81. Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 16,000 shares of its own common stock at $15 per share. Three months later Long sold 8,000 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 8,000 treasury shares, Long should credit
a. Treasury Stock for $152,000.
b. Treasury Stock for $80,000 and Paid-in Capital from Treasury Stock for $72,000.
c. Treasury Stock for $120,000 and Paid-in Capital from Treasury Stock for $32,000.
d. Treasury Stock for $120,000 and Paid-in Capital in Excess of Par for $32,000.
82. An analysis of stockholders' equity of Hahn Corporation as of January 1, 2018, is as follows:
Common stock, par value $20; authorized 100,000 shares;
issued and outstanding 90,000 shares $1,800,000
Paid-in capital in excess of par 900,000
Retained earnings 760,000
Total $3,460,000
Hahn uses the cost method of accounting for treasury stock and during 2018 entered into the following transactions:
Acquired 2,500 shares of its stock for $75,000.
Sold 2,000 treasury shares at $35 per share.
Sold the remaining treasury shares at $20 per share.
Assuming no other equity transactions occurred during 2018, what should Hahn report at December 31, 2018, as total additional paid-in capital?
a. $895,000
b. $900,000
c. $905,000
d. $915,000
83. Percy Corporation was organized on January 1, 2018, with an authorization of 1,200,000 shares of common stock with a par value of $6 per share. During 2018, the corporation had the following capital transactions:
January 5 issued 600,000 shares @ $10 per share
July 28 purchased 80,000 shares @ $11 per share
December 31 sold the 80,000 shares held in treasury @ $18 per share
Percy used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount of additional paid-in capital as of December 31, 2018?
a. $-0-.
b. $1,840,000.
c. $2,400,000.
d. $2,960,000.
84. Sosa Co.'s stockholders' equity at January 1, 2018 is as follows:
Common stock, $10 par value; authorized 300,000 shares;
Outstanding 225,000 shares $2,250,000
Paid-in capital in excess of par 800,000
Retained earnings 2,190,000
Total $5,240,000
During 2018, Sosa had the following stock transactions:
Acquired 6,000 shares of its stock for $270,000.
Sold 3,600 treasury shares at $50 a share.
Sold the remaining treasury shares at $41 per share.
No other stock transactions occurred during 2018. Assuming Sosa uses the cost method to record treasury stock transactions, the total amount of all additional paid-in capital accounts at December 31, 2018 is
a. $791,600.
b. $770,000.
c. $808,400.
d. $827,600.
85. Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2017:
Common stock, par value $20; authorized 75,000 shares;
issued and outstanding 45,000 shares $ 900,000
Paid-in capital in excess of par value 350,000
Retained earnings 500,000
$1,750,000
During 2018, the following transactions occurred relating to stockholders' equity:
3,000 shares were reacquired at $28 per share.
3,000 shares were reacquired at $35 per share.
1,800 shares of treasury stock were sold at $30 per share.
For the year ended December 31, 2018, Oaks reported net income of $450,000. Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2018, balance sheet?
a. $2,065,000.
b. $2,061,400.
c. $2,057,800.
d. $1,615,000.
86. On December 1, 2018, Abel Corporation exchanged 50,000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of $40 per share, and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Abel's total stockholders' equity will increase by
a. $ 500,000.
b. $2,000,000.
c. $2,750,000.
d. $2,250,000.
87. Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2018, and December 31, 2017. The board of directors declared and paid an $8,000 dividend in 2017. In 2018, $40,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2018?
a. $28,000
b. $20,000
c. $12,000
d. $10,000
88. Anders, Inc., has 15,000 shares of 4%, $100 par value, cumulative preferred stock and 60,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2016. The board of directors declares and pays a $110,000 dividend in 2017 and in 2018. What is the amount of dividends received by the common stockholders in 2018?
a. $40,000
b. $60,000
c. $110,000
d. $0
89. Colson Inc. declared a $230,000 cash dividend. It currently has 12,000 shares of 5%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders?
a. $110,000.
b. $120,000.
c. $170,000.
d. None.
90. Pierson Corporation owned 15,000 shares of Hunter Corporation. These shares were purchased in 2014 for $135,000. On November 15, 2018, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 135,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend?
Gain Net Reduction in
Retained Earnings
a. $0 $378,000
b. $0 $121,500
c. $256,500 $121,500
d. $256,500 $ 34,000
91. Stinson Corporation owned 40,000 shares of Matile Corporation. These shares were purchased in 2014 for $360,000. On November 15, 2018, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a stockholder. On that date, when the market price of Matile was $28 per share, there were 360,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend?
Gain Net Reduction in
Retained Earnings
a. $0 $ 324,000
b. $0 $1,008,000
c. $684,000 $ 144,000
d. $684,000 $ 324,000
92. Winger Corporation owned 900,000 shares of Fegan Corporation stock. On December 31, 2018, when Winger's account “Equity Investments (Fegan Corporation”) had a carrying value of $5 per share, Winger distributed these shares to its stockholders as a dividend. Winger originally paid $8 for each share. Fegan has 5,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Fegan share was $7 on the declaration date and $9 on the distribution date.
What would be the reduction in Winger's stockholders' equity as a result of the above transactions?
a. $3,600,000
b. $4,500,000
c. $7,200,000
d. $8,100,000
93. Gibbs Corporation owned 20,000 shares of Oliver Corporation’s $5 par value common stock. These shares were purchased in 2014 for $225,000. On September 15, 2018, Gibbs declared a property dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when the market price of Oliver was $35 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend?
a. $202,500
b. $630,000
c. $213,750
d. $427,500
94. Melvern’s Corporation has an investment in 20,000 shares of Wallace Company common stock with a cost of $872,000. These shares are used in a property dividend to stockholders of Melvern’s. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to stockholders of record on June 15. The fair value per share of Wallace stock is $63 on May 25, $66 on June 15, and $68 on July 31. The net effect of this property dividend on retained earnings is a reduction of
a. $1,360,000.
b. $1,320,000.
c. $1,260,000.
d. $ 872,000.
95. Hernandez Company has 560,000 shares of $10 par value common stock outstanding. During the year, Hernandez declared a 15% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by
a. $2,842,000.
b. $1,260,000.
c. $462,000.
d. $ 420,000.
96. On June 30, 2018, when Ermler Co.'s stock was selling at $65 per share, its capital accounts were as follows:
Capital stock (par value $50; 60,000 shares issued) $3,000,000
Premium on capital stock 600,000
Retained earnings 4,200,000
If a 100% stock dividend were declared and distributed, capital stock would be
a. $3,000,000.
b. $3,600,000.
c. $6,000,000.
d. $7,800,000.
97. The stockholders' equity section of Gunkel Corporation as of December 31, 2017, was as follows:
Common stock, par value $2; authorized 20,000 shares;
issued and outstanding 10,000 shares $ 20,000
Paid-in capital in excess of par 30,000
Retained earnings 85,000
$135,000
On March 1, 2018, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2018, the fair value of the stock was $6 per share. For the two months ended February 28, 2018, Gunkel sustained a net loss of $15,000.
What amount should Gunkel report as retained earnings as of March 1, 2015?
a. $61,000.
b. $67,000.
c. $71,000.
d. $77,000.
98. The stockholders' equity of Howell Company at July 31, 2018 is presented below:
Common stock, par value $20, authorized 400,000 shares;
issued and outstanding 160,000 shares $3,200,000
Paid-in capital in excess of par 160,000
Retained earnings 650,000
$4,010,000
On August 1, 2018, the board of directors of Howell declared a 15% stock dividend on common stock, to be distributed on September 15th. The market price of Howell's common stock was $70 on August 1, 2018, and $76 on September 15, 2018. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?
a. $ 960,000.
b. $1,680,000.
c. $1,824,000.
d. $ 1,200,000.
99. On January 1, 2018, Dodd, Inc., declared a 10% stock dividend on its common stock when the fair value of the common stock was $30 per share. Stockholders' equity before the stock dividend was declared consisted of:
Common stock, $10 par value, authorized 200,000 shares;
issued and outstanding 120,000 shares $1,200,000
Additional paid-in capital on common stock 150,000
Retained earnings 700,000
Total stockholders' equity $2,050,000
What was the effect on Dodd’s retained earnings as a result of the above transaction?
a. $180,000 decrease
b. $360,000 decrease
c. $600,000 decrease
d. $300,000 decrease
100. On January 1, 2018, Culver Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $15, the corporation declared a 15% stock dividend to be issued to stockholders of record on December 16, 2018. What was the impact of the 15% stock dividend on the balance of the retained earnings account?
a. $82,500 decrease
b. $225,000 decrease
c. $247,500 decrease
d. No effect
101. At the beginning of 2015, Flaherty Company had retained earnings of $400,000. During the year Flaherty reported net income of $100,000, sold treasury stock at a “gain” of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2018 was
a. $380,000.
b. $410,000.
c. $416,000.
d. $446,000.
102. Masterson Company has 490,000 shares of $10 par value common stock outstanding. During the year Masterson declared a 15% stock dividend when the market price of the stock was $36 per share. Three months later Masterson declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by
a. $2,984,100
b. $2,646,000
c. $ 485,100
d. $ 462,000
103. Layne Corporation had the following information in its financial statements for the years ended 2017 and 2018:
Cash dividends for the year 2018 $ 10,000
Net income for the year ended 2018 93,000
Market price of stock, 12/31/17 10
Market price of stock, 12/31/18 12
Common stockholders’ equity, 12/31/17 1,600,000
Common stockholders’ equity, 12/31/18 1,980,000
Outstanding shares, 12/31/18 160,000
Preferred dividends for the year ended 2018 15,000
What is the payout ratio for Layne Corporation for the year ended 2018?
a. 18.1%
b. 16.1%
c. 12.8%
d. 10.8%
104. Layne Corporation had the following information in its financial statements for the years ended 2017 and 2018:
Cash dividends for the year 2018 $ 10,000
Net income for the year ended 2018 93,000
Market price of stock, 12/31/17 10
Market price of stock, 12/31/18 12
Common stockholders’ equity, 12/31/17 1,600,000
Common stockholders’ equity, 12/31/18 1,980,000
Outstanding shares, 12/31/18 160,000
Preferred dividends for the year ended 2018 15,000
What is the book value per share for Layne Corporation for the year ended 2018?
a. $12.38
b. $12.28
c. $12.22
d. $10.00
105. At the beginning of 2018, Hamilton Company had retained earnings of $320,000. During the year Hamilton reported net income of $75,000, sold treasury stock at a “gain” of $27,000, declared a cash dividend of $45,000, and declared and issued a small stock dividend of 1,500 shares ($10 par value) when the fair value of the stock was $30 per share. The amount of retained earnings available for dividends at the end of 2018 was:
a. $354,500.
b. $332,000.
c. $327,500.
d. $305,000.
106. Mingenback Company has 630,000 shares of $10 par value common stock outstanding. During the year Mingenback declared a 15% stock dividend when the market price of the stock was $48 per share. Two months later Mingenback declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by:
a. $ 434,700.
b. $ 594,000.
c. $4,536,000.
d. $4,970,700.
107. Sealy Corporation had the following information in its financial statements for the years ended 2017 and 2018:
Cash dividends for the year 2018 $ 5,000
Net income for the year ended 2018 97,000
Market price of stock, 12/31/17 10
Market price of stock, 12/31/18 12
Common stockholders’ equity, 12/31/17 1,000,000
Common stockholders’ equity, 12/31/18 1,200,000
Outstanding shares, 12/31/18 100,000
Preferred dividends for the year ended 2018 15,000
What is the rate of return on common stock equity for Sealy Corporation for the year ended 2018?
a. 8.8%
b. 6.8%
c. 7.5%
d. 6.5%
108. Sealy Corporation had the following information in its financial statements for the years ended 2017 and 2018:
Cash dividends for the year 2018 $ 10,000
Net income for the year ended 2018 97,000
Market price of stock, 12/31/17 10
Market price of stock, 12/31/18 12
Common stockholders’ equity, 12/31/17 1,000,000
Common stockholders’ equity, 12/31/18 1,200,000
Outstanding shares, 12/31/18 100,000
Preferred dividends for the year ended 2018 15,000
What is the payout ratio for Sealy Corporation for the year ended 2018?
a. 18.3%
b. 10.3%
c. 12.2%
d. 25.8%
109. Mays, Inc. had net income for 2018 of $1,590,000 and earnings per share on common stock of $5. Included in the net income was $225,000 of bond interest expense related to its long-term debt. The income tax rate for 2018 was 30%. Dividends on preferred stock were $300,000. The payout ratio on common stock was 25%. What were the dividends on common stock in 2018?
a. $322,500.
b. $397,500.
c. $361,875.
d. $483,750.
110. Presented below is information related to Orender, Inc.:
December 31,
2018 2017
Common stock $ 75,000 $ 60,000
5% Preferred stock 350,000 350,000
Retained earnings (includes net income for current year) 90,000 75,000
Net income for year 35,500 32,000
What is Orender’s rate of return on common stock equity for 2018?
a. 23.7%
b. 12.0%
c. 10.9%
d. 21.5%
111. The following data are provided:
December 31,
2018 2017
5% Cumulative preferred stock, $50 par $100,000 $100,000
Common stock, $10 par 140,000 90,000
Additional paid-in capital 80,000 70,000
Retained earnings (includes current year net income) 250,000 215,000
Net income 50,000
Additional information:
On May 1, 2018, 5,000 shares of common stock were issued. The preferred dividends were not declared during 2018. The market price of the common stock was $50 at December 31, 2018.
The rate of return on common stock equity for 2018 is calculated as
a. 50 ÷ 420.
b. 50 ÷ 470.
c. 45 ÷ 420.
d. 45 ÷ 470.
112. The following data are provided:
December 31,
2018 2017
5% Cumulative preferred stock, $50 par $100,000 $100,000
Common stock, $10 par 140,000 90,000
Additional paid-in capital 80,000 70,000
Retained earnings (includes current year net income) 250,000 215,000
Net income 50,000
Additional information:
On May 1, 2018, 5,000 shares of common stock were issued. The preferred dividends were not declared during 2018. The market price of the common stock was $50 at December 31, 2018.
The book value per share of common stock at 12/31/18 is calculated as
a. 465 ÷ 14.
b. 390 ÷ 14.
c. 220 ÷ 14.
d. 470 ÷ 14.
113. Turner Corporation had the following information in its financial statements for the year ended 2017 and 2018:
Common cash dividends for the year 2018 $ 20,000
Net income for the year ended 2018 130,000
Market price of stock, 12/31/18 24
Common stockholders’ equity, 12/31/17 2,200,000
Common stockholders’ equity, 12/31/18 2,700,000
Outstanding shares, 12/31/18 150,000
Preferred dividends for the year ended 2018 30,000
What is the payout ratio for Turner Corporation for the year ended 2018?
a. 15.4%
b. 20.0%
c. 23.1%
d. 38.5%
114. Turner Corporation had the following information in its financial statements for the year ended 2017 and 2018:
Common cash dividends for the year 2018 $ 20,000
Net income for the year ended 2018 130,000
Market price of stock, 12/31/18 24
Common stockholders’ equity, 12/31/17 2,200,000
Common stockholders’ equity, 12/31/18 2,700,000
Outstanding shares, 12/31/18 150,000
Preferred dividends for the year ended 2018 30,000
What is the book value per share for Turner Corporation for the year ended 2018?
a. $17.80
b. $18.00
c. $14.67
d. $17.67
*115. Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year.
Assuming that $225,000 will be distributed as a dividend in the current year, how much will the common stockholders receive?
a. Zero.
b. $117,000.
c. $153,000.
d. $189,000.
*116. Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year.
Assuming that $95,000 will be distributed as a dividend in the current year, how much will the preferred stockholders receive?
a. $32,000.
b. $36,000.
c. $72,000.
d. $95,000.
*117. Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. The preferred stock is cumulative and participating. Dividends have been paid in every year except the past two years and the current year.
Assuming that $270,000 will be distributed, how much will the common stockholders receive?
a. $162,000.
b. $132,000.
c. $138,000.
d. $ 72,000.
*118. Yoder, Inc. has 150,000 shares of $10 par value common stock and 75,000 shares of $10 par value, 4%, cumulative, participating preferred stock outstanding. Dividends on the preferred stock are one year in arrears. Assuming that Yoder wishes to distribute $270,000 as dividends, the common stockholders will receive
a. $ 60,000.
b. $110,000.
c. $160,000.
d. $210,000.
*119. Mann Co. has outstanding 80,000 shares of 5% preferred stock with a $10 par value and 150,000 shares of $3 par value common stock. Dividends have been paid every year except last year and the current year. If the preferred stock is cumulative and nonparticipating and $250,000 is distributed, the common stockholders will receive
a. $0.
b. $170,000.
c. $210,000.
d. $250,000.
