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Review questions about dividends, stock splitting, Common st

1. Occidental Produce Company has 40,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $0.01 par value; the preferred stock is 4% non-cumulative, with $100 par value. On October 15, 2014, the company declares a total dividend payment of $40,000. What is the total amount of dividends that will be paid to the common shareholders?

$40,000
$32,000
$ 400
$ 4,500
None of these is correct

2. If a company does not have enough cash to pay out regular dividends, but still wishes to give the shareholders something that they would consider of value, the company should consider doing a stock split.
True
False

3. The purchase of treasury stock requires a credit to the Common stock account.
True
False

4. Which of the following describes the correct sequence of year-end closing entries?
Close Revenues to Income summary; close Expenses to Income summary; close Income summary to Retained earnings.
Close Expenses to Income summary; close Revenues to Income summary; close Income summary to Retained earnings.
Close Revenues to Income summary; close Income summary to Retained earnings; close Expenses to Retained earnings.
Close Revenues to Retained earnings; close Expenses to Retained earnings; close Income summary to Retained earnings.

5. If preferred stock is non-cumulative, then the company does NOT need to pay dividends that were passed in previous years.
True
False

6. Which of the following statements is TRUE?
The purchase of treasury stock decreases assets and decreases stockholders' equity.
The purchase of treasury stock increases assets and increases stockholders' equity.
The purchase of treasury stock increases assets and decreases stockholders' equity.
The purchase of treasury stock decreases assets and increases stockholders' equity.

7. Which of the following describes the term outstanding stock?
The shares of stock that are held by the stockholders
The shares of stock that have been sold for the highest price
The total amount of stock that has been authorized by state law
The total amount of stock that has not been sold yet

8. On March 1, 2013, Parkinson Company originally issued 10,000 shares of common stock at $4.00 per share. The stock had a par value of $0.01 per share. On March 1, 2012, Parkinson distributed a 12% stock dividend; the market price at that time had dropped to $3.75 per share. Parkinson must record a loss of $300.
True
False

9. Stock dividends have no effect on assets or liabilities.
True
False

10. Which of the following would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share cash?
Cash would be debited for $65,000.
Common stock would be debited for $50,000.
Common stock would be credited for $65,000.
Paid-in capital in excess of par-common would be debited for $5,000.

Solution Preview

1. Occidental Produce Company has 40,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $0.01 par value; the preferred stock is 4% non-cumulative, with $100 par value. On October 15, 2014, the company declares a total dividend payment of $40,000. What is the total amount of dividends that will be paid to the common shareholders?

$40,000
***$32,000
$ 400
$ 4,500
None of these is correct

COACHING TIP:
Due to preferred: 4% x $100 = $4 per share x 2,000 shares = $8,000
Due to common: $40,000 - $8,000 = $32,000

2. If a company does not have enough cash to pay out regular dividends, but still wishes to give the shareholders something that they would consider of value, the company should consider doing a stock split.
True
***False

COACHING TIP:
COACHING TIP:
False. Not really any better economically.

3. The purchase of treasury stock requires a credit to the Common stock account.
True
*** ...

Solution Summary

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