Equity Flashcards

Question 1

Q

The total equity of Hale Corporation is

a. $8,600,000.
b. $8,750,000.
c. $7,100,000.
d. $7,250,000.

Question 2

Q

The total contributed capital related to the ordinary shares is

a. $4,300,000.
b. $4,850,000.
c. $5,250,000.
d. $4,700,000.

Question 3

Q

Manning Company issued 10,000 shares of its $5 par value ordinary shares having a fair value of $25 per share and 15,000 shares of its $15 par value preference shares having a fair value of $20 per share for a lump sum of $480,000. How much of the proceeds would be allocated to the ordinary shares?

a. $50,000
b. $218,182
c. $250,000
d. $255,000

Question 4

Q

Norton Company issues 4,000 shares of its $5 par value ordinary shares having a fair value of $25 per share and 6,000 shares of its $15 par value preference shares having a fair value of $20 per share for a lump sum of $192,000.

What amount of the proceeds should be allocated to the preference shares?

a. $172,000
b. $120,000
c. $104,727
d. $90,000

Question 5

Q

Berry Corporation has 50,000 shares of $10 par ordinary shares authorized. The following transactions took place during 2015, the first year of the corporation’s existence:
Sold 5,000 ordinary shares for $18 per share.
Issued 5,000 ordinary shares in exchange for a patent valued at $100,000.

At the end of the Berry’s first year, total contributed capital amounted to
a. $40,000.
b. $90,000.
c. $100,000.
d. $190,000.

Question 6

Q

Glavine Company issues 6,000 shares of its $5 par value ordinary shares having a market value of $25 per share and 9,000 shares of its $15 par value preference shares having a fair value of $20 per share for a lump sum of $288,000. The proceeds allocated to the ordinary shares is

a. $30,000
b. $130,909
c. $150,000
d. $157,091

Question 7

Q

Wheeler Company issued 5,000 shares of its $5 par value ordinary shares having a market value of $25 per share and 7,500 shares of its $15 par value preference shares having a market value of $20 per share for a lump sum of $240,000. The proceeds allocated to the preference shares is

a. $215,000
b. $150,000
c. $130,909
d. $109,091

Question 8

Q

Hiro Corp. issues 1,000 €5 par value ordinary shares and 1,000 €20 par value preference shares for a lump sum of €60,000. At the issue date, the ordinary shares were selling for €36 and the preference shares were selling for €28. The Share Premium—Ordinary account will be credited for
a. €31,000
b. €36,000
c. €26,250
d. €28,750

Question 9

Q

Hiro Corp. issues 1,000 €5 par value ordinary shares and 1,000 €20 par value preference shares for a lump sum of €60,000. At the issue date, the ordinary shares were selling for €36 and the preference shares were selling for €28. How much is recorded in Hiro’s statement of financial position for the preference shares?

a. €31,000
b. €36,000
c. €26,250
d. €28,750

Question 10

Q

On January 1 Hiro Corp. issues 1,000 no-par ordinary shares for €15 per share. The shares have a stated value of €5 per share. When Hiro prepares the journal entry to record the issuance of the shares which of the following will be recorded?

a. Debit Share Capital—Ordinary €5,000.
b. Credit Share Capital—Ordinary €15,000.
c. Debit Share Premium—Ordinary €15,000.
d. Credit Share Premium—Ordinary €10,000

Question 11

Q

Five years ago, Dunn Trading Co. issued 2,500 ordinary shares. The shares have a ₤2 par value and sold at that time for ₤12 per share. On January 1, 2015, Dunn Trading Co. Purchased 1,000 of these shares for ₤24 per share. On September 30, 2015, Dunn reissued 500 of the shares for ₤28 per share. The journal entry to record the reissuance will include

a. A debit to Treasury Shares ₤12,000.
b. A credit to Share Premium—Treasury ₤2,000.
c. A credit to Treasury Shares ₤14,000.
d. A credit to cash ₤14,000.

Question 12

Q

Pember Corporation started business in 2009 by issuing 200,000 shares of $20 par ordinary shares for $36 each. In 2014, 20,000 of these shares were purchased for $52 per share by Pember Corporation and held as treasury shares. On June 15, 2015, these 20,000 shares were exchanged for a piece of property that had an assessed value of $810,000. Pember’s shares are actively traded and had a fair price of $60 on June 15, 2015. The cost method is used to account for treasury shares. The amount of share premium—treasury resulting from the above events would be

a. $800,000.
b. $480,000.
c. $390,000.
d. $160,000.

Question 13

Q

On September 1, 2015, Valdez Company reacquired 12,000 shares of its $10 par value ordinary shares for $15 per share. Valdez uses the cost method to account for treasury shares. The journal entry to record the reacquisition of the shares should debit
a. Treasury Shares for $120,000.
b. Share Capital—Ordinary for $120,000.
c. Share Capital—Ordinary for $120,000 and Share Premium—Ordinary for $60,000.
d. Treasury Shares for $180,000.

Question 14

Q

Gannon Company acquired 6,000 shares of its own ordinary shares at $20 per share on February 5, 2010, and sold 3,000 of these shares at $27 per share on August 9, 2015. The fair value of Gannon’s ordinary shares was $24 per share at December 31, 2014, and $25 per share at December 31, 2015. The cost method is used to record treasury shares transactions. What account(s) should Gannon credit in 2015 to record the sale of 3,000 shares?
a. Treasury Shares for $81,000.

b. Treasury Shares for $60,000 and Share Premium—Treasury for $21,000.
c. Treasury Shares for $60,000 and Retained Earnings for $21,000.
d. Treasury Shares for $72,000 and Retained Earnings for $9,000.

Question 15

Q

Long Co. issued 100,000 shares of $10 par ordinary shares for $1,200,000. Long acquired 8,000 shares of its own shares at $15 per share. Three months later Long sold 4,000 of these shares at $19 per share. If the cost method is used to record treasury shares transactions, to record the sale of the 4,000 treasury shares, Long should credit
a. Treasury Shares for $76,000.
b. Treasury Shares for $40,000 and Share Premium—Treasury for $36,000.
c. Treasury Shares for $60,000 and Share Premium—Treasury Stock for $16,000.
d. Treasury Shares for $60,000 and Share Premium—Ordinary for $16,000.

Question 16

Q

An analysis of equity of Hahn Corporation as of January 1, 2015, is as follows:
Share capital—ordinary, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares
Share premium—ordinary Retained earnings
Total
$1,800,000 900,000 760,000 $3,460,000
Equity 15 - 15
Hahn uses the cost method of accounting for treasury shares and during 2015 entered into the following transactions:
Acquired 2,500 of its shares 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 2015, what should Hahn report at December 31, 2015, as total share premium?

a. $895,000
b. $900,000
c. $905,000 d. $915,000

Question 17

Q

Percy Corporation was organized on January 1, 2015, with an authorization of 1,200,000 ordinary shares with a par value of $6 per share. During 2015, the corporation had the following capital transactions:
January 5 July 28 December 31
issued 675,000 shares @ $10 per share
purchased 90,000 shares @ $11 per share
sold the 90,000 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 share premium as of December 31, 2015?
a. $-0-.
b. $2,070,000.
c. $2,700,000.
d. $3,330,000.

Question 18

Q

No other share transactions occurred during 2016. Assuming Sosa uses the cost method to record treasury share transactions, the total amount of all share premium accounts at December 31, 2016 is

a. $891,600.
b. $870,000.
c. $908,400.
d. $927,600.

Question 19

Q

For the year ended December 31, 2016, Oaks reported net income of $450,000. Assuming Oaks accounts for treasury under the cost method, what should it report as total equity on its December 31, 2016, statement of financial position?
a. $1,965,000.
b. $1,961,400.
c. $1,957,800.
d. $1,515,000.

Question 20

Q

On December 1, 2016, Abel Corporation exchanged 20,000 shares of its $10 par value ordinary shares 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 ordinary shares 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 equity will increase by

a. $200,000.
b. $800,000.
c. $1,100,000.
d. $900,000.

Question 21

Q

Luther Inc., has 2,000 shares of 6%, $50 par value, cumulative preference shares and 100,000 shares of $1 par value ordinary shares outstanding at December 31, 2016, and December 31, 2015. The board of directors declared and paid a $5,000 dividend in 2015. In 2016, $24,000 of dividends are declared and paid. What are the dividends received by the preference shareholders in 2016?

a. $17,000
b. $12,000
c. $ 7,000
d. $ 6,000

Question 22

Q

Anders, Inc., has 5,000 shares of 5%, $100 par value, cumulative preference shares and 20,000 shares of $1 par value ordinary shares outstanding at December 31, 2016. There were no dividends declared in 2014. The board of directors declares and pays a $45,000 dividend in 2015 and in 2016. What is the amount of dividends received by the ordinary shareholders in 2016?
a. $15,000
b. $25,000
c. $45,000
d. $0

Question 23

Q

Colson Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 7%, $100 par value cumulative preference shares outstanding. It is one year in arrears on its preference shares. How much cash will Colson distribute to the ordinary shareholders?
a. $76,000.
b. $84,000.
c. $118,000.
d. None.

Question 24

Q

On 1/1/16, Everwood Co. issues 10,000 shares of £10 par value convertible preference shares for £12 cash per share. Each share is convertible into 4 ordinary shares. On this date the £1 par value ordinary shares are selling for £3 per share. Approximately 2 years later, Everwood’s shareholders convert their preference shares into ordinary shares. On the date of conversion the preference shares are selling for £16 and the ordinary shares are selling for £5 per share. The journal entry on 1/1/16 will include which of the following?

a. Credit Share Capital—Preference £20,000.
b. Credit Share Premium—Ordinary £20,000.
c. Credit Share Capital—Preference £100,000.
d. Debit Share Premium—Ordinary £20,000.

Question 25

Q

Everwood Co. issues 10,000 shares of £10 par value convertible preference shares for £12 cash per share. Each share is convertible into 4 ordinary shares. On this date the £1 par value ordinary shares are selling for £3 per share. Approximately 2 years later, Everwood’s shareholders convert their preference shares into ordinary shares. On the date of conversion the preference shares are selling for £16 and the ordinary shares are selling for £5 per share. The journal entry on the date of conversion will include which of
the following?

a. Credit Share Capital—Preference £20,000.
b. Credit Share Premium—Ordinary £80,000.
c. Credit Share Capital—Ordinary £100,000.
d. Credit Share Premium—Ordinary £160,000.

Question 26

Q

Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were purchased in 2014 for $90,000. On November 15, 2016, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a shareholder. On that date, when the market price of Hunter was $14 per share, there were 90,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Gain Retained Earnings
a. $0 $126,000
b. $0
c. $45,000
d. $45,000
$ 81,000 $ 81,000 $ 36,000

Question 27

Q

106.
Stinson Corporation owned 30,000 shares of Matile Corporation. These shares were purchased in 2014 for $270,000. On November 15, 2016, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a shareholder. On that date, when the market price of Matile was $14 per share, there were 270,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Net Reduction in Gain Retained Earnings
a. $0 $243,000
b. $0 $378,000
c. $135,000 $108,000
d. $135,000 $243,000

Question 28

Q

Winger Corporation owned 900,000 shares of Fegan Corporation. On December 31, 2016, when Winger’s account “Investment in Fegan Corporation” had a carrying value of $5 per share, Winger distributed these shares to its shareholders as a dividend. Winger originally paid $8 for each share. Fegan has 3,000,000 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 equity as a result of the above transactions?
a. $3,600,000.
b. $4,500,000.
c. $7,200,000.
d. $8,100,000.

Question 29

Q

Gibbs Corporation owned 20,000 shares of Oliver Corporation’s $5 par value ordinary shares. These shares were purchased in 2014 for $180,000. On September 15, 2016, Gibbs declared a property dividend of one share of Oliver for every ten shares of Gibbs held by a shareholder. On that date, when the market price of Oliver was $14 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend?

a. $90,000
b. $252,000
c. $72,000
d. $162,000

Question 30

Q

Melvern’s Corporation has an investment in 5,000 shares of Wallace Company ordinary shares with a cost of $218,000. These shares are used in a property dividend to shareholders of Melvern’s. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to shareholders of record on June 15. The market value per Wallace share 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. $340,000.
b. $330,000.
c. $315,000.
d. $218,000.

Question 31

Q

1. Hernandez Company has 350,000 shares of $10 par value ordinary shares outstanding. During the year, Hernandez declared a 10% share 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. $542,500.
b. $525,000.
c. $192,500.
d. $175,000.

Question 32

Q

On June 30,
accounts were as follows:
Share capital—ordinary (par value $50; 60,000 shares issued) Share premium—ordinary
Retained earnings
2016, when Ermler Co.’s stock was selling at $65 per share, its equity
If a 100% share dividend were declared and distributed, share capital—ordinary would be a. $3,000,000.
b. $3,600,000.
c. $6,000,000.
d. $7,800,000.

Question 33

Q

The equity section of Gunkel Corporation as of December 31, 2015, was as follows: Share capital—ordinary, par value $2; authorized 20,000 shares;
issued and outstanding 10,000 shares Share premium—ordinary
Retained earnings
$ 20,000 30,000 75,000 $125,000
Equity 15 - 19
$3,000,000 600,000 4,200,000
On March 1, 2016, the board of directors declared a 15% share dividend, and accordingly 1,500 additional shares were issued. On March 1, 2016, the fair value of the share was $6 per share. For the two months ended February 28, 2016, Gunkel sustained a net loss of $10,000.
What amount should Gunkel report as retained earnings as of March 1, 2016?
a. $62,000.
b. $65,000.
c. $69,000.
d. $72,000.

Question 34

Q

On August 1, 2016, the board of directors of Howell declared a 15% share dividend on ordinary shares, to be distributed on September 15th. The market price of Howell’s ordinary shares was $35 on August 1, 2016, and $38 on September 15, 2016. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this share dividend?

a. $480,000.
b. $840,000.
c. $912,000.
d. $600,000.

Question 35

Q

On January 1, 2016, Dodd, Inc., declared a 10% ordinary share dividend when the fair value of the ordinary shares was $20 per share. Equity before the share dividend was declared consisted of:
Share capital—ordinary, $10 par value, authorized 200,000 shares;
issued and outstanding 160,000 shares Share premium—ordinary
issued and outstanding 120,000 shares Share premium—ordinary
Retained earnings
Total equity
$1,200,000 150,000 700,000 $2,050,000

What was the effect on Dodd’s retained earnings as a result of the above transaction?
a. $120,000 decrease
b. $240,000 decrease
c. $400,000 decrease
d. $200,000 decrease

Question 36

Q

On January 1, 2016, Culver Corporation had 110,000 shares of its $5 par value ordinary shares outstanding. On June 1, the corporation acquired 10,000 shares to be held in the treasury. On December 1, when the market price of the shares was $8, the corporation declared a 10% share dividend to be issued to shareholders of record on December 16, 2016. What was the impact of the 10% share dividend on the balance of the retained earnings account?

a. $50,000 decrease
b. $80,000 decrease
c. $88,000 decrease
d. No effect

Question 37

Q

At the beginning of 2016, Flaherty Company had retained earnings of $200,000. During the year Flaherty reported net income of $100,000, sold treasury shares at a “gain” of $36,000, declared a cash dividend of $60,000, and declared and issued a share dividend of 3,000 shares ($10 par value) when the fair value of the shares was $20 per share. The amount of retained earnings available for dividends at the end of 2016 was

a. $180,000.
b. $210,000.
c. $216,000.
d. $246,000.

Question 38

Q

Masterson Company has 420,000 shares of $10 par value ordinary shares outstanding. During the year Masterson declared a 5% share dividend when the market price of the shares 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. $474,600
b. $756,000
c. $264,600
d. $252,000

Question 39

Q

At the beginning of 2016, Hamilton Company had retained earnings of $150,000. During the year Hamilton reported net income of $75,000, sold treasury shares at a “gain” of $27,000, declared a cash dividend of $45,000, and declared and issued a small share dividend of 1,500 shares ($10 par value) when the fair value of the shares was $30 per share. The amount of retained earnings available for dividends at the end of 2016 was:

a. $184,500.
b. $162,000.
c. $157,500.
d. $165,000.

Question 40

Q

Mingenback Company has 560,000 shares of $10 par value ordinary shares outstanding. During the year Mingenback declared a 5% share dividend when the market price of the shares 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. $336,000.
b. $352,800.
c. $1,344,000.
d. $632,800.

Question 41

Q

Janae Corporation has outstanding 10,000 shares of £10 par value ordinary shares and retained earnings of £500,000. If Janae declares a 10 percent share dividend when the
fair value of the shares is £85 per share, the entry includes:
a. A debit to Retained Earnings for £10,000.
b. A credit to Share Premium—Ordinary for £75,000.
c. A debit to cash for £85,000.
d. No entry is required for a share dividend.

Question 42

Q

Janae Corporation has outstanding 10,000 shares of £10 par value ordinary shares and retained earnings of £500,000. If Janae declares a 2-for-1 share split when the fair value of the shares is £85 per share, the entry includes:
a. A debit to Retained Earnings for £10,000.
b. A credit to Share Premium—Ordinary for £75,000.
c. A debit to cash for £85,000.
d. No entry is required for a share split.

Question 43

Q

Nikos Company has cash dividends of €210,000 and net income of €620,000. At yearend, its ordinary shareholders’ equity is €2,000,000 and it has 200,000 ordinary shares outstanding. The book value per share for the Nikos Company is:
a. €10/share.
b. €1.05/share.
c. €3.10/share.
d. Cannot be determined based on the information provided.

Question 44

Q

Nikos Company paid preference dividends of €210,000 and reported net income of
€620,000. Its average ordinary shareholders’ equity is €2,000,000 and it has 200,000 ordinary shares outstanding. The return on ordinary share equity for the Nikos Company is approximately:
a. 31%.
b. 21%.
c. 42%.
d. Cannot be determined based on the information provided.

Question 45

Q

What is the payout ratio for Layne Corporation for the year ended 2016?
a. 24.7%
b. 16.1%
c. 10.3%
d. 8.6%

Question 46

Q

What is the book value per share for Layne Corporation at December 31, 2016?
a. $12.00
b. $11.90
c. $11.33
d. $10.67

Question 47

Q

What is the return on ordinary share equity for Sealy Corporation for the year ended 2016?
a. 6.5%
b. 6.0%
c. 5.6%
d. 5.2%

Question 48

Q

What is the price-earnings ratio for Sealy Corporation at December 31, 2016?
a. 16.1
b. 16.7
c. 19.4
d. 21.1

Question 49

Q

Mays, Inc. had net income for 2015 of $2,120,000 and earnings per share on ordinary shares of $5. Included in the net income was $300,000 of bond interest expense related to its long-term debt. The income tax rate for 2015 was 30%. Dividends on preference shares were $400,000. The payout ratio on ordinary shares was 25%. What were the dividends on ordinary shares in 2015?

a. $430,000.
b. $530,000.
c. $482,500.
d. $645,000.

Question 50

Q

Presented below is information related to Orender, Inc.:
Ordinary shares
4% Preference shares
Retained earnings (includes net income for current year) Net income for year
What is Orender’s return on ordinary share equity for 2016?
a. 20.0%
b. 10.7%
c. 18.2%
d. 21.3%

Question 51

Q

The return on ordinary share equity for 2016 is
a. 90 ÷ 400.
b. 90 ÷ 440.
c. 80 ÷ 400.
d. 80 ÷ 440.

Question 52

Q

The book value per share at 12/31/16 is
a. 430 ÷ 12.
b. 200 ÷ 12.
c. 330 ÷ 12.
d. 440 ÷ 11.

Question 53

Q

What is the payout ratio for Turner Corporation for the year ended 2016?
a. 12.1%
b. 16.0%
c. 36.3%
d. 41.3%

Question 54

Q

What is the book value per share for Turner Corporation at December 31, 2016?
a. $19.17
b. $20.00
c. $10.43
d. $24.00

Question 55

Q

Assuming that $150,000 will be distributed as a dividend in the current year, how much will the ordinary shareholders receive?
a. Zero.
b. $78,000.
c. $102,000. d. $126,000.

Question 56

Q

Assuming that $63,000 will be distributed as a dividend in the current year, how much will the preference shareholders receive?
a. $21,000.
b. $24,000.
c. $48,000.
d. $63,000.

Question 57

Q

Assuming that $183,000 will be distributed, and the preference shares are also participating, how much will the ordinary shareholders receive?
a. $111,000.
b. $90,000.
c. $93,000. d. $48,000.

Question 58

Q

Yoder, Inc. has 50,000 shares of $10 par value ordinary shares and 25,000 shares of $10 par value, 6%, cumulative, participating preference shares outstanding. Dividends on the preference shares are one year in arrears. Assuming that Yoder wishes to distribute $135,000 as dividends, the ordinary shareholders will receive
a. $30,000.
b. $55,000.
c. $80,000.
d. $105,000.

Question 59

Q

Mann Co. has outstanding 50,000 shares of 8% preference shares with a $10 par value and 125,000 shares of $3 par value ordinary shares. Dividends have been paid every year except last year and the current year. If the preference shares are cumulative and nonparticipating and $250,000 is distributed, the ordinary shareholders will receive
a. $0.
b. $170,000.
c. $210,000.
d. $250,000.

Question 60

Q

Horton Co. was organized on January 2, 2016, with 500,000 authorized shares of $10 par value ordinary shares. During 2016, Horton had the following capital transactions:
January 5—issued 375,000 shares at $14 per share.
July 27—purchased 25,000 shares at $11 per share.
November 25—sold 15,000 shares of treasury shares at $13 per share.
Horton used the cost method to record the purchase of the treasury shares. What would be the balance in the Share Premium—Treasury account at December 31, 2016?
a. $0.
b. $15,000.
c. $30,000.
d. $45,000.

Question 61

Q

Farmer Corp. owned 20,000 shares of Eaton Corp. purchased in 2012 for $240,000. On December 15, 2015, Farmer declared a property dividend of all of its Eaton Corp. shares on the basis of one share of Eaton for every 10 ordinary shares of Farmer held by its shareholders. The property dividend was distributed on January 15, 2016. On the declaration date, the aggregate market price of the Eaton shares held by Farmer was $400,000.

The entry to record the declaration of the dividend would include a debit to Retained Earnings of
a. $0.
b. $160,000.
c. $240,000.
d. $400,000.

Question 62

Q

On May 1, 2016, Ziek Corp. declared and issued a 10% ordinary shares dividend. Prior to this dividend, Ziek had 100,000 ordinary shares of $1 par value issued and outstanding. The fair value of Ziek ‘s ordinary shares was $20 per share on May 1, 2016. As a result of this share dividend, Ziek’s total equity
a. increased by $200,000.
b. decreased by $200,000.
c. decreased by $10,000.
d. did not change.

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Equity Flashcards

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