash) and retained earnings by the amount of the dividend.

Quiz 12: Statement of Cash Flows