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Exam 11: Corporate Reporting and Analysis

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Question 21

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On September 20,Fletcher Corporation issued 25,000 shares of no-par common stock for equipment having a market value of $85,000.Prepare the general journal entry to record this transaction.

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Question 22

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Comfort Mattresses,Inc.sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share.The entry to record this transaction would be:

A) Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value,Common Stock $286,000.
B) Debit Cash for $312,000; credit Common Stock $312,000.
C) Debit Common Stock $26,000; debit Paid-in Capital in Excess of Par Value,Common Stock $286,000; credit Cash $312,000.
D) Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000.
E) Debit Common Stock $26,000; credit Cash $26,000.

F) B) and E)
G) A) and E)

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Question 23

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The price at which a share of stock is bought or sold is known as par value.

Dynasty Corporation had stockholders' equity on January 1 as follows: Common Stock,$5 par value,1,000,000 shares authorized,400,000 shares issued; Paid-in Capital in Excess of Par Value,Common Stock,$800,000; Retained Earnings,$3,600,000.Prepare journal entries to record the following transactions:

West Company declared a $0.50 per share cash dividend.The company has 190,000 shares issued,and 10,000 shares in treasury stock.The journal entry to record the payment of the dividend is:

When no-par stock is not assigned a stated value,the total amount received is recorded in the Common Stock account.

Shareholders in a corporation have the power to bind the corporation to contracts.

Lafferty Corporation reported earnings per share of $9.75,paid a $6.00 cash dividend per share to preferred shareholders,and paid a $0.54 cash dividend per share to common shareholders.There were 10,000 shares of preferred stock outstanding and 600,000 shares of common stock outstanding during the year,and the market price per share of common stock was $41.60.Calculate the company's dividend yield for common stock.

Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock.

Alto Company issued 7% preferred stock with a $100 par value.This means that:

A corporation may be authorized to issue both common and preferred stock.

A company has earnings per share of $9.60.Its dividend per share is $0.50,its market price per share is $110,and its book value per share is $96.Its price-earnings ratio equals:

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding.The journal entry to record the declaration of the cash dividend is:

Prior to May 1,Fortune Company has never had any treasury stock transactions.A company repurchased 100 shares of its common stock on May 1 for $5,000.On July 1,it reissued 50 of these shares at $52 per share.On August 1,it reissued the remaining treasury shares at $49 per share.What is the balance in the Paid-in Capital,Treasury Stock account on August 2?

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

The date the directors vote to declare and pay a dividend is called the:

Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

Changes in retained earnings are commonly reported in the:

A company has $200,000 of 10% noncumulative,nonparticipating,preferred stock outstanding,and $150,000 of common stock outstanding.In the company's first year of operation,no dividends were paid,but during the second year,it paid cash dividends of $25,000.Compute the dividends to be distributed to (1)preferred shares and (2)common shares.

A dividend preference for preferred stock means that: