Question

1. Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share. When the transaction is recorded, credits are made to

a.Common Stock, $7,000, and Paid-In Capital in Excess of Stated Value, $15,000

b.Common Stock, $15,000, and Paid-In Capital in Excess of Par—Common Stock, $7,000

c.Common Stock, $22,000

2. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends:

Year 1	$10,000
Year 2	45,000
Year 3	90,000

3. Determine the dividends per share for preferred and common stock for the second year.

a.$0 and $0.45

b.$2.25 and $0

c.$2.25 and $0.45

d.$2.00 and $0.45

4. Sneed Corporation issues 10,000 shares of $50 par preferred stock for cash at $75 per share. The entry to record the transaction will consist of a debit to Cash for $750,000 and a credit or credits to

a.Preferred Stock for $500,000 and Paid-In Capital in Excess of Par—Preferred Stock for $250,000

b.Preferred Stock for $750,000

c.Preferred Stock for $500,000 and Retained Earnings for $250,000

d.Paid-In Capital from Preferred Stock for $750,000

d.Common Stock, $22,000, and Retained Earnings, $15,000

5. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2-per-share dividend is declared?

a.$80,000

b.$90,000

c.$100,00

d.$10,000

6. What is the total stockholders' equity based on the following account balances?

Common Stock	$375,000
Paid-In Capital in Excess of Par	90,000
Retained Earnings	190,000
Treasury Stock	15,000

a.$655,000

b.$670,000

c.$565,000

d.$640,000

Answer 1

1.

Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share.

Following journal entry will be made for this transaction:

	Cash	22,000
	Common Stock		15,000
	Paid-In Capital in Excess of Par—Common Stock		7,000

Correct option is (b)

2. and 3

Annual preferred dividends = Number of preferred shares x Par value per share x Dividend rate

= 20,000 x 100 x 2%

= $40,000

In year 1, dividend paid is only $10,000 and it will be paid to preferred stockholders only.

Dividend in arrears on preferred stock in year 1 = Annual preferred dividends - Dividend paid

= 40,000 - 10,000

= $30,000

In the year 2, whole of $45,000 dividend will be paid to preferred stockholders. No dividend is payable to common stockholders in year 2

Dividend per share for preferred stock = Preferred dividend/Number of preferred shares

= 45,000/20,000

= $2.25

Dividend per share common stock = $0

Correct option is (b)

4.

Sneed Corporation issues 10,000 shares of $50 par preferred stock for cash at $75 per share.

Following journal entry will be made for this transaction:

	Cash	750,000
	Preferred Stock		500,000
	Paid-In Capital in Excess of Par - Preferred Stock		250,000

Correct option is (a)

5.

Number of outstanding shares = Number of shares issued - Number of shares reacquired

= 45,000 - 5,000

= 40,000

Dividend per share = $2

Total dividends = Number of outstanding shares x Dividend per share

= 40,000 x 2

= $80,000

Correct option is (a)

6.

stockholders' equity section

Common Stock	$375,000
Paid-In Capital in Excess of Par	90,000
Retained Earnings	190,000
Treasury Stock	- 15,000
Total stockholders' equity	$640,000

Correct option is (d)

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