Accounting Stock Transactions Exercises
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Questions and Answers

What was the return on stockholders' equity ratio for Manning Company in 2016?

  • 9%
  • 12% (correct)
  • 15%
  • 10%

Why would net income increase while the return on common stockholders' equity decreased for Hampton Corporation?

  • Increase in total revenue
  • Decrease in stockholders' equity (correct)
  • Reduction in total assets
  • Increase in liabilities

What is the debt to total assets ratio for Manning Company in 2017 post-debt issuance?

  • 50% (correct)
  • 30%
  • 40%
  • 20%

What effect would the repurchase of shares have on Manning Company's return on equity?

<p>Increase due to reduced equity (B)</p> Signup and view all the answers

How would you describe Manning Company's solvency position based on the changes in its liabilities and equity?

<p>Worsened as liabilities increased beyond equity (A)</p> Signup and view all the answers

What will be the new total stockholders’ equity after Kalen Corporation distributes a 15% stock dividend?

<p>$1,048,000 (D)</p> Signup and view all the answers

How does the payout ratio for Epstein Corporation change from 2016 to 2017?

<p>It decreased. (A)</p> Signup and view all the answers

What is the calculation for the return on common stockholders’ equity for Epstein Corporation in 2017?

<p>20% (C)</p> Signup and view all the answers

What was the amount received in cash when Miles Co. issued 60,000 shares of common stock?

<p>$250,000 (A)</p> Signup and view all the answers

What is the preferred stock's par value for the shares issued by Miles Co.?

<p>$100 (D)</p> Signup and view all the answers

What is the total amount paid by Browning Corporation in cash dividends during the year?

<p>$120,000 (C)</p> Signup and view all the answers

How much treasury stock did Miles Co. purchase?

<p>$10,000 (B)</p> Signup and view all the answers

What is the significance of the $10 par value in Kalen Corporation's stock equity?

<p>It represents the legal capital per share. (A)</p> Signup and view all the answers

What was the cash dividend declared per share by Giraldi Corporation on June 30, 2017?

<p>$1.50 (A)</p> Signup and view all the answers

How many shares were outstanding after the 10% stock dividend declared on June 30, 2017?

<p>66,000 (A)</p> Signup and view all the answers

What is the fair market value of Giraldi Corporation's stock on June 30, 2017?

<p>$16 (C)</p> Signup and view all the answers

What was the par value of the stock after the 2 for 1 stock split declared on December 1, 2017?

<p>$5 (C)</p> Signup and view all the answers

What amount would appear under common stock in the stockholders’ equity section after the adjustments due to stock dividend and stock split?

<p>$600,000 (C)</p> Signup and view all the answers

What was the retained earnings amount for Giraldi Corporation at December 31, 2016?

<p>$150,000 (B)</p> Signup and view all the answers

What were the total stockholders' equity for Giraldi Corporation at December 31, 2016?

<p>$912,500 (B)</p> Signup and view all the answers

How many shares did Giraldi Corporation issue on December 1, 2017?

<p>4,000 (D)</p> Signup and view all the answers

What was the issuance price per share for the common stock of Black Corporation on July 1, 2017?

<p>$15 (C)</p> Signup and view all the answers

How many shares of preferred stock were issued and outstanding by Fleming Corporation at the end of 2016?

<p>10,000 shares (B)</p> Signup and view all the answers

What was the total par value of the common stock outstanding for Black Corporation on January 1, 2017?

<p>$2,000,000 (B)</p> Signup and view all the answers

What is the market value of Black Corporation stock on December 31, 2017?

<p>$16 per share (C)</p> Signup and view all the answers

What is the total amount of common stock issued by Bradley, Inc.?

<p>$500,000 (B)</p> Signup and view all the answers

When was the dividend on common stock of Fleming Corporation declared?

<p>November 1, 2017 (B)</p> Signup and view all the answers

How much is the paid-in capital in excess of par value for common stock at Bradley, Inc.?

<p>$950,000 (A)</p> Signup and view all the answers

What amount of dividends was declared for preferred stock on September 15, 2017, by Fleming Corporation?

<p>$0 (B)</p> Signup and view all the answers

What will be the dividends payable on December 15, 2017 if a stock dividend of 10% was declared?

<p>$1,200,000 (D)</p> Signup and view all the answers

What is the total stockholders' equity for Bradley, Inc. at December 31, 2017?

<p>$2,730,000 (C)</p> Signup and view all the answers

What was the par value of the common stock of Fleming Corporation?

<p>$10 (A)</p> Signup and view all the answers

What amount is restricted for plant expansion from retained earnings at Bradley, Inc.?

<p>$200,000 (D)</p> Signup and view all the answers

What is the stated value of common stock for Marvel Corporation?

<p>$5 per share (A)</p> Signup and view all the answers

What is the total amount of treasury stock for Marvel Corporation?

<p>$98,000 (B)</p> Signup and view all the answers

What is the total value of retained earnings for Marvel Corporation at December 31, 2017?

<p>$1,634,000 (B)</p> Signup and view all the answers

How much is the paid-in capital in excess of stated value for common stock at Marvel Corporation?

<p>$1,050,000 (A)</p> Signup and view all the answers

What is the total amount in cash on the balance sheet as of December 31, 2014?

<p>$24,600 (B)</p> Signup and view all the answers

What amount did Hampton collect from customers on account during 2015?

<p>$276,000 (D)</p> Signup and view all the answers

How much preferred stock was issued by Hampton on January 1, 2015?

<p>$49,200 (D)</p> Signup and view all the answers

What is the balance of accounts payable as of December 31, 2015?

<p>$27,400 (D)</p> Signup and view all the answers

What amount was declared as dividends for common stock?

<p>$1.20 per share (A)</p> Signup and view all the answers

What is the balance of the Allowance for Doubtful Accounts at year-end 2015?

<p>$3,500 (A)</p> Signup and view all the answers

What is the total revenue earned from services performed on account in 2015?

<p>$320,000 (D)</p> Signup and view all the answers

What was the total operating expense paid by Hampton during 2015?

<p>$188,200 (D)</p> Signup and view all the answers

Flashcards

Stockholders' Equity

The portion of a company's assets that belongs to its shareholders.

Common Stock

Shares of ownership in a company that give the holder voting rights and a share in profits.

Preferred Stock

Shares of ownership that have preference over common stock in dividend payments and asset distribution.

Paid-in Capital in Excess of Par Value

The amount of money received from investors for shares that exceeds the par value.

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Retained Earnings

The accumulated profits of a company that have not been distributed as dividends.

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Treasury Stock

Shares of a company's own stock that have been repurchased by the company.

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Common Stock Dividends Distributable

Dividends declared by the company that have not yet been paid to shareholders.

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Restricted Retained Earnings

Portion of retained earnings that is set aside for a specific purpose, such as plant expansion.

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Return on Stockholder's Equity

Measures the profitability of a company relative to its equity financing. It is calculated by dividing net income by average stockholder's equity.

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Debt to Total Assets Ratio

Indicates the proportion of a company's assets that are financed by debt. It is calculated by dividing total liabilities by total assets.

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Earnings per Share (EPS)

Represents the amount of net income earned per share of outstanding common stock. It is calculated by dividing net income by the number of outstanding shares.

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Return on Assets (ROA)

Measures how profitable a company is relative to its total assets. It is calculated by dividing net income by average total assets.

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How can Net Income Increase while Return on Equity Decreases?

This can occur when there is a significant increase in equity financing, even while net income grows. The increased equity dilutes the impact of the net income increase on the return on equity ratio.

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Stock Dividend

A dividend paid to shareholders in the form of additional shares of the company's stock instead of cash. It increases the number of shares outstanding but does not change the total value of the company's equity.

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Par Value

The stated value of a share of stock, typically set at a very low amount. It's the minimum amount legally required for a company to issue a share; it doesn't necessarily reflect the market price.

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Paid-In Capital

The amount of money investors contribute to a company above the par value of its shares. It represents additional funds received beyond the basic value of the stock.

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Payout Ratio

The percentage of earnings that a company pays out to its shareholders as dividends. It shows how much of the profit is being distributed and how much is being retained.

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Return on Common Stockholders' Equity

A profitability ratio that measures how effectively a company uses its shareholders' investments to generate profits. It shows the return on the money invested in the company by common stockholders.

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Cash Dividend

A direct payment to shareholders from the company's earnings, distributing a portion of the company's profits to its owners.

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Stock Split

A corporate action that increases the number of outstanding shares of a company's stock while reducing the par value per share proportionally, to make the stock more affordable for investors.

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Fair Market Value

The price at which an asset (e.g., stock) can be bought or sold in an open market, reflecting current market conditions.

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Declaration Date

The date when the corporate board of directors formally announces a dividend.

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Accounts Payable

Money owed by a company to its suppliers for goods or services received but not yet paid for.

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Accounts Receivable

Money owed to a company by its customers for goods or services delivered but not yet paid for.

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Depreciation

The gradual decrease in the value of an asset over time due to wear and tear or obsolescence.

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Allowance for Doubtful Accounts

An account used to estimate the amount of accounts receivable that may not be collected due to customer defaults.

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Dividend

A distribution of a company's profits to its shareholders.

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Stated Value

A value assigned to no-par stock for accounting purposes, representing a minimum amount of capital contributed for each share. It is not a par value, and the stock may be issued at a price higher than the stated value.

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No-Par Stock

Common stock that doesn't have a par value assigned to it. This means the company can issue the shares at any price they decide, without a predetermined value.

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Issued and Outstanding

Describes shares of stock that have been sold to investors and are currently held by them. These are the active shares that impact the company's ownership structure.

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What does 'cumulative' preferred stock mean?

Preferred stockholders have the right to receive any unpaid dividends from previous periods before common stockholders can receive any dividends. They are 'cumulative' in that they 'accumulate' unpaid dividends.

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What is a stock dividend?

When a corporation distributes additional shares of its own stock to existing stockholders, instead of cash dividends.

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Stock Dividend Declaration

The formal announcement by a company's board of directors that they will distribute a stock dividend to shareholders. This usually includes the dividend percentage.

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What is the impact of issuing stock at a price above par?

When a company issues stock above its par value, the excess amount received is recorded as 'Paid-in capital in excess of par'. This represents the additional funds contributed by investors.

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Study Notes

Brief Exercises

  • Patrick Corporation is authorized to issue 1,000,000 shares of $1 par value common stock.
  • In 2016, the company had various stock transactions.
  • January 15: Issued 600,000 shares at $7 per share.
  • September 5: Purchased 20,000 treasury shares at $8 per share.
  • December 6: Declared a $0.50 per share dividend payable January 3, 2017.

Be. 216

  • An inexperienced accountant made entries for Teahan Corporation.
  • July 1: Cash 170,000; Common Stock 170,000 (Issued 20,000 shares of no-par common stock, stated value $6 per share)
  • September 1: Common Stock 36,000; Retained Earnings 24,000; Cash 60,000 (Purchased 4,000 shares issued on July 1 for the treasury at $15 per share)

Be. 218

  • Samson Company had transactions:
    • Issued 4,000 shares of $100 par preferred stock at $107 per share.
    • Issued 8,000 shares of common stock with $10 par value for $110,000.
    • Purchased 500 shares of treasury common stock for $12,000.

Be. 221

  • Lindy Corporation has 1,000,000 authorized shares of $20 par value common stock.
  • As of June 30, 2017, 600,000 shares were issued and outstanding.
  • On June 30, 2017, a $0.30 per share cash dividend was declared, payable on August 1, 2017.

Be. 222

  • Kalen Corporation's stockholders' equity on November 1, 2017:
    • Common stock, $10 par value: $600,000
    • Paid-in capital in excess of par value: $180,000
    • Retained earnings: $200,000
    • Total stockholders' equity: $980,000
  • On November 1, 2017, a 15% stock dividend was declared. Market value was $14 per share.

Be. 224

  • Epstein Corporation's data for 2017 and 2016:
    • Average common stockholders' equity: $1,500,000 and $1,000,000 for 2017 and 2016 respectively
    • Average total stockholders' equity: $2,000,000 each year
    • Common dividends declared and paid: $72,000 and $50,000
    • Preferred dividends declared and paid: $30,000 and $30,000
    • Net income: $240,000 and $200,000

Ex. 227

  • Miles Co. transactions:
    • June 12: Issued 60,000 shares of $3 stated value common stock for $250,000 cash.
    • July 11: Issued 2,000 shares of $100 par value preferred stock for $106 per share.
    • November 28: Purchased 2,000 shares of treasury stock for $10,000.

Ex. 228

  • Browning Corporation transactions:
    • January 1, 2017: 75,000 shares of $1 par value common stock issued and outstanding.
    • March 1: Issued 60,000 shares of common stock for $675,000.
    • June 1: Declared a $2.00 per share cash dividend (June 15).
    • June 30: Paid the $2.00 cash dividend.
    • December 1: Purchased 5,000 shares of common stock in treasury for $18 per share.
    • December 15: Declared a $2.50 cash dividend.
    • December 31: Paid the $2.50 cash dividend
    • 2017 net income amounted to $951,000.

Ex. 230

  • Patrick Corporation's stockholders' equity at December 31:
    • Preferred stock, 6,000 shares issued (cumulative): $300,000
    • Common stock, 600,000 shares issued: $3,000,000
    • Retained earnings: $1,358,000; Treasury Stock (6,000 shares): ($32,000)
    • Total stockholders' equity: $4,626,000

... (and so on for the remaining exercises)

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Chapter 11 Brief Exercises PDF

Description

Test your knowledge of stock transactions and accounting entries with these brief exercises. Learn how to manage common stock issuance, treasury stock purchases, and dividend declarations for various companies.

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