Question

1. Restrictions of retained earnings may result from each of the following except a. contractual restrictions....

1. Restrictions of retained earnings may result from each of the following except

a. contractual restrictions.

b. legal restrictions.

c. prior period adjustment restrictions.

d. voluntary restrictions.

2. Manner, Inc. has 15,000 shares of 6%, $100 par value, noncumulative preferred stock and 30,000 shares of $1 par value common stock outstanding at December 31, 2011. There were no dividends declared in 2010. The board of directors declares and pays a $150,000 dividend in 2011. What is the amount of dividends received by the common stockholders in 2011?

a. $0

b. $60,000

c. $150,000

d. $90,000

3. Hauser Manufacturing declared a 10% stock dividend when it had 150,000 shares of $3 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to

a. Stock Dividends for $45,000.

b. Common Stock Dividends Distributable for $180,000.

c. Common Stock for $45,000.

d. Paid-in Capital in Excess of Par for $135,000.

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Answer #1

Question - (1)

Answer -

Restrictions of retained earnings may result from contractual restrictions, legal restrictions and voluntary restrictions.

Hence, Option - (c), Prior period adjustment restrictions, is Correct.

.

Question - (2)

Answer -

The amount of dividends received by the common stockholders in 2011 :-

= Total dividend amount - Dividends received by the preferred stockholders

= $150000 - [(15000 shares * $100) * 6%]

= $150000 - $90000

= $60000

Hence, Option - (b) is Correct.

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