Question 1

Which of the following is not a right or preference associated with preferred stock?

Accepted Answer

Preferred stockholders typically do not have the right to vote in corporate decisions.

Question 2

A corporation purchases 20,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

The answer of A corporation purchases 20,000 shares of its...

Question 3

Treasury shares plus outstanding shares equal

Accepted Answer

Treasury shares are shares of a company's own stock that have been bought back and are held by the company. Outstanding shares are shares that are currently owned by investors. When you add the number of treasury shares to the number of outstanding shares, you get the total number of issued shares. Therefore, Treasury shares plus outstanding shares equals issued stock.

Question 4

Logan Corporation issues 40,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reported

Accepted Answer

Since the preferred stock is issued for cash at a price higher than the par value, there will be an increase in both capital stock and additional paid-in capital. Therefore, the effects of the transaction will be reported under both the capital stock and additional paid-in capital sections.

Question 5

Dividends in arrears are dividends on

Accepted Answer

The answer of Dividends in arrears are dividends on
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Question 6

A company would not acquire treasury stock

Accepted Answer

Companies would not acquire treasury stock as an asset investment. Treasury stock represents shares of a company that has been repurchased by the company itself, and it is not an asset in the traditional sense. It is not used to generate income or increase trading of the company's stock. Instead, it is held temporarily and may be used for a variety of purposes, including to reissue to officers or to have additional shares available to use in acquisitions of other companies.

Question 7

Dividends in arrears on cumulative preferred stock

Accepted Answer

Dividends in arrears on cumulative preferred stock are not recognized as liabilities until they are declared. However, they should be disclosed in the notes to the financial statements to inform users about the potential obligation and its impact on future cash flows.

Question 8

Dividends in arrears on cumulative preferred stock

Accepted Answer

Dividends in arrears on cumulative preferred stock must be paid before common stockholders can receive a dividend. If a company does not pay the full amount due in dividends on its cumulative preferred stock, the unpaid amount is called dividends in arrears. These dividends accumulate and must be paid before any dividends can be paid to common stockholders. Therefore, they are recorded as a current liability until they are paid. Dividends in arrears enable the preferred stockholders to receive their entitled share in the corporate earnings.

Question 9

Treasury stock should be reported in the financial statements of a corporation as a(n)

Accepted Answer

Treasury stock is the stock that a company buys back from its shareholders. This stock should be reported as a deduction from total paid-in capital and retained earnings in the financial statements of the corporation. This is because when a company buys back its own stock, it reduces the amount of capital that it has raised from investors, and it reduces the amount of total earnings that shareholders are entitled to. As a result, it is deducted from both paid-in capital and retained earnings in the financial statements of the company.

Question 10

The acquisition of treasury stock by a corporation

Accepted Answer

The acquisition of treasury stock by a corporation decreases its total assets and total stockholders' equity. This is because treasury stock represents shares of a company's own stock that have been reacquired by the company and are no longer outstanding, which reduces the total number of shares and the amount of stockholders' equity.

Question 11

Outstanding stock of the Hall Corporation included 40,000 shares of $5 par common stock and 20,000 shares of 6%, $10 par non-cumulative preferred stock. In 2013, Hall declared and paid dividends of $8,000. In 2014, Hall declared and paid dividends of $24,000. How much of the 2014 dividend was distributed to preferred shareholders?

Accepted Answer

The preferred shareholders receive 6% of the $10 par value, which is $0.60 per share. With 20,000 shares, they receive $12,000 in dividends for 2014.

Question 12

YZ Company has $20,000 of dividends in arrears. Based on this information, which of the following statements is false?

Accepted Answer

The investment community does not generally look favorably on companies with dividends in arrears, as it indicates that the company has not been able to meet its obligations to shareholders. The other statements are true: dividends in arrears are not considered liabilities (since they have not been declared), an obligation for dividends in arrears exists only after the board of directors declares payment, and the amount of dividends in arrears should be disclosed in the notes to the financial statements.

Question 13

The number of shares of issued stock equals

Accepted Answer

The answer of The number of shares of issued stock...

Question 14

Treasury Stock is a(n)

Accepted Answer

Treasury stock is a contra stockholders' equity account because it represents the company's own stock that has been repurchased and no longer outstanding. Therefore, it reduces the total stockholders' equity amount.

Question 15

Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 5,000 shares of preferred stock for land with an asking price of $625,000 and a market value of $550,000, which of the following would be the best journal entry for Retro to record?

Accepted Answer

The answer of Retro Company is authorized to issue 10,000...

Question 16

All of the following statements about preferred stock are true except

Accepted Answer

There can be multiple classes of preferred stock with different characteristics such as different dividend rates or redemption terms.

Question 17

Nice Corporation issues 30,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $3,300,000 and a credit or credits to

Accepted Answer

The entry will credit Preferred Stock for the par value amount ($100 x 30,000 = $3,000,000) and credit Paid-in Capital in Excess of Par Value-Preferred Stock for the excess amount ($10 x 30,000 = $300,000).

Question 18

A corporation purchases 15,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

When a corporation purchases its own stock, it is recorded as treasury stock at cost, which reduces total stockholders' equity by the cost of the purchase. The cost is 15,000 shares x $35 per share = $525,000.

Question 19

Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will consist of a debit to Cash for $3,000,000 and a credit or credits to

Accepted Answer

The preferred stock is credited for its par value ($50 x 50,000 = $2,500,000), and the excess over par value ($10 x 50,000 = $500,000) is credited to Paid-in Capital in Excess of Par Value-Preferred Stock.

Question 20

Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2013, West declared and paid dividends of $4,000. In 2014, West declared and paid dividends of $12,000. How much of the 2014 dividend was distributed to preferred shareholders?

Accepted Answer

Preferred shareholders receive 6% of $10 par value per share, which is $0.60 per share. With 10,000 shares, they receive $6,000 in dividends. Since the preferred stock is non-cumulative, they only receive the current year's dividend, not any missed from previous years.

Quiz 11: Reporting and Analyzing Stockholders Equity

Which of the following is not a right or preference associated with preferred stock?

A corporation purchases 20,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?

Treasury shares plus outstanding shares equal

Logan Corporation issues 40,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reported

Dividends in arrears are dividends on

A company would not acquire treasury stock

Dividends in arrears on cumulative preferred stock

Dividends in arrears on cumulative preferred stock

Treasury stock should be reported in the financial statements of a corporation as a(n)

The acquisition of treasury stock by a corporation

YZ Company has $20,000 of dividends in arrears. Based on this information, which of the following statements is false?

The number of shares of issued stock equals

Treasury Stock is a(n)

All of the following statements about preferred stock are true except

Nice Corporation issues 30,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $3,300,000 and a credit or credits to

A corporation purchases 15,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will consist of a debit to Cash for $3,000,000 and a credit or credits to