Question :
61. A company declares a 40% stock dividend when there were : 1228445
61. A company declares a 40% stock dividend when there were 4 million common shares outstanding with a $1 par value. The current market price is $20 per common share. Which of the following will be the effect of the stock dividend?
A. Retained earnings will decrease by $1.6 million and contributed capital will increase by $1.6 million.
B. Contributed capital will decrease by $1.6 million and retained earnings will increase by $1.6 million.
C. Retained earnings will decrease by $32 million and contributed capital will increase by $32 million.
D. Contributed capital will decrease by $32 million and retained earnings will increase by $32 million.
62. Davidson Company has 10,000,000 common shares issued and 500,000 shares of treasury stock. The stock’s par value is $2 per share and its current market price is $25 per share. Which of the following is correct when a 15% stock dividend is declared and distributed?
A. Retained earnings will decrease $37.5 million.
B. Retained earnings will decrease $35.625 million.
C. Retained earnings will decrease $3 million.
D. Retained earnings will decrease $2.85 million.
63. Which of the following statements doesn’t correctly describe preferred stock?
A. Preferred shareholders have a preference with respect to dividend payments.
B. Preferred shareholders have a preference with respect to assets in the event of liquidation.
C. Preferred shareholders have voting rights on a per share basis.
D. Preferred stock typically has a fixed dividend rate.
64. What is the correct entry for the sale of 1,000 shares of $10 par value preferred stock for $50,000 cash?
A. Option A
B. Option B
C. Option C
D. Option D
65. Which of the following doesn’t correctly describe preferred stock?
A. Preferred stock has a higher priority status relative to common stock.
B. Preferred shareholders are guaranteed to receive dividends.
C. Preferred stock usually does not carry voting rights.
D. Preferred stockholders receive dividends in arrears only if the shares are cumulative.
66. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will be paid to the common stockholders assuming the preferred stock is cumulative?
A. $12,000
B. $50,000
C. $47,000
D. $38,000
67. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will be paid to the preferred stockholders assuming the preferred stock is cumulative?
A. $12,000
B. $3,000
C. $47,000
D. $38,000
68. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will be paid to the preferred stockholders assuming the preferred stock is noncumulative?
A. $12,000
B. $3,000
C. $47,000
D. $38,000
69. Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 – 2009).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will be paid to the common stockholders assuming the preferred stock is noncumulative?
A. $12,000
B. $3,000
C. $47,000
D. $38,000
70. Slickers, Inc. had the following capital structure during 2010:
Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for 2008 and 2009.
Common stock, $100 par value, 2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000. How much of the dividend is paid to the preferred stockholders during 2010 assuming the preferred stock is cumulative?
A. $3,500
B. $7,000
C. $10,500
D. $14,500
