Introductory to Financial Accounting - Chapter 11

A company has net income of $225,000 and declares and pays dividends in the amount of $75,000. What is the net impact on retained earnings?

• Increase of $225,000
  

• Decrease of $75,000
  

• Increase of $150,000
  

• Decrease of $150,000
  

Which statement regarding dividends is false?

• Dividends represent a distribution of corporate profits to owners.

• Cash dividends reduce retained earnings.

• Cash dividends paid to stockholders reduce net income.

• None of the above statements are false.

Which of the following dates does not require a journal entry?

• Date of declaration.

• Date of record.

• Date of payment.

• A journal entry is recorded on all of these dates.

Katz Corporation has issued 400,000 shares of common stock and holds 20,000 shares in treasury. The charter authorized the issuance of 500,000 shares. The company has declared and paid a dividend of $1 per share on outstanding common stock. What is the total amount of the dividend paid to common stockholders?

• $400,000

• $20,000

• $380,000

• $500,000

Which statement regarding treasury stock is false?

• Treasury stock is considered to be issued but not outstanding.

• Treasury stock has no voting, dividend, or liquidation rights.

• Treasury stock reduces total equity on the balance sheet.

• None of the above are false.

A company issued 100,000 shares of common stock with a par value of $1 per share. The stock sold for $20 per share. By what amount will stockholders’ equity increase?

• $100,000

• $1,900,000

• $2,000,000

• Stockholders’ equity will not change.

Which order best describes the largest number of shares to the smallest number of shares?

• Shares authorized, shares issued, shares outstanding.

• Shares issued, shares outstanding, shares authorized.

• Shares outstanding, shares issued, shares authorized.

• Shares in the treasury, shares outstanding, shares issued.

When treasury stock is purchased with cash, what is the impact on the balance sheet equation?

• No change: The reduction of the asset cash is offset with the addition of the asset treasury stock.

• Assets decrease and stockholders’ equity increases.

• Assets increase and stockholders’ equity decreases.

• Assets decrease and stockholders’ equity decreases.