Question : Learning Objective 8-5 1) During 2011, Stockton, Inc. reported net income : 1253377

Learning Objective 8-5

1) During 2011, Stockton, Inc. reported net income of $4,000, declared and paid a cash dividend of $2,000, and issued common stock for $20,000. At December 31, 2011, Stockton reported total shareholders’ equity of $58,000. What was total shareholders’ equity at the beginning of the year, on January 1, 2011?

A) $36,000

B) $40,000

C) $58,000

D) $60,000

2) Retained earnings is the ________.

A) past profits and dividends maintained in treasury

B) beginning retained earnings plus net income minus dividends

C) past distributed profits

D) minimum legal capital that must be retained by the company

3) Equitable, Inc. issued no new common stock and had 100,000 shares issued and outstanding during 2011. The following information is taken from Equitable’s accounting records:

Net income for the year ended, December 31, 2011

$370,000

Retained earnings, December 31, 2010

$280,000

Retained earnings, December 31, 2011

$360,000

Total shareholders’ equity at December 31, 2011

$725,000

What was the dividend declared during the year ended December 31, 2011?

A) $290,000

B) $360,000

C) $725,000

D) $365,000

4) Which financial statement is the best place to look to determine the amount of dividends DECLARED?

A) Income statement

B) Statement of changes in shareholders’ equity

C) Balance sheet

D) Statement of cash flows

5) Retained earnings are ________.

A) increased by net income since the day the company began

B) increased by net losses since the day the company began

C) increased by dividends declared to shareholders since the company began

D) increased when additional shares of stock are sold

6) Retained earnings is also called ________ capital.

A) additional paid-in

B) earned

C) contributed

D) paid-in

7) Team Shirts has a balance in retained earnings of $15,000. This amount is ________.

A) matched by the amount of cash in the Cash account

B) the amount of cash available for dividends

C) the amount of net income kept by Team Shirts

D) the cash amount received from the sale of stock

8) J & D Company had beginning retained earnings of $65,000. During the year the company had net income of $150,000, and declared and paid dividends of $9,500. The ending balance in retained earnings is ________.

A) $215,000

B) $55,500

C) $205,500

D) $224,500

9) B & B Company had beginning retained earnings of $45,000. During the year the company had net income of $139,000, and declared and paid dividends of $9,500. B & B Company sold 2,500 shares of stock for $30 per share. What is the net effect of these transactions on the following accounts?

A) increase Retained earnings; increase Common stock

B) increase Retained earnings; decrease Common stock

C) no effect on Retained earnings; increase Common stock

D) increase Retained earnings; no effect on Common stock

10) DM Company had beginning retained earnings of $60,000. During the year the company had net income of $275,000 and declared and paid dividends of $7,500. The ending balance in retained earnings is ________.

A) $282,500

B) $327,500

C) $335,000

D) $342,500