Question : 71. On September 1, a corporation had 50,000 shares of $5 : 1256409

 

 

71. On September 1, a corporation had 50,000 shares of $5 par value common stock and $1,000,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:  

A.

Retained Earnings

750,000

 

Common Stock Split Distributable

 

750,000

B.

Retained Earnings

750,000

 

Common Stock

 

750,000

C.

Retained Earnings

250,000

 

Common Stock

 

250,000

D.

Retained Earnings

250,000

 

Stock split payable

 

250,000

E. No entry is made for this transaction.

 

 

72. A corporation declared and issued a 15% stock dividend on November 1. The following up-to-date information was available immediately prior to the dividend: 

Retained earnings

$750,000

Shares issued and outstanding

60,000

Market value per share

$15

Par value per share

$5

The amount that total stockholders’ equity will increase (decrease) as a result of recording this stock dividend is: A. $45,000B. $135,000C. $(90,000)D. $(135,000)E. $0

 

 

73. A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:  

A.

Retained Earnings

135,000

 

Common Stock Dividend Distributable

 

135,000

B.

Retained Earnings

135,000

 

Cash

 

135,000

C.

Retained Earnings

135,000

 

Common Stock Dividend Distributable

 

100,000

Paid-In Capital in Excess of Par Value,

Common Stock

 

 

35,000

D.

Retained Earnings

100,000

 

Common Stock Dividend Distributable

 

100,000

E. No entry is made until the stock is issued

 

 

74. A corporation had 20,000 shares of $10 par value common stock outstanding on January 10. Later that day the board of directors declared a 30% stock dividend when the market value of each share was $40. The entry to record this dividend is:  

A.

Retained Earnings

60,000

 

Common Stock Dividend Distributable

 

60,000

B.

Retained Earnings

60,000

 

Cash

 

60,000

C.

Retained Earnings

240,000

 

Common Stock Dividend Distributable

 

60,000

Paid-In Capital in Excess of Par Value,

Common Stock

 

 

180,000

D.

Retained Earnings

240,000

 

Common Stock Dividend Distributable

 

240,000

E. No entry is made until the stock is issued

 

 

 

75. A corporation had 40,000 shares of $10 par value common stock outstanding on August 1. Later that day, the board of directors declared a 9% stock dividend when the market value of each share was $72. The entry to record this dividend is:  

A.

Common Stock Dividend Distributable

259,200

 

Retained Earnings

 

259,200

B.

Retained Earnings

259,200

 

Common Stock Dividend Distributable

 

259,200

C.

Retained Earnings

259,200

 

Common Stock Dividend Distributable

 

36,000

Paid-In Capital in Excess of Par Value,

Common Stock

 

 

223,200

D.

Retained Earnings

36,000

 

Common Stock Dividend Distributable

 

36,000

E. No entry is made until the stock is issued

 

 

76. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is called: A. Noncumulative preferred stockB. Participating preferred stockC. Callable preferred stockD. Cumulative preferred stockE. Convertible preferred stock

 

 

77. Preferred stock that the issuing corporation at its option may retire by paying a specified amount to the preferred stockholders plus any dividends in arrears is called: A. Convertible preferred stockB. Callable preferred stockC. Premium stockD. Cumulative preferred stockE. Participating preferred stock

 

 

78. Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called: A. Financial leverageB. Discount on stockC. Premium on stockD. Preemptive rightE. Capital gain

 

 

79. Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called: A. Cumulative preferred stockB. Callable preferred stockC. Participating preferred stockD. Convertible preferred stockE. Preferential preferred stock

 

 

80. Xtreme Sports has $100,000 par, 8% noncumulative, nonparticipating, preferred stock outstanding. Xtreme Sports also has $500,000 par common stock outstanding. In the company’s first year of operation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of $30,000. This dividend should be distributed as follows: A. $8,000 preferred; $22,000 common.B. $16,000 preferred; $14,000 common.C. $7,500 preferred; $22,500 common.D. $15,000 preferred; $15,000 common.E. $0 preferred; $30,000 common.

 

 

 

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