ACCT 001A Lecture Notes - Lecture 26: Moe Williams, Retained Earnings, Debt Ratio

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pucemallard867

7 Jan 2021

School

Pasadena City College

Department

Accounting

Course

ACCT 001A

Professor

Hossain

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Document Summary

Due to accounting for stock dividends: (transfer from retained earnings to paid in capital) This will avoid stockholder dissent that sometimes comes about when retained earnings is high, and no dividends are being issued. Stock splits: to reduce the market value per share of stock, to make it more affordable. Decreases par value per share so total amount of paid in capital will stay the same/ no effect on accounts. Reverse stock splits: minimum trading price on some stock exchanges, certain institutional investors (pension funds) have rules about the market value per share of stocks they invest in. Increases par value per share so total amount of paid in capital will stay the same/ no effect on accounts. In consolidated balance sheets (when company owns more than 50% of another company) in stockholders" equity section. The portion of owner"s equity that is not controlled by the parent company. Fasb ruled that noncontrolling interest must be reported in stockholders" equity section.

Related Questions

1. The effect of a stock dividend is to

Question 17 options:

change the composition of stockholders' equity.

increase the book value per share of common stock.

decrease total assets and stockholders' equity.

decrease total assets and total liabilities

2. Regular dividends are declared out of:

	Common Stock.
	Treasury Stock.
	Retained Earnings.
	Paid-in Capital in Excess of Par.

3. Solaris, Inc. has 2,000 shares of 5%, $10 par value,cumulative preferred stock and 50,000 shares of $1 par value commonstock outstanding at December 31, 2014. What is the annual dividendon the preferred stock?

Question 20 options:

$5 per share

$10,000 in total

$1,000 in total

$.05 per share

4. Corporations generally issue stock dividends in order to

Question 21 options:

decrease the amount of capital in the corporation.

increase the market price per share.

exceed stockholders' dividend expectations.

increase the marketability of the stock.

5. A stockholder who receives a stock dividend would

Question 22 options:

expect the par value of the stock to change.

own more shares of stock.

expect retained earnings to increase.

expect the market price per share to increase.

6. When stock dividends are distributed,

Question 23 options:

	Retained Earnings is decreased.
	Common Stock Dividends Distributable is decreased.
	no entry is necessary if it is a large stock dividend.
	Paid-in Capital in Excess of Par is debited if it is a smallstock dividend.

Identify the effect the declaration and distribution of a stockdividend has on the par value per share.

Question 24 options:

No effect

Increase or decrease

Increase

Decrease

A stock split

Question 25 options:

will have no effect on the par value per share of stock.

will increase the total par value of the stock.

will increase total paid-in capital.

may occur in the absence of retained earnings.

On January 1, Sly Corporation had 120,000 shares of $10 parvalue common stock outstanding. On March 17, the company declared a15% stock dividend to stockholders of record on March 20. Marketvalue of the stock was $13 on March 17. The entry to record thetransaction of March 17 would include a

Question 26 options:

debit to Common Stock Dividends Distributable for $180,000.

credit to Cash for $234,000.

credit to Stock Dividends for $54,000.

credit to Common Stock Dividends Distributable for $180,000.

Bento, Inc. had 500,000 shares of common stock outstandingbefore a stock split occurred, and 1,500,000 shares outstandingafter the stock split. The stock split was

Question 27 options:

1-for-5.

2-for-5.

5-for-1.

3-for-1.

In the stockholders' equity section of the balance sheet,

Question 28 options:

Dividends in arrears will appear as a restriction of RetainedEarnings.

Common Stock Dividends Distributable will appear in its ownsubsection of the stock- holders' equity.

Common Stock Dividends Distributable will be classified as partof additional paid-in capital.

Additional Paid-in Capital appears under the subsection Paid-inCapital.

During 2014 Miami Inc. had sales revenue $1,328,000, grossprofit $728,000, operating expenses $398,000, cash dividends$90,000, other expenses and losses $40,000. Its corporate tax rateis 30%. What was Miami's income tax expense for the year?

Question 29 options:

$87,000

$398,400

$180,000

$60,000

Paiva Corporation splits its common stock 2 for 1, when themarket value is $80 per share. Prior to the split, Paiva had100,000 shares of $10 par value common stock issued andoutstanding. After the split, the par value of the stock

Question 30 options:

	remains the same.
	is reduced to $5 per share.
	is reduced to $2 per share.
	is reduced to $20 per share.

periwinklejellyfish203

The following information pertains to Parsons Co.: Preferredstock, cumulative: Par value per share $100 Dividend rate 8% Sharesoutstanding 9,000 Dividends in arrears none Common stock: Par valueper share $10 Shares issued 130,000 Dividends paid per share $2.10Market price per share $48 Additional paid-in capital $480,000Unappropriated retained earnings (after closing) $250,000 Retainedearnings appropriated for contingencies $320,000 Common treasurystock: Number of shares 9,000 Total cost $250,000 Net income$616,000 Compute (assume no changes in balances during the pastyear): (Round per share and ratios to 2 decimal places, e.g. $15.75or 15.75%.) (a) Total amount of stockholders' equity in the balancesheet $ (b) Earnings per share of common stock $ per share (c) Bookvalue per share of common stock $ per share (d) Payout ratio ofcommon stock % (e) Return on common stock equity %

orchidduck386

Module 14 Accounting for Corporations Problem 13-4A -

1. Instruction

Morrow Enterprises Inc. manufactures bathroom fixtures. Thestockholdersâ equity accounts of Morrow Enterprises Inc., withbalances on January 1, 2016, are as follows:

Common Stock, $20 stated value(500,000 shares authorized, 375,000 shares issued)	$7,500,000
Paid-In Capital in Excess of StatedValueâCommon Stock	825,000
Retained Earnings	33,600,000
Treasury Stock (25,000 shares, atcost)	450,000

The following selected transactions occurred during theyear:

Jan.	22	Paid cash dividends of $0.08 pershare on the common stock. The dividend had been properly recordedwhen declared on December 1 of the preceding fiscal year for$28,000.
Apr.	10	Issued 75,000 shares of commonstock for $24 per share.
Jun.	6	Sold all of the treasury stock for$26 per share.
Jul.	5	Declared a 4% stock dividend oncommon stock, to be capitalized at the market price of the stock,which is $25 per share.
Aug.	15	Issued the certificates for thedividend declared on July 5.
Nov.	23	Purchased 30,000 shares of treasurystock for $19 per share.
Dec.	28	Declared a $0.10-per-share dividendon common stock.
	31	Closed the credit balance of theincome summary account, $1,125,000.
	31	Closed the two dividends accountsto Retained Earnings.

Required:

Enter the January 1 balances inT accounts for the stockholdersâ equity accounts listed.

Journalize the entries torecord the transactions, and post to the eight selected accounts.No post ref is required in the journal. Refer to the Chart ofAccounts for exact wording of account titles.

Prepare a retained earningsstatement for the year ended December 31, 2016. Enter all amountsas positive numbers. The word âLessâ is not required.*

Prepare the StockholdersâEquity section of the December 31, 2016, balance sheet. âLessâ orâDeductâ will automatically appear if it is required. *

* Refer to the list of Amount Descriptions provided for theexact wording of the answer choices for text entries2.

2.CHART OF ACCOUNTSMorrow Enterprises Inc.General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
193	Equipment
194	AccumulatedDepreciation-Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable

	EQUITY
311	Common Stock
313	Paid-In Capital in Excess of StatedValue-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess ofPar-Preferred Stock
331	Paid-In Capital from Sale ofTreasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

EXPENSES

510

Cost of Merchandise Sold

Office Supplies Expense

537

Organizational Expenses

562

Depreciation Expense-Equipment

590

Miscellaneous Expense

710

Interest Expense

3. AmountDescriptions
Cash balance, July 31, 2016
Common stock, $20 stated value;500,000 shares authorized, 375,000 issued
Common stock, $20 stated value;500,000 shares authorized, 438,000 issued
Common stock, $20 stated value;500,000 shares authorized, 468,000 issued
Decrease in retained earnings
Dividends
Excess of issue price over statedvalue
For the Year Ended December 31,2016
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Retained earnings
Retained earnings, December 31,2016
Retained earnings, January 1,2016
Total
Total paid-in capital
Total stockholdersâ equity

4. T Accounts:

A. Enter the January 1 balances in T accounts for thestockholdersâ equity accounts listed. Post the journal entries frompart B to the eight selected accounts. No post ref is required inthe journal.

Common Stock

Paid-In Capital inExcess of Stated Value-Common Stock

Retained Earnings

Treasury Stock

Paid-In Capital fromSale of Treasury Stock

Stock DividendsDistributable

Stock Dividends

Cash Dividends

5. Journal

B. Journalize the entries to record the transactions. No postref is required in the journal. Refer to the Chart of Accounts forexact wording of account titles.

PAGE 10

JOURNAL

6.Retained Earning Statements

C. Prepare a retained earnings statement for the year endedDecember 31, 2016. Enter all amounts as positive numbers. The wordâLessâ is not required. Refer to the list of Amount Descriptionsprovided for the exact wording of the answer choices for textentries.

Morrow Enterprises

Retained Earnings Statement

For the Year Ended December 31, 2016

1
2
3
4
5

7. Stockholdersâ Equity

D. Prepare the Stockholdersâ Equity section of the December 31,2016 balance sheet. âLessâ or âDeductâ will automatically appear ifit is required. Refer to the list of Amount Descriptions providedfor the exact wording of the answer choices for text entries.

Stockholdersâ Equity

1	Paid-in capital:
2
3
4
5
6
7
8

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ACCT 001A Lecture Notes - Lecture 26: Moe Williams, Retained Earnings, Debt Ratio

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