Fifo Inc. raises $4 million dollars by issuing shares of common
stock. The market rate of interest is 10% at the time of issue. Assuming a corporate income tax rate of 30%, 100,000 common shares issued, and an increase in net income of $1,000,000 due to the additional resources, what is the effect on earnings per share?
a. $40 increase
b. $28 increase
c. $4.20 increase
d. $7 increase
Loretta Inc. issues 2,000 shares of preferred stock in exchange for land and building that have a fair value of $50,000 and $80,000 respectively. What is included in the journal entry to record this transaction?
a. A debit to Land and Building for $130,000
b. A debit to Land for $80,000
c. A credit to Preferred Stock for $130,000
d. A credit to Preferred Stock for $2,000
Sabie Inc. has 100,000 authorized shares of common stock, 2,000 shares issued and 1,800 outstanding. It has decided to declare a 2‐for‐1 stock split when the average cost per share is $10. What is the effect of this stock split?
a. Stock outstanding increases to 3,600
b. Stock issued is unchanged
c. Stockholder's equity decreases by $20,000
d. Stockholder's equity increases by $18,000
A company is authorized to issue 500,000 shares of common stock. There are 5,000 outstanding shares. The board declares a cash dividend of $.50 per share on December 1, 2019. What is included in the journal entry to record the declaration of the dividend?
a. A debit to Cash Dividends Declared of $2,500
b. A credit to Retained Earnings of $2,500
c. A debit to Cash Dividends Declared of $250,000
d. No entry is made
A company has the following capital stock outstanding: preferred shares of $15,000, common shares of $30,000, retained earnings of $100,000. Preferred dividends in arrears amount to $5,000. There are 10,000 shares of common stock and 1,000 shares of preferred outstanding. What is the book value of one share of common stock?
A company has the following capital stock outstanding: preferred shares of $15,000, common shares of $30,000, retained earnings of $100,000. Preferred dividends in arrears amount to $5,000. There are 10,000 common shares and 1,000 preferred shares issued. What is the book value one share of preferred stock?
PART 2: Financial statement effects
For each event listed below, indicate whether the amount of each financial statement component is
- increased or decreased .
- Mark + or -
- Indicate with an 'x' if there is no change. (See the response to statement 1 below.)
Consider each event to be unrelated to the others, unless otherwise indicated.
Assets | Liabilities | Stockholders' Equity
1. Declared of cash dividend x - +
2. Paid the cash dividend in item 1
3. Split common stock 2:1
4. Declared a stock dividend
5. Redeemed preferred stock for cash
6. Paid a stock dividend
7. Recorded a restriction on retained earnings
Recently Asked Questions
- Please refer to the attachment to answer this question. This question was created from Restest Exam Fall 2019 Student.docx.
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