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Exam 11: Reporting and Analyzing Shareholders Equity

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Question 1

Multiple Choice

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Authorized shares of a corporation

A) are the minimum amount of shares that must be issued.
B) increase shareholders' equity.
C) are specified in its articles of incorporation.
D) must be recorded by a formal accounting entry.

E) C) and D)
F) A) and D)

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Question 2

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The journal entry to record the declaration of a stock dividend includes

A) a credit to Stock Dividends Distributable.
B) a credit to Stock Dividends Payable.
C) a credit to Dividends Declared.
D) a credit to Cash.

E) B) and C)
F) None of the above

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Question 3

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Retractable preferred shares are

Use the following information for questions. On July 15, 2018, the board of directors of George Easton Limited declared a cash dividend of $0.50 per share on 84,000 common shares. The dividend is to be paid on August 15, 2018, to shareholders of record on July 31, 2018. -The correct entry to be recorded on August 15, 2018 will include a

Which of the following statements about dividends is not correct?

Apricot Inc. is reacquiring 25,000 common shares. The price is $4.25/share and the average price is $4.00. Assuming that there is a contributed surplus balance of $5,000, the entry to record the transaction would be

Ford Harrison has invested $650,000 in a corporation. The corporation does not do well and must declare bankruptcy. What amount does Harrison stand to lose?

Which of the following would not affect the balance of the Retained Earnings account?

Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

Retained earnings represents the amount of cash available for dividends.

On the dividend record date

The trading of a corporation's shares on the secondary market has no impact on the corporation's financial position.

A shareholder owning common shares has the right to vote in the election of the board of directors.

Declaration and distribution of a stock dividend does not affect the total amount of shareholders' equity.

Preferred shares have a contractual preference over common shares in certain areas, but do not have the right to vote.

Determine whether a cash dividend, stock dividend, or stock split will result in the effect listed in the first column. For example, for the first item, indicate by inserting a yes or no in the space provided whether a cash dividend will result in a decrease in total assets; whether a stock dividend will result in a decrease in total assets; and whether a stock split will result in a decrease in total assets.

Accumulated other comprehensive income is reported in the shareholders' equity section of the statement of financial position for a publicly-traded company.

As of December 31, 2017, Shannon Corporation had 500,000 common shares authorized, 100,000 of which had been issued for proceeds of $1.9 million. The Retained Earnings balance was $1,150,000 and Accumulated Other Comprehensive Income was $1,800,000.On January 18, 2018, 50,000 common shares were issued at $25 per share. Net income for 2018 was $275,000. No dividends were declared in 2018.Instructions a. Prepare the entry to record the common share issue on January 18. b. Prepare the shareholders' equity section of the statement of financial position at December 31, 2018.

$3 cumulative preferred shares means that each preferred shareholder is eligible to receive

In its first year of operations, Jagger Ltd. had the following transactions relating to its common shares: InstructionsRecord the above transactions.