Question

1. Cash dividends on the $10 par value common stock of Garrett Company were as follows:
1st quarter of 2016 ...... $ 800,000
2nd quarter of 2016 ...... 900,000
3rd quarter of 2016 ...... 1,000,000
4th quarter of 2016 ...... 1,100,000
The 4th-quarter cash dividend was declared on December 21, 2016, to shareholders of record on December 31, 2016. Payment of the 4th quarter cash dividend was made on January 18, 2017. In addition, Garrett declared a 5% stock dividend on its $10 par value common stock on December 3, 2016, when there were 300,000 shares issued and outstanding and the market value of the common stock was $20 per share. The shares were issued on December 24, 2016. What was the effect on Garrett’s shareholders’ equity accounts as a result of the preceding transactions?
2. A prior period adjustment should be reflected of applicable income taxes, in the financial statements of a business entity in the:
a. Retained earnings statement after net income but before dividends
b. Retained earnings statement as an adjustment of the opening balance
c. Income statement after income from continuing operations
d. Income statement as part of income from continuing operations
3. Prince Corporation’s accounts provided the following information at December 31, 2016:
Total income since incorporation .......... $840,000
Total cash dividends paid ............ 260,000
Total value of stock dividends distributed ...... 60,000
Additional paid-in capital from treasury stock .... 140,000
What should be the current balance of retained earnings?
a. $520,000
b. $580,000
c. $610,000
d. $670,000
4. Effective May 1, the shareholders of Baltimore Corporation approved a 2-for-l split of the company’s common stock and an increase in authorized common shares from 100,000 shares (par value $20 per share) to 200,000 shares (par value $10 per share). Baltimore’s shareholders’ equity items immediately before issuance of the stock split shares were as follows:
What should be the balances in Baltimore's .Additional Paid in Capital and Retained Earnings accounts immediately after the stock split is effected?
5. Kent Corporation was organized on January 1, 2014. On that date, it issued 200,000 shares of $10 par value common stock at $15 per share. During the period January 1, 2014, through December 31, 2016, Kent reported net income of $750,000 and paid cash dividends of $380,000. On January' 5, 2016, Kent purchased 12,000 shares of its common stock at $12 per share. On December 28, 2016, 8,000 treasury' shares were sold at $8 per share. Kent used the cost method of accounting for treasury' shares. What is Kent’s total shareholders’ equity as of December 31, 2016?
a. $3,290,000
b. $3,306,000
c. $3,338,000
d. $3,370,000
6. For purposes of computing the weighted average number of shares outstanding during the year, a midyear event that must be treated as occurring at the beginning of the year is the:
a. Issuance of stock warrants
b. Purchase of treasury stock
c. Sale of additional common stock
d. Declaration and issuance of a stock dividend
7. In determining basic earnings per share, dividends on nonconvertible cumulative preferred stock should be:
a. Deducted from net income only if declared
b. Deducted from net income whether declared or not
c. Added back to net income whether declared or not
d. Disregarded
8. Hyde Corporation's capital structure at December 31, 2015, was as follows:
Shares Issued and Outstanding
Common stock ....... 100,000
Nonconvertible preferred stock ... 20,000
On July 2, 2016, Hyde issued a Mi stock dividend on its common stock and paid a cash dividend of $2.00 per share on its preferred stock. Net income for the year ended December 31, 2016, was $780,000. What should be Hyde’s 2016 basic earnings per share?
a. $7.80
b. $7.09
c. $7.68
d. $6.73
9. Iredell Company has 2,500,000 shares of common LO 16.5 stock outstanding on December 31, 2015. An additional 500,(XX) shares of common stock were issued on April 2, 2016, and 250,000 more on July 2, 2016. On October 1, 2016, Iredell issued 5,000, $1,000 face value, 7% convertible bonds. Each bond is dilutive and convertible into 40 shares of common stock. No bonds were converted into common stock in 2016. What is the number of shares to be used in computing basic earning? Per share and diluted earnings per share, respectively, for the war ended December 31, 2016?
a. 2,875,000 and 2,925,000
b. 2,875,000 and 3,075,000
c. 3,000,000 and 3,050,000
d. 3,000,000 and 3,200,000
10. At December 31, 2016, Talbot Corporation had 90,000 shares of common stock and 20,000 shares of convertible preferred stock outstanding, in addition to 9% convertible bonds payable in the face amount of $2,000,000. During 2016, Talbot paid dividends of $2.50 per share on the preferred stock. The preferred stock is convertible into 20,000 shares of common stock. The 9% convertible bonds are convertible into 30,000 shares of common stock. Net income for 2016 was $970,000. Assume an income tax rate of 30%. How much is the diluted earnings per share for the year ended December 31, 2016?
a. $7.83
b. $8.82
c. $9.35
d. $10.22


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