Learning Objective 8-2
1) A difference between preferred stock and common stock is preferred shareholders ________.
A) have voting rights, while common shareholders do not
B) have the right to share in any assets left if the company goes out of business after both the creditors and common shareholders receive their share
C) have the right to buy new shares in order to maintain their percentage ownership before the company can issue new shares to the general public
D) must receive their dividends before any of the common shareholders are paid
2) Team Shirts reported total shareholders’ equity of $80,000 on its October 31 balance sheet. During November, the business earned $270,000, and declared and paid a cash dividend of $20,000. What was total shareholders’ equity on November 30?
A) $80,000
B) $350,000
C) $250,000
D) $330,000
3) Distributions of a corporation’s earnings to its shareholders are called ________.
A) dividends
B) paid-in capital
C) retained earnings
D) distribution expense
4) The declaration date is the date ________.
A) on which the board of directors of a corporation announces that a dividend will be paid
B) used to determine exactly who will receive dividends
C) when cash is actually paid to the shareholders
D) when earnings are declared
5) The date of record is the date ________.
A) on which the board of directors of a corporation announces that a dividend will be paid
B) used to determine exactly who will receive dividends
C) when cash is actually paid to the shareholders
D) when earnings are declared
6) The date of payment is the date ________.
A) on which the board of directors of a corporation announces that a dividend will be paid
B) used to determine exactly who will receive dividends
C) when cash is actually paid to the shareholders
D) when earnings are declared
7) The date on which the board of directors of a corporation decides that earnings are sufficient to pay a dividend is the ________.
A) declaration date
B) date of record
C) date of payment
D) dividend date
8) Cumulative preferred stock means that ________.
A) the fixed dividend amount accumulates from year to year. The entire amount of all past unpaid dividends must be paid to the preferred shareholders before any dividends can be paid to common shareholders
B) the preferred dividend rate will increase each year the shares are outstanding
C) preferred dividends accumulate as earnings accumulate
D) the balance in the Preferred stock account is increased by any additional shares that are sold during the year
9) Noncumulative preferred stock means that ________.
A) the fixed dividend amount accumulates from year to year. The entire amount of all past unpaid dividends must be paid to the preferred shareholders before any dividends can be paid to common shareholders
B) the board of directors has the option to decide whether past unpaid dividends will be paid to preferred shareholders
C) preferred dividends accumulate as earnings accumulate
D) the balance in the Preferred stock account is increased by any additional shares that are sold during the year
10) A company has 2,000 shares of $100 par, 6%, noncumulative preferred stock outstanding. If the board of directors declares a dividend this year, how much will the preferred shareholders receive?
A) $100 per share
B) $6 per share
C) $200,000 in total
D) $60 per share
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