Question : 55. On January 1, 2010, Framm Corporation issued 10,000 shares of : 1224815

55. On January 1, 2010, Framm Corporation issued 10,000 shares of its 10%, $20 par value cumulative preferred stock. No dividends were declared by Framm in 2010 or 2011. In 2012, Framm had a profitable year and was in a strong cash position, so it declared a dividend of $200,000. How much of this dividend was paid to Framm’s common stockholders? 
A. $140,000
B. $160,000
C. $180,000
D. $200,000

56. Parnell, Inc. has 5,000 shares of $5 par, 3% cumulative preferred stock outstanding and 25,000 shares of $2 par common stock outstanding. No dividends have been paid for the past two years. If the company wishes to distribute $2 per share to the common stockholders, what is the total amount of dividends that must be paid in the current year? 
A. $52,250
B. $50,750
C. $50,000
D. $2,250

57. Many stockholders choose to invest in preferred stock because: 
A. preferred stock can always be converted into common stock at the stockholder’s option.
B. the preferred dividend distributions are generally increased each year.
C. dividends are distributed to preferred stockholders before common stockholders.
D. preferred stockholders includes the right to participate in management decisions through voting privileges.

58. If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders? 
A. They must forgo dividends for any periods when no dividends are declared.
B. They have the right to receive current-year dividends and all unpaid dividends from prior years.
C. They will receive a fixed dividend each year regardless of the amount of dividends declared.
D. They will have an option to convert their shares to common stock at a specified date.

59. Patch, Inc. plans to distribute $134,000 in dividends. It has outstanding 200,000 shares of 7% $10 par preferred stock (cumulative) and 60,000 shares of $2 par common stock. How much will be distributed per share on preferred and common stock?

  Preferred stock   Common stock 
A. $3.35                     $1.12
B. $0.70                     $2.00
C. $0.67                     $ -0-
D. $1.68                     $1.68

60. Dividends in arrears are required to be reported in: 
A. a liability account.
B. a contra-equity account.
C. the stockholders’ equity section of the balance sheet.
D. the notes to the financial statements.

61. The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for cash at $70 per share. The entry to record the transaction will consist of a debit to Cash for $700,000 and a credit or credits to: 
A. Preferred Stock for $700,000.
B. Preferred Stock for $500,000 and Additional Paid-in Capital for $200,000.
C. Preferred Stock for $500,000 and Retained Earnings for $200,000.
D. Paid-in Capital from Preferred Stock for $700,000.

62. Treasury shares represent the: 
A. number of previously issued shares that have been repurchased by the corporation.
B. number of shares that the corporation has sold.
C. number of shares that are currently held by stockholders.
D. maximum number of shares that can be sold by the corporation.

63. All of the following are reasons that a corporation may purchase treasury stock except: 
A. if it needs the stock for its employee stock bonus program.
B. if it desires to make an investment in its own stock and is reported as an asset.
C. to buy out the ownership of stockholders.
D. to increase the reported amount of earnings per share.

64. Which of the following statements is true regarding a corporation’s purchase of treasury stock? 
A. The cost of treasury stock is a reduction in stockholders’ equity.
B. Dividends must still be paid on treasury stock because it is still issued.
C. Treasury stock is reported as an asset because it is considered an investment in the corporation’s own stock.
D. Treasury stock is no longer considered issued once it is back in the hands of the issuer.