Question 1

The per share amount normally assigned by the board of directors to a large stock dividend is
A)the market value of the stock on the date of declaration.
B)the average price paid by stockholders on outstanding shares.
C)the par or stated value of the stock.
D)zero.

Accepted Answer

The per share amount normally assigned by the board of directors to a large stock dividend is the par or stated value of the stock. This is because a large stock dividend involves distributing additional shares to existing shareholders, which increases the number of outstanding shares without changing the company's overall value. Therefore, the per share amount assigned is simply the par or stated value of the stock, which is typically a nominal amount. Options A, B, and D are incorrect as they do not reflect the actual value of the stock or the number of outstanding shares.

Question 2

Which of the following statements regarding the date of a cash dividend declaration is not accurate?
A)The dividend can be rescinded once it has been declared.
B)The corporation is committed to a legal, binding obligation.
C)The board of directors formally authorizes the cash dividend.
D)A liability account must be increased.

Accepted Answer

Once a cash dividend has been declared, it cannot be rescinded without significant legal consequences. The other statements are accurate. The corporation is committed to a legal, binding obligation once the dividend is declared, the board of directors formally authorizes the dividend, and a liability account must be increased to reflect the obligation to pay the dividend.

Question 3

Which of the following statements is not true about a 2-for-1 split?
A)Par value per share is reduced to half of what it was before the split.
B)Total contributed capital increases.
C)The market price probably will decrease.
D)A stockholder with ten shares before the split owns twenty shares after the split.

Accepted Answer

The answer of Which of the following statements is not...

Question 4

Berman Inc. has 6,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2016, and December 31, 2017. The board of directors declared and paid an $12,000 dividend in 2016. In 2017, $72,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2017?
A)$48,000.
B)$42,000.
C)$54,000.
D)$18,000.

Accepted Answer

The preferred stock is cumulative, which means that any unpaid dividends from previous years must be paid before any dividends can be paid to common stockholders. In 2016, the preferred stockholders received $12,000 in dividends, which is equal to the $3,000 annual dividend ($50 par value x 6% dividend rate x 6,000 shares) for the year. In 2017, the preferred stockholders are entitled to receive $18,000 in dividends ($3,000 for the current year plus $15,000 for the unpaid dividends from 2016). After the preferred stockholders have received their dividends, the remaining $54,000 ($72,000 total dividends - $18,000 preferred dividends) is available for distribution to the common stockholders.

Question 5

A small stock dividend is defined as
A)less than 30% but greater than 25% of the corporation's issued stock.
B)between 50% and 100% of the corporation's issued stock.
C)more than 30% of the corporation's issued stock.
D)less than 20-25% of the corporation's issued stock.

Accepted Answer

A small stock dividend is typically less than 20-25% of the corporation's issued stock. Choices A and C are incorrect because they state percentages that are above or exceed the typical definition of a small stock dividend. Choice B is incorrect because it states a range that is much higher than the definition of a small stock dividend.

Question 6

Brewer Inc. has 5,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. The board of directors declared and paid a $12,000 dividend in 2016. In 2017, $60,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2017?
A)$42,000.
B)$30,000.
C)$18,000.
D)$15,000.

Accepted Answer

The preferred stock is cumulative, which means that any unpaid dividends accumulate and have to be paid before any dividends can be paid to common stockholders. In 2016, $12,000 of dividends were paid, leaving $48,000 ($60,000 - $12,000) of unpaid dividends.

In 2017, the preferred stockholders are entitled to receive the $60,000 of declared dividends before any dividends can be paid to common stockholders. Therefore, the preferred stockholders will receive the $48,000 of accumulated unpaid dividends from 2016 plus $12,000 of current year dividends for a total of $60,000 in dividends for 2017.

The dividends received by preferred stockholders in 2017 are $60,000. However, the question is asking specifically for the dividends received by the preferred stockholders in 2017, so the answer is $18,000 ($60,000 - $42,000 of accumulated unpaid dividends from 2016).

Question 7

Corporations generally issue stock dividends in order to
A)increase the market price per share.
B)exceed stockholders' dividend expectations.
C)increase the marketability of the stock.
D)decrease the amount of capital in the corporation.

Accepted Answer

Stock dividends are often issued to increase the marketability of the stock by increasing the number of shares available, which can make the stock more accessible to a wider range of investors due to a lower price per share. This does not directly aim to increase the market price per share, exceed dividend expectations, or decrease the corporation's capital.

Question 8

The per share amount normally assigned by the board of directors to a small stock dividend is
A)the market value of the stock on the date of declaration.
B)the average price paid by stockholders on outstanding shares.
C)the par or stated value of the stock.
D)zero.

Accepted Answer

The answer of The per share amount normally assigned by...

Question 9

The board of directors must assign a per share value to a stock dividend declared that is
A)greater than the par or stated value.
B)less than the par or stated value.
C)equal to the par or stated value.
D)at least equal to the par or stated value.

Accepted Answer

When a board of directors assigns a per share value to a stock dividend, it must be at least equal to the par or stated value. This ensures that the stock's value is not diluted and maintains the integrity of the existing shares' value.

Question 10

Watson, Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $90,000 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?
A)$30,000.
B)$40,000.
C)$50,000.
D)$0.

Accepted Answer

Preferred stock is entitled to a fixed dividend before any dividends can be paid to common stockholders. The preferred stock has a 5% dividend rate, which means that the preferred stockholders are entitled to receive $5 per share in dividends each year. The preferred stock is cumulative, which means that any unpaid dividends from previous years must be paid before any dividends can be paid to common stockholders.In 2015, no dividends were declared, so the preferred stockholders are entitled to receive $50,000 in dividends ($100 par value x 5% dividend rate x 10,000 shares). In 2016, the board of directors declares and pays a $90,000 dividend. This dividend is first used to pay the preferred stockholders their $50,000 in unpaid dividends from 2015. The remaining $40,000 is then available to be paid to the common stockholders.In 2017, the board of directors again declares and pays a $90,000 dividend. This dividend is first used to pay the preferred stockholders their $50,000 in dividends. The remaining $40,000 is then available to be paid to the common stockholders.Therefore, the common stockholders received $40,000 in dividends in 2017.

Question 11

Which of the following statements about dividends is not accurate?
A)Dividends are generally reported quarterly as a dollar amount per share.
B)Low dividends may mean high stock returns.
C)The board of directors is obligated to declare dividends.
D)Payment of dividends from legal capital is illegal in many states.

Accepted Answer

The board of directors is not obligated to declare dividends. They have the authority to decide whether to declare a dividend or not based on the financial position and future plans of the company. It is common for some companies to not pay dividends if they reinvest earnings back into the business for growth opportunities.

Question 12

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

Accepted Answer

The answer of Indicate the respective effects of the declaration...

Question 13

When stock dividends are distributed,
A)Common Stock Dividends Distributable is decreased.
B)Retained earnings is decreased.
C)Paid-in Capital in Excess of Par Value is debited if it is a small stock dividend.
D)No entry is necessary if it is a large stock dividend.

Accepted Answer

The answer of When stock dividends are distributed,
A)Common Stock Dividends...

Question 14

On the dividend record date
A)a dividend becomes a current obligation.
B)no entry is required.
C)an entry may be required if it is a stock dividend.
D)Dividends Payable is debited.

Accepted Answer

The answer of On the dividend record date
A)a dividend becomes...

Question 15

A stockholder who receives a stock dividend would
A)expect the market price per share to increase.
B)own more shares of stock.
C)expect retained earnings to increase.
D)expect the par value of the stock to change.

Accepted Answer

A stockholder who receives a stock dividend would own more shares of stock. A stock dividend is essentially a distribution of additional shares of stock to existing shareholders, instead of the payment of cash as a dividend. This increases the overall number of shares the stockholder owns, but does not change the market price per share, retained earnings or the par value of the stock.

Question 16

Which of the following is not a significant date with respect to dividends?
A)The declaration date.
B)The incorporation date.
C)The record date.
D)The payment date.

Accepted Answer

The incorporation date is not relevant to dividends. The declaration date is when the company announces the dividend, the record date is the date on which a shareholder must own shares to be eligible to receive the dividend, and the payment date is the date the dividend is actually distributed to shareholders.

Question 17

CAB Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?
A)$50 per share.
B)$5,000 in total.
C)$500 in total.
D)$0.50 per share.

Accepted Answer

The annual dividend on the preferred stock is calculated as 5% of the par value ($100) per share, which equals $5 per share. With 1,000 shares, the total annual dividend is $5,000.

Question 18

Sizemore, Inc. has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2017. If the board of directors declares a $25,000 dividend, the
A)preferred stockholders will receive 1/10th of what the common stockholders will receive.
B)preferred stockholders will receive the entire $25,000.
C)$25,000 will be held as restricted retained earnings and paid out at some future date.
D)preferred stockholders will receive $12,500 and the common stockholders will receive $12,500.

Accepted Answer

The preferred stockholders are entitled to their cumulative dividend of 4% on $100 par value, which amounts to $40,000. Since the declared dividend is only $25,000, the entire amount will go to the preferred stockholders.

Question 19

Ace Inc. has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?
A)$40 per share
B)$40,000 in total
C)$4,000 in total
D)$0.40 per share

Accepted Answer

The annual dividend on the preferred stock is calculated as 4% of the $100 par value per share. Therefore, the dividend per share is $4 (4% of $100), and with 10,000 shares, the total annual dividend is $40,000.

Question 20

Denson, Inc. has 10,000 shares of 5%, $100 par value, non-cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2016. The board of directors declares and pays a $120,000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017?
A)$0.
B)$50,000.
C)$120,000.
D)$70,000.

Accepted Answer

The preferred stockholders are entitled to their dividends before any dividends are paid to the common stockholders. The preferred stock has a fixed 5% dividend rate, which means they are entitled to $5 per share annually. Therefore, the total preferred dividend for 2017 is $50,000 (10,000 shares x $5 per share). The remaining $70,000 ($120,000 - $50,000) will be paid to the common stockholders. Therefore, the amount of dividends received by the common stockholders in 2017 is $70,000.

Quiz 10: Reporting and Analyzing Stockholders Equity

The per share amount normally assigned by the board of directors to a large stock dividend is

Which of the following statements regarding the date of a cash dividend declaration is not accurate?

Which of the following statements is not true about a 2-for-1 split?

A small stock dividend is defined as

Corporations generally issue stock dividends in order to

The per share amount normally assigned by the board of directors to a small stock dividend is

The board of directors must assign a per share value to a stock dividend declared that is

Which of the following statements about dividends is not accurate?

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

When stock dividends are distributed,

On the dividend record date

A stockholder who receives a stock dividend would

Which of the following is not a significant date with respect to dividends?

CAB Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?

Sizemore, Inc. has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2017. If the board of directors declares a $25,000 dividend, the

Ace Inc. has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?