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Instructions:
Financial Report Assignment (Accountancy 332/532)
1st chapter homework
Summer 2021
Problem 1: multiple choice questions
On the answer sheet, write the letter of the best answer.
1. Which of the statements below is correct?
A. The presence of retained earnings is a required but insufficient condition for a corporation’s Board of Directors to declare a cash dividend.
B. The excess of the cost of treasury stock over the amount obtained from selling it should be charged to paid in capital, not retained earnings, because a business cannot report a loss while dealing in its own stock, according to the Accounting Standards Codification.
C. A and B are two options.
D. Neither A nor B are correct.
2. Which of the statements below is correct?
A. Before a large stock dividend may be declared, it must be approved by the stockholders.
B. A stock split performed in the form of a stock dividend refers to a significant stock payout.
C. A and B are two options.
D. Neither A nor B are correct.
3. Which of the statements below is correct?
A. When convertible preferred stock is converted into common stock, the difference between the market value of the common shares and the book value of the preferred shares is charged to paid in capital from prior preferred stock conversions up to the credit amount, and then to retained earnings.
B. Because the company’s stockholders voted against a reverse stock split, Blockbuster’s common stock was delisted.
C. A and B are two options.
D. Neither A nor B are correct.
To answer questions 4 6, use the information below about Komey Inc.:
31st of December
2020 and 2021
$ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $
$2 par value common stock 120,000 160,000
590,000 750,000 paid in capital-common
150,000 310,000 150,000 310,000 150,000 310,000 150,000 310,000 150,000 310,000 150,000 310,000 1
5,000 shares of common stock held in treasury
110,000 110,000 (2020 and 2021)
$ 1,000,000 $ 1,360,000 total stockholders’ equity
Declared and paid cash dividends during the year
On preferred 20,000 20,000
On average, 40,000 to 60,000 people are employed.
120,000 240,000 120,000 240,000 120,000 240,000 120,000 240,000 120,000 240,000 120,000 2
4. What is the return on common shareholders’ equity (rounded) for Komey in 2021?
A. 20.3 percent of the population.
B. 25.8 percent .
C. 23.7 percent .
D. 18.6% of the population.
5. What is Komey’s common stock payout ratio for 2021 (rounded)?
A. 25% of the total.
B. Approximately 27.3 percent
C. 33.3 percent of the population
D. With 36.7 percent,
6. What is the cash dividend per share of common stock for 2021, assuming that all common stock issued in that year was issued on January 2?
A. $.75.
B. $1.00.
C. $.80.
D. $1.07.
7. On January 1, 2021, Oneweigh Inc. provided you with the following information:
$1,000,000 in total assets
600,000 in total liabilities
Oneweigh completed the following transactions on January 2, 2021:
For $100,000, 8,000 shares of common stock with a par value of $10 were issued.
The proceeds of the stock issuance were used to pay $10,000 in underwriting fees related with the stock offering.
What is Oneweigh’s debt-to-equity ratio (rounded) immediately following the two transactions above?
A. a hundred percent
B. The percentage is 118.75 percent.
C. The percentage is 117.65%.
D. The percentage is 122.45 percent.
8. Find Apple’s 10-K annual report filed with the Securities and Exchange Commission for the fiscal year ending September 26, 2020 on the internet. Which of the following claims is true based on this report?
A. For the year ended September 26, 2020, Apple spent $72,358,000,000 to repurchase its own common shares.
B. The total number of common shares issued and outstanding as at September 26, 2020 was 17,772,945,000.
C. A and B are two options.
D. Neither A nor B are correct.
9. Which of the following claims is correct regarding Apple Inc.?
A. To lower the amount paid for qualification or licensing fees in areas where Apple did business as a foreign corporation, the Company switched from no par common stock to par value common stock.
B. The major goal of the Company’s 7-for-1 stock split was to lower the market price of its common stock to a more accessible level, allowing small investors to purchase shares.
C. A and B are two options.
D. Neither A nor B are correct.
10. Carol Inc. has current assets of $500,000 and current liabilities of $350,000 as of September 28, 2021, when a cash dividend was declared. Carol’s Board of Directors declared a $50,000 cash dividend on September 28, 2021, which will be paid on October 17 to stockholders of record on October 10. Which of the statements below is correct?
A. The current ratio is lower after the cash dividend was paid on October 17 than it was before the cash dividend was issued.
B. The current ratio is higher after the cash dividend was paid on October 17 than it was before the cash dividend was proclaimed.
C. A and B are two options.
D. Neither A nor B are correct.
11. Which of the statements below is correct?
A. Stock dividends, whether modest and big, result in the permanent capitalization of retained earnings.
B. The statement by a company that it intends to buy back its own common stock frequently results in an increase in the market price of that company’s common stock.
C. A and B are two options.
D. Neither A nor B are correct.
12. What effect would a two-for-one stock split have on each of the following?
Authorized shares Par value per share Earnings retained
A. No impact Increase Decrease
B. Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease De
C. Increase Reduction Reduction
D. Intensify No impact Intensify
13. What is the market value of a company’s common stock if it is worth more than its par value?
What impact would a 100% stock dividend have on the amounts reported for each of the following?
Retained earnings Common stock Additional paid in capital
A. No impact Increase Decrease
B. No effect, no effect, no effect, no effect, no effect, no effect, no
C. Increase with no effect Decrease with no effect
D. Raise Raise Raise Raise Raise Raise Raise Raise R
14. What is the market value of a company’s common stock if it is worth more than its par value?
What would a 10% stock dividend mean in terms of the amounts reported for each of the following?
Retained earnings Common stock Additional paid in capital
A. Increase Reduction Reduction
B. There is no effect Decrease There is no effect
C. No impact Increase Decrease
D. Raise Raise Raise Raise Raise Raise Raise Raise R
Answer questions 15 and 16 using the information given.
Prior to the declaration of a 40% stock dividend, Sara Lea Inc. reported the following information on June 30, 2021:
$ 4,000,000 in common stock, par value $2.50, issued 1,600,000 shares
7,000,000 in capital was paid out.
9,500,000 in retained earnings
240,000 shares of Treasury stock at a cost of $2,880,000
Sara Lea’s Board of Directors declared a 40% stock dividend on issued shares on July 1, 2021. The dividend will be paid on July 20th to stockholders who were on the books on July 10th. Sara Lea’s common stock had a market value of $40 per share on the day of the declaration.
15. Which of the following assertions is correct after recording the pronouncement of the stock dividend?
A. The total value of the stockholders’ equity is $17,620,000.
B. The total amount of retained earnings is $7,900,000.
C. A and B are two options.
D. Neither A nor B are correct.
16. How many shares of common stock will be issued when the stock dividend is distributed?
outstanding?
Outstanding Issued
A. 2,000,000 2240000
B. 1,904,000; 2,240,000; 2,240,000; 2,240,000; 2,240,000
C. 1,904,000; 2,144,000; 2,144,000; 2,144,000; 2,144,000
D. 2,000,000 2,144,000
17. Which of the statements below is correct?
A. The major goal of Microsoft’s 2 for 1 stock split was to lower the market value of the company’s common stock so that it could be included in the Dow Jones Industrial Average.
B. Investors who purchase Berkshire-Class Hathaway’s B common shares do not expect to receive cash dividends.
C. A and B are two options.
D. Neither A nor B are correct.
18. Simon Inc. owns 65,000 shares of Shortridge Inc. common stock. Simon’s Board of Directors decided on December 31, 2021, to distribute one share of Shortridge common stock for every five shares of Simon’s common stock outstanding. Simon had 300,000 common shares outstanding on the day of the declaration. Shortridge common stock cost $15 per share and has a market value of $18 per share as of December 31, 2021. Which of the following assertions about the property dividend declaration date is correct?
A. $1,080,000 should be deducted from retained earnings.
B. $180,000 in unrealized gain on marketable equity securities should be credited.
C. A and B are two options.
D. Neither A nor B are correct.
19. Which of the statements below is correct?
A. Dividends in arrears on cumulative preferred stock due to be declared and paid in 2022 are reflected under current liabilities on the December 31, 2021, balance sheet.
B. Convertible preferred stockholders, like common stockholders, have voting rights.
C. A and B are two options.
D. Neither A nor B are correct.
20. Able Company’s Board of Directors is debating whether to declare a stock split or a stock dividend of equal size. Which of the following claims is correct, according to the Board?
A. If the Board of Directors declares a stock dividend rather than a stock split, the debt-to-equity ratio will be higher.
B. If the Board of Directors declares a stock dividend rather than a stock split, the par value of the common shares will be increased.
C. A and B are two options.
D. Neither A nor B are correct.
21. Which of the statements below is correct?
A. Transfer agents are used by publicly traded companies to disburse cash dividends to stockholders.
B. Cash dividends must meet the criteria for being categorized as ordinary dividends in order to be taxed preferentially for federal income taxes.
C. A and B are two options.
D. Neither A nor B are correct.
22. Which of the statements below is correct?
A. Dividend yields that are higher than the industry average should be avoided if the high yield is due to a dropping common stock price.
B. According to the Accounting Standards Codification, a property dividend is a reciprocal transfer of a nonmonetary asset.
C. A and B are two options.
D. Neither A nor B are correct.
23. Which of the statements below is correct?
A. The “dividend push” strategy involves buying common stock from companies that have a history of paying cash dividends every year.
B. Stock dividends are not taxed, unlike cash dividends, because they do not transfer wealth from the firm to the stockholders.
C. A and B are two options.
Neithe, D.
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Financial Report Assignment |
Financial Report Assignment