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ACC 326 Study Guide - Midterm Guide: Historical Cost, Current Asset, Credit Risk

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reddinosaur956
31 May 2017
School
UT-Austin
Department
Accounting
Course
ACC 326
Professor
S Moore

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Document Summary

Two ways to do treasurey stock accounting: cost method = purchase and sale of treasury stock viewed as one continuous transactions. But only if the reissue price is higher! If it"s lower then debit the apic as well as cash and credit the treeasury only: par-value method, don"t need to know. The difference is the basis of reacquired stock cost or par value. Common stock div are aat discretion of the board. When amount paid is not cumulative, take every year individually, pay the preferred stock first (up to the annual dividend) and then give the rest to common stock. When amount paid is cumulative, continue through the years taking into account the deficit that was not paid to the preferred stock in the arears account. Once there preferred has been paid off to the appropraiate amount (annual div a year has reached xx max) put the rest into common stock.

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Related Questions

1-)Please refer to the following information for PeartreeCompany: • Common stock, $1.00 par, 100,000 issued, 95,000outstanding • Paid-in capital in excess of par: $2,150,000 •Retained earnings: $910,000 • Treasury stock: 5,000 sharespurchased at $20 per share If Peartree resold 1,000 shares oftreasury stock for $24 per share, what journal entry would berequired?

A) Debit Cash $24,000 and credit Treasury stock $24,000.

B) Debit Treasury stock $24,000 and credit Cash $24,000.

C) Debit Treasury stock $20,000, debit Paid-in capital $2,000and credit Cash $24,000.

D) Debit Cash $24,000, credit Treasury stock $20,000 and creditPaid-in capital $4,000.

2-)Which of the following is a common reason for companies toretire preferred stock?

A) To stop paying out dividends to preferred shareholders

B) To increase stockholders' equity

C) To reward the preferred shareholders

D) To make a profit on the retirement of preferred stock

3-)At January 1, 2014, Foxmore Company had 80,000 shares ofcommon stock outstanding and no preferred stock. During the year,they issued 40,000 additional shares of common stock. At December31, 2014, Foxmore had 120,000 shares of common stock outstanding,and no preferred stock. In addition, Foxmore reported the followingresults for the year 2014: Sales revenues from regular businessoperations $3,000,000 Cost of goods sold 900,000 Operating expensesfrom their regular business operations 600,000 Gain on disposal ofseveral items of property, plant & equipment 15,000 Income taxexpense on continuing operations 330,000 Loss on the termination ofa discontinued business segment, net of tax 120,000 Losses ondamage caused by earthquake, net of tax 280,000 At December 31,2014, how much is the earnings per share for income (loss) fromcontinuing operations? (Please round all calculations to thenearest cent.)

A) $(1.20)

B) $10.65 C)

$7.85

D) $11.85

4-)) A corporation has net income of $365,000 for the currentyear. It paid its required preferred dividend of $17,500 and had noother stock transactions during the year. The average number ofcommon shares outstanding during the year was 69,500. What is theearnings per share?

A) $1.00

B) $4.37

C) $5.84

D) $5.00

5-)Qtopia Company uses the direct method to prepare itsstatement of cash flows. It has reported sales revenues of $100,000on its income statement for the year 2012. If the balance inaccounts receivable has gone up by $4,000 during the year, then$4,000 will have to be added to $100,000 to calculate collectionsfrom customers. True or false

6-)Qtopia Company uses the direct method to prepare itsstatement of cash flows. It has reported operating expenses of$21,000 on its income statement for the year 2012. If the balancein accrued liabilities has gone up by $1,000 during the year, then$1,000 will have to be added to $21,000 as part of the process tocalculate payments to suppliers for operating expenses. true orfalse.

7-Please refer to the following information for Petra SalesCompany: • Common stock, $1.00 par, 200,000 issued, 180,000outstanding • Paid-in capital in excess of par: $1,600,000 •Retained earnings: $2,440,000 • Treasury stock: 20,000 sharespurchased at $12 per share If Petra Sales sells 10,000 shares oftreasury stock at $14 per share, the company will record a gain onthe sale of treasury stock of $20,000. True or false

8- Public companies are required to publish financialstatements, but privately held companies are generally not requiredto do so.true or false

Oakwood Inc. is a public enterprise whose shares are traded inthe over-the-counter market. At December 31, 2015, Oakwood had6,000,000 authorized shares of $10 par value common stock, of which2,000,000 shares were issued and outstanding. The shareholders'equity accounts at December 31, 2015, had the followingbalances:

Common stock $20,000,000
Additional paid-in capital on common stock 7,500,000
Retained earnings 6,470,000

Transactions during 2016 and other information relating to theshareholders' equity accounts were as follows:

On January 5, 2016, Oakwood issued at $54 per share, 100,000shares of $50 par value, 9%, cumulative convertible preferredstock. Each share of preferred stock is convertible, at the optionof the holder, into 2 shares of common stock. Oakwood had 600,000authorized shares of preferred stock.

On February 2, 2016, Oakwood reacquired 20,000 shares of itscommon stock for $16 per share. Oakwood uses the cost method toaccount for treasury stock.

On April 27, 2016, Oakwood sold 500,000 shares (previouslyunissued) of $10 par value common stock to the public at $17 pershare.

On June 18, 2016, Oakwood declared a cash dividend of $1 pershare of common stock, payable on July 13, 2016, to shareholders ofrecord on July 2, 2016.

On November 9, 2016, Oakwood sold 10,000 shares of treasurystock for $21 per share.

On December 14, 2016, Oakwood declared the yearly cash dividendon preferred stock, payable on January 14, 2017, to shareholders ofrecord on December 31, 2016.

On January 18, 2017, before the books were closed for 2016,Oakwood became aware that the ending inventories at December 31,2015, were understated by $300,000 (the after-tax effect on 2015net income was $210,000). The appropriate correcting entry wasrecorded the same day.

After correcting the beginning inventory, net income for 2016was $4,500,000.

Required:

1. Prepare a statement of retained earnings for Oakwood for theyear ended December 31, 2016. Assume that only single-periodfinancial statements for 2016 are presented.

2. Prepare the shareholders' equity section of Oakwood's balancesheet at December 31, 2016.

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.