1. The residual interest in a corporation belongs to the
c. common shareholders.
2. The pre-emptive right of a common shareholder is the right to
b. share proportionately in any new issues of shares of the same class.
3. The pre-emptive right enables a shareholder to
a. share proportionately in any new issues of shares in the same class.
4. The liability of shareholders is
d. limited to their property or service invested in the corporation.
5. Which of the following is not a reason that corporations would issue two or more classes of shares?
a. To free up more earnings for distribution to common shareholders.
6. Dividends on cumulative preferred shares
c. must be paid before dividends may be paid on common shares.
7. Participating preferred shares
a. share with the common shares in any profit distributions beyond the prescribed rate.
8. Total shareholders' equity represents
c. a claim against a portion of the total assets of an enterprise.
9. A primary source of shareholders' equity is
d. both income retained by the corporation AND contributions by shareholders.
10. Shareholders' equity is generally classified into two major categories:
d. Earned capital and Contributed capital.
11. In law, capital is considered that portion of shareholders' equity that is required by statute to be retained in the business for protection of creditors. Legal capital is
d. all of these.
12. Authorized common shares are sold on a subscription basis. Common Shares should be credited when the
d. last payment is made and the shares are issued.
13. Subscriptions Receivable are reported as
d. either a current asset or a deduction from shareholders' equity.
14. The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the
d. either the proportional method or the incremental method.
15. Direct costs incurred to sell shares such as underwriting costs should be accounted for as
1. a reduction of share capital.
2. an expense of the period in which the shares is issued.
3. an intangible asset.
16. When shares are reacquired at a cost greater than their original issue price and cancelled, what account(s) should be debited?
c. The share account for the average per share amount and retained earnings for the additional amount.
*17. “Gains" on sales of treasury shares should be credited to
a. contributed surplus.
*18. Gahan Corp. purchased its own shares on January 1, 2006 for $20,000 and debited the treasury shares account for the purchase price. The shares were subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from
a. contributed surplus to the extent that previous net "gains" from sales or retirements of the same class of shares are included therein; otherwise, from retained earnings.
*19. How should a "gain" from the sale of treasury shares be reflected in the financial statements?
b. As contributed surplus from treasury shares transactions
20. According to the CBCA, when a company purchases its own shares on the market
c. they must be cancelled.
21. When shares are reacquired at a cost less than the average per share value, the difference is assigned to
d. contributed surplus.
22. When shares are purchased or redeemed and cancelled, guidelines have been established for the sequence for the allocation of the cost. Which of the following is the first account to be adjusted?
b. The share capital account
23. Which of the following best describes a possible result of the reacquisition and cancellation of shares by a corporation?
c. May directly decrease but not increase retained earnings
*24 An acceptable method of reporting treasury shares in the balance sheet is
c. as an account with a debit balance after retained earnings.
25. The cumulative feature of preferred shares
b. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.
26. When all of the outstanding preferred shares are purchased and retired by the issuing corporation for less than its original issue price, proper accounting for the retirement increases
b. the contributed capital of the common shareholders.
27. Which of the following transactions does not result in a decrease to retained earnings?
c. Acquisition of treasury shares for less than the original issue price
28. Which of the following transactions does not result in an increase to retained earnings?
b. Issuance of a 3-for-1 stock split
29. At the date of the financial statements, common shares issued would exceed common shares outstanding as a result of the
c. purchase of treasury shares.
30. An entry is not made on the
b. date of record.
31. Which of the following statements is not generally true about dividend declarations?
d. All of these statements are generally true.
32. Cash dividends are paid on the basis of the number of shares
33. Which of the following statements about property dividends is not true?
c. The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.
34. The fair value of a property dividend should be determined by referring to
d. All of these are acceptable.
35. Farmer Corporation owns 4,000,000 shares of shares in Baha Corporation. On December 31, 2006, Farmer distributed these shares as a dividend to its shareholders. This is an example of a
a. property dividend.
36. A scrip dividend results in a debit to retained earnings and a credit to a(n)
b. liability account.
37. Which of the following statements about scrip dividends is not true?
d. All of these statements are true.
38. A dividend which is a return to shareholders of a portion of their original investments is a
a. liquidating dividend.
39. A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to
b. Common Shares.
40. Declaration and issuance of a stock dividend
d. has no effect on total assets, liabilities, or shareholders' equity.
41. If management wishes to "capitalize" part of the earnings, it may issue a
b. stock dividend.
42. Which dividends do not reduce shareholders' equity?
b. Stock dividends
43. The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding
b. decreases retained earnings but does not change total shareholders' equity.
44. Pryor Corporation issued a 2-for-1 stock split of its common shares which had been originally issued at $10 per share. At what amount should retained earnings be capitalized for the additional shares issued?
a. There should be no capitalization of retained earnings
45. The issuer of a 5% common stock dividend to common shareholders preferably should transfer from retained earnings to contributed capital an amount equal to the
a. market value of the shares issued.
46. At the date of declaration of a small common stock dividend, the entry should not include
a. a credit to Common Stock Dividend Payable.
47. As a minimum, how large in relation to total outstanding shares may a stock distribution be before it should be accounted for as a large stock dividend instead of as a small stock dividend?
c. No less than 20% to 25%
48. The balance in Common Stock Dividend Distributable should be reported as a(n)
b. addition to common shares.
49. A feature common to both stock splits and stock dividends is
b. that there is no effect on total shareholders' equity.
50. What effect does the issuance of a 2-for-1 stock split have on each of the following?
Common Shares Retained Earnings
a. No effect No effect
51. Which of the following is not a valid reason for a stock split?
d. All of these are valid reasons.
52. Dividends are not paid on
c. treasury common shares.
53. Noncumulative preferred dividends in arrears
a. are not paid or disclosed.
54. How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?
55. A company wishes to raise funds by issuing either bonds or cumulative preferred shares. How will the annual interest or dividend affect total liabilities each year?
a. Interest is a current liability each year (until paid).
56. A retained earnings appropriation always means the company is
b. disclosing managerial policy.
57. For which of the following purposes should an appropriation for indefinite possible future losses on inventory be established?
d. To inform shareholders that a portion of retained earnings should be set aside from amounts available for dividends because of such a contingency.
58. Total shareholders' equity is not affected by the
d. issuance of a stock dividend and the creation of an appropriation for future income taxes.
59. A restriction of retained earnings is most likely to be required by the
b. purchase of treasury shares.
60. Companies that carry no insurance against insurable casualty losses sometimes use an account called "appropriation for self-insurance." In preparing a balance sheet, this account preferably would appear as a
b. part of retained earnings.
61. Preferred terminology limits the use of the term "reserve" to
c. appropriations of retained earnings.
62. The term "reserve" in financial statements should be used to identify
c. an amount of retained earnings identified for a specified purpose.
63. The payout ratio can be calculated by
b. dividing cash dividends by net income less preferred dividends.
64. Windsor Company has outstanding both common shares and nonparticipating, non-cumulative preferred shares. The liquidation value of the preferred is equal to its par value. The book value per share of the common shares is unaffected by
c. the payment of a previously declared cash dividend on the common shares.
*65. For a two-year period following a properly implemented financial reorganization, Grant Corporation operated profitably and paid dividends equal to 10% of its net income each of the two years. How could one determine that the financial reorganization had occurred?
c. By the dating of retained earnings
*66. Conditions warranted that a company has a financial reorganization. Immediately after the financial reorganization, the retained earnings account
a. has a zero balance.
*67. Which of the following statements is false concerning the requirements that must be fulfilled under a financial reorganization?
b. Immediately after the financial reorganization, the corporation must have a credit balance in retained earnings.
*68. The accounting for a financial reorganization usually results in a net
c. write-down of assets and elimination of a deficit.
Use the following information for questions 69 through 71.
Presented below is information related to Oil Corporation:
Subscriptions Receivable, Common Shares $ 120,000
Common Shares, no par 3,810,000
Common Shares Subscribed 240,000
$4 Preferred Shares 1,440,000
Retained Earnings 900,000
Treasury Common Shares (at cost) 90,000
*69. The total shareholders' equity of Oil Corporation is
*70. The total earnings retained in the business is
71. The total amount that will be added to the Common Shares account when the final subscriptions are received will be
72. Chizu Co. has 100,000 no par value common shares authorized, issued, and outstanding. All 100,000 shares were issued at $8 per share. Retained earnings of the company are $120,000. If 10,000 shares of Chizu common were reacquired at $6 and cancelled,
d. contributed surplus from treasury shares would increase $20,000.
73. Levi Corporation has 100,000 no par value common shares authorized, issued and outstanding. All 100,000 shares were issued at $90 each. Retained earnings of the company are $250,000. If 2,000 shares of Levi common were reacquired at $98 and cancelled, shareholders' equity would decrease by
*74. McMynn Corporation's shareholders' equity section of its December 31, 2006, balance sheet was as follows:
Common shares, $5 par value, authorized 1,200,000 shares;
issued 900,000 shares; outstanding 800,000 shares; $ 4,500,000
Contributed surplus in excess of par 3,250,000
Retained earnings 5,240,000
Less treasury shares, at cost, 100,000 shares 800,000
Total shareholders' equity $12,190,000
During 2007, McMynn reissued 60,000 shares of the treasury shares at $10 per share. No other similar transactions occurred during 2007. What amount and type of gain should be reported on this transaction on the 2007 income statement?
c. $120,000 extraordinary income
*75. Boheme Company acquired 12,000 shares of its own common shares at $20 per share on February 5, 2006, and sold 6,000 of these shares at $27 per share on August 9, 2007. The market value of Boheme's common shares was $24 per share at December 31, 2006, and $25 per share at December 31, 2007. What account(s) should Boheme credit in 2007 to record the sale of 6,000 shares?
b. Treasury Shares for $120,000 and Contributed from Treasury Shares for $42,000.
Use the following information for questions *76 and 77.
Wotan Co. issued 100,000 no par common shares for $1,200,000. Wotan acquired 4,000 shares of its own common shares at $15 per share. Three months later, Wotan sold 2,000 of these shares at $19 per share.
*76. To record the sale of the 2,000 treasury shares, Wotan should credit
c. Treasury Shares for $30,000 and Contributed Surplus from Treasury Shares for $8,000.
77. If instead of holding the shares as treasury shares, Wotan had been required to cancel them, Wotan should debit
a. Common Shares for $48,000 and Retained Earnings for $12,000.
*78. Cohen Corporation has 50,000 no par value common shares authorized, issued and outstanding. All 50,000 shares were issued at $23 per share. Retained earnings of the company are $40,000. If 3,000 shares of Cohen common were reacquired at $27 and they were held as treasury shares,
c. shareholders’ equity would decrease $81,000.
*79. An analysis of shareholders' equity of Derkaz Corporation as of January 1, 2006, is as follows:
Common shares, no par value; authorized 100,000 shares;
issued and outstanding 90,000 shares $2,700,000
Retained earnings 760,000
Derkaz uses the cost method of accounting for treasury shares and during 2006 entered into the following transactions:
Acquired 2,500 shares of its shares for $75,000.
Sold 2,000 treasury shares at $35 per share.
Retired the remaining treasury shares.
Assuming no other equity transactions occurred during 2006, what should Derkaz report at December 31, 2006, as total contributed surplus?
80. Aida Corporation was organized on January 1, 2006, with an authorization of 400,000 no par value common shares. During 2006, the corporation had the following capital transactions:
January 5 issued 150,000 shares @ $10 per share
April 6 issued 50,000 shares @ $12 per share
June 8 issued 50,000 shares @ $14 per share
July 28 purchased 20,000 shares @ $11 per share and cancelled them
December 31 issued 20,000 shares @ $18 per share
What is the total amount of contributed surplus as of December 31, 2006?
Use the following information for questions 81 and 82.
Dot Ltd. was organized on January 1, 2006, with 300,000 no par value common shares authorized. During 2006, Dot had the following shares transactions:
Jan. 4 Issued 120,000 shares at $10 per share.
Mar. 8 Issued 40,000 shares at $11 per share.
May 17 Purchased 15,000 shares at $12 per share and cancelled them.
July 6 Issued 30,000 shares at $13 per share.
Aug. 27 Issued 10,000 shares at $14 per share.
81. The total amount in the share capital account at December 31, 2006 is
82. The total amount of contributed surplus at December 31, 2006 is
Use the following information for questions *83 and 84.
Guelph Corp.'s shareholders' equity at January 1, 2006 is as follows:
Common shares, no par value; authorized 200,000 shares;
outstanding 75,000 shares $ 1,050,000
Retained earnings 730,000
During 2006, Guelph had the following shares transactions:
Acquired 2,000 shares of its shares for $90,000.
Sold 1,200 treasury shares at $50 a share.
Retired the remaining treasury shares.
No other shares transactions occurred during 2006.
*83. The total amount of all contributed surplus accounts at December 31, 2006 is
84. Assuming Guelph retired all 2,000 shares when it acquired them for $90,000, the journal entry to record the retirement would be
d. Dr. Common Shares, $28,000; Dr. Retained Earnings, $62,000; Cr. Cash, $90,000.
Use the following information for questions *85 and 86:
The balance in the retained earnings account of Dohaniuk Ltd. was $420,000 at December 31, 2006. During 2006, Dohaniuk had the following transactions:
(a) Acquired 5,000 treasury shares at $27 a share. The shares are no par and had originally been issued for $24 per share. There had been no previous treasury shares transactions.
(b) Net income was $150,000 in 2006.
(c) Sold the 5,000 treasury shares at $32 a share.
*85. The balance in retained earnings at December 31, 2006 is
86. If Dohaniuk cancelled the treasury shares instead of holding them, the balance in retained earnings at December 31, 2006 is
*87. The balance in the retained earnings account of Minsk Corporation was $450,000 at December 31, 2005. During 2006, the company had the following transactions:
1. Acquired 5,000 treasury shares at $70 per share. The shares are no par value and had originally been issued for $65 per share. There had been no previous treasury shares transactions.
2. Net income of $400,000 was earned in 2006.
3. Sold the 5,000 shares of treasury shares at $80 per share.
What is the balance in retained earnings at December 31, 2006?
*88. Presented below is the shareholders' equity section of Dosanjh Corporation at December 31, 2005:
Common shares, no par value; authorized 75,000 shares;
issued and outstanding 45,000 shares $ 1,150,000
Retained earnings 500,000
During 2006, the following transactions occurred relating to shareholders' equity:
2,000 shares were reacquired at $28 per share.
2,000 shares were reacquired at $35 per share.
1,200 of the treasury shares were sold at $30 per share.
For the year ended December 31, 2006, Dosanjh reported net income of $450,000. What should it report as total shareholders' equity on its December 31, 2006, balance sheet?
*89. On December 1, 2006, Fort James Ltd exchanged 10,000 of its no par value common shares held in treasury for a used machine. The treasury shares were acquired by Fort James at a cost of $40 per share. On the date of the exchange, the common shares had a market value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Fort James's total shareholders' equity will increase by
90. Inuvik Corporation was incorporated on January 1, 2006, with the following authorized capitalization:
20,000 common shares, no par value.
6,000, $.05, cumulative preferred shares, no par value.
During 2006, Inuvik issued 10,000 common shares for a total of $600,000 and 5,000 preferred shares at $24 per share. In addition, on December 20, 2006, subscriptions for 1,000 preferred shares were taken at a purchase price of $30. These subscribed shares were paid for on January 2, 2007. What should Inuvik report as total contributed capital on its December 31, 2006, balance sheet?
Use the following information for questions 91 and 92.
Lochlan Corp. is authorized to issue 400,000 no par value common shares. Subscribers have contracted to purchase the shares at $20 per share with a 40% down payment.
91. Assume that shareholders subscribed to 100,000 shares and make the required down payment. The journal entry to record receipt of the subscriptions includes a
b. credit to Common Shares Subscribed for $2,000,000.
92. The journal entry to record the issuance of the shares upon receipt of the final instalment includes a
a. debit to Common Shares Subscribed for $2,000,000.
93. Yaalev Corporation owned 300,000 shares of Marley Corporation shares. On December 31, 2006, when Yaalev's account "Investment in Common Shares of Marley Corporation" had a carrying value of $5 per share, Yaalev distributed these shares to its shareholders as a dividend. Yaalev originally paid $8 for each share. Marley has 1,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Marley share was $7 on the declaration date and $9 on the distribution date.
What would be the reduction in Yaalev's shareholders' equity as a result of the above transactions? (Do not consider income tax effects.)
94. L’esperance Company has 1,000,000 no par common shares authorized of which 800,000 shares are outstanding. The average carrying value of the shares is $5 per share. L’esperance declared a stock dividend when the market value was $10 per share, entitling its shareholders to one additional share for each share held. What entry, if any, should L’esperance make to record this transaction?
b. Retained Earnings 4,000,000
Common Stock Dividend Distributable 4,000,000
95. On June 30, 2006, when Forza Co.'s shares were selling at $65 per share, its capital accounts were as follows:
Capital shares (no par value; 40,000 shares issued) $2,600,000
Retained earnings 4,200,000
If a 100% stock dividend were declared and distributed, the share capital would be
96. The directors of Casino Corp., whose no par value common shares are currently selling at $70 per share, have decided to issue a stock dividend. Casino has an authorization for 250,000 common shares, has issued 100,000 shares of which 10,000 shares are now held as treasury shares, and desires to capitalize $630,000 of the Retained Earnings balance. To accomplish this, the percentage of stock dividend that the directors should declare is
97. The shareholders' equity section of Al Rahman Corporation as of December 31, 2005, was as follows:
Common shares, no par value; authorized 20,000 shares;
issued and outstanding 10,000 shares $ 50,000
Retained earnings 90,000
On March 1, 2006, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2006, the fair market value of the shares was $6 per share. For the two months ended February 28, 2006, Al Rahman sustained a net loss of $10,000.
What amount should Al Rahman report as retained earnings as of March 1, 2006?
98. Cash dividends on the no par value common shares of Sonoko Company were as follows:
1st quarter of 2006 $330,000
2nd quarter of 2006 350,000
3rd quarter of 2006 420,000
4th quarter of 2006 450,000
The 4th quarter cash dividend was declared on December 20, 2006, to shareholders of record on December 31, 2006. Payment of the 4th quarter cash dividend was made on January 9, 2007. In addition, Sonoko declared a 10% stock dividend on its common shares on December 1, 2006, when there were 400,000 shares issued and outstanding, and the market value of the common shares was $16 per share. The shares were issued on December 21, 2006.
What was the effect on Sonoko's shareholders' equity accounts during 2006 as a result of the above transactions?
Common Shares Retained Earnings
c. $640,000 credit $2,190,000 debit
99. The shareholders' equity of Abzug Company at July 31, 2006 is presented below:
Common shares, no par value, authorized 400,000 shares;
issued and outstanding 200,000 shares $4,160,000
Retained earnings 650,000
On August 1, 2006, the board of directors of Abzug declared a 15% stock dividend on common shares, to be distributed on September 15. The market price of Abzug's common shares was $35 on August 1, 2006, and $38 on September 15, 2006. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?
100. On January 1, 2006, Dallas Inc., declared a 10% stock dividend on its common shares when the market value of the common shares was $20 per share. Shareholders' equity before the stock dividend was declared consisted of:
Common shares, no par value, authorized 200,000 shares
issued and outstanding 120,000 shares $1,350,000
Retained earnings 700,000
Total shareholders' equity $2,050,000
What was the effect on Dallas’ retained earnings as a result of the above transaction?
b. $240,000 decrease
101. On January 1, 2006, Revel Corporation had 110,000 no par value common shares outstanding. On June 1, the corporation acquired 10,000 shares to be held in the treasury. On December 1, when the market price of the shares was $8, the corporation declared a 10% stock dividend to be issued to shareholders of record on December 16, 2006. What was the impact of the 10% stock dividend on the balance of the retained earnings account?
b. $80,000 decrease
102. Cardston Ltd. had outstanding 2,000 no par value, $6, cumulative preferred shares and 30,000 no par value common shares on December 31, 2006. At December 31, 2006, dividends in arrears on the preferred shares were $6,000. Cash dividends declared in 2007 totalled $30,000. The amounts paid to each class of shares were
Preferred Shares Common Shares
d. $18,000 $12,000
Use the following information for questions 103 through 105.
Bloor, Ltd. has outstanding 100,000 no par common shares and 20,000 no par 8% preferred shares with a stated value of $5. The preferred shares are cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year.
103. Assuming that $50,000 will be distributed as a dividend in the current year, how much will the common shareholders receive?
104. Assuming that $21,000 will be distributed as a dividend in the current year, how much will the preferred shareholders receive?
105. The total amount of common shares is $200,000 in the current year. Assuming that $61,000 will be distributed, and the preferred shares are also participating, how much will the common shareholders receive?
106. McNamara, Ltd. has 20,000 no par value common shares with a carrying value of $200,000 and 10,000 no par value, $0.60, cumulative, participating preferred shares outstanding with a carrying value of $100,000. Dividends on the preferred shares are one year in arrears. Assuming that McNamara wishes to distribute $54,000 as dividends, the common shareholders will receive
Use the following information for questions 107 through 109.
Tarzwell Corp. has outstanding 20,000 no par value, $0.80, preferred shares and 100,000 no par value common shares. Dividends have been paid every year except last year and the current year. The carrying value of the preferred shares is $200,000 and of the common shares is $300,000.
107. If the preferred shares are cumulative and nonparticipating and $100,000 is distributed, the common shareholders will receive
108. If the preferred shares are non-cumulative and fully participating and $70,000 is distributed, the common shareholders will receive
109. If the preferred shares are cumulative and fully participating and $101,000 is distributed, the common shareholders will receive
110. Harrison Ltd. had net income for 2006 of $5,300,000 and earnings per share on common shares of $5.00. Included in the net income was $750,000 of bond interest expense related to its long-term debt. The income tax rate for 2006 was 30%. Dividends on preferred shares were $1,000,000. The payout ratio on common shares was 25%. What were the dividends on common shares in 2006?
111. Presented below is information related to Wright, Ltd.:
Common shares $ 75,000 $ 60,000
6% Preferred shares 350,000 350,000
Retained earnings (includes net income for current year) 90,000 75,000
Net income for year 60,000 32,000
What is Wright’s rate of return on common shares equity for 2006?
Use the following information for questions 112 through 114.
The following data are provided:
Cumulative preferred shares, $5, no par, 4,000 shares
issued and outstanding $200,000 $200,000
Common shares, no par, 24,000 shares outstanding 400,000 310,000
Retained earnings 480,000 430,000
Net income 180,000
On May 1, 2006, 6,000 common shares were issued. The preferred dividends were not declared during 2006. The market price of the common shares was $100 at December 31, 2006.
112. The rate of return on common shareholders’ equity for 2006 is
c. 160 ÷ 800.
113. The price-earnings ratio for 2006 is
a. 100 ÷ (160 ÷ 22).
114. The book value per common share at December 31, 2006 is
a. 860 ÷ 24.
Use the following information for questions 115 and 116.
Balances in shareholders’ equity accounts at December 31, 2006 are:
Common shares, no par, 50,000 authorized, 40,000 outstanding $1,300,000
Retained earnings (deficit) (364,000)
A financial reorganization was approved. Equipment was written down $101,800, and inventory increased $5,800.
*115. How much should the common shares be adjusted in the first step of the reorganization?
*116. What is the net increase in the deficit from revaluation of assets?
Multiple Choice Answers—Computational
DERIVATIONS — Computational
No. Answer Derivation
69. a $3,600,000 + $240,000 + $210,000 + $1,200,000 + $240,000 + $900,000 –
$90,000 – $120,000 = $6,180,000.
70. b RE = $900,000.
71. b $240,000, the subscription price.
72. d (10,000 × $2) = $20,000
73. c 2,000 × $98 = $196,000.
*74. a 60,000 × $2 = $120,000, recorded as contributed surplus from treasury shares.
*75. b 6,000 × $20 = $120,000; 6,000 × $7 = $42,000.
*76. c 2,000 × $15 = $30,000; 2,000 × $4 = $8,000.
77. a 4,000 × $12 = $48,000 = CS; 4,000 × $3 = $12,000 = RE.
*78. c (3,000 × $27) = $81,000.
*79. c 2,000 × $5 = $10,000.
80. b (150,000 × $10) + (50,000 × $12) + (50,000 × $14) = $2,800,000.
$2,800,000 ÷ 250,000 = $11.20; $11.20 ×20,000 = $224,000.
$11.00 × 20,000 = $220,000; $224,000 – $220,000 = $4,000.
81. b [(120,000 × $10) + (40,000 × $11)] ÷ 160,000 = $10.25.
(120,000 × $10) + (40,000 ×$11) – (15,000 × $10.25) + (30,000 × $13) + (10,000 ×$14) = $2,016,250.
82. a $-0-; Paid more than carrying value of the shares.
*83. c 1,200 × $5 = $6,000.
84. d $-0-; Paid more than carrying value of the shares.
*85. b $420,000 + $150,000 = $570,000.
86. a $420,000 – (5,000 × $3) + $150,000 = $555,000.
*87. b $450,000 + $400,000 = $850,000.
*88. a $1,650,000 – (2,000 × $28) – (2,000 × $35) + (1,200 × $30) + $450,000 =
*89. c 10,000 × $55 = $550,000.
No. Answer Derivation
90. b $600,000 + (5,000 × $24) = $720,000.
91. b 100,000 × $20 = $2,000,000.
92. a 100,000 × $20 = $2,000,000.
93. b (300,000 × $7) – [($7 – $5) × 300,000] = $1,500,000.
94. b 800,000 × $5 = $4,000,000.
95. d $2,600,000 × 2 = $5,200,000.
96. b (90,000 × X) × $70 = $630,000.
X = .10 = 10%.
97. a $90,000 – $10,000 – (1,500 × $6) = $71,000.
98. c $640,000 Cr. (common shares)
$330,000 + $350,000 + $420,000 + $450,000 + $640,000
= $2,190,000 Dr. (retained earnings).
99. b 200,000 × .15 × $35 = $1,050,000.
100. b 120,000 × .10 × $20 = $240,000.
101. b $100,000 × .10 × $8 = $80,000.
102. d $6,000 + ($200,000 × .06) = $18,000 (preferred shares).
$30,000 – $18,000 = $12,000 (common shares).
103. b $50,000 – (20,000 × $5 × .08 × 3) = $26,000.
104. d 20,000 × $5 × .08 × 3 = $24,000 > $21,000.
105. b 8% × $200,000 = $16,000 (current year)
7%* × $200,000 = 14,000 (participating)
*20,000 ×$5 × 8% × 3 = $24,000 (preferred dividends)
$200,000 × 8% = 16,000 (common current dividends)
$61,000 – $40,000
—————————— = 7%.
$100,000 + $200,000
No. Answer Derivation
106. c Common Shares
$200,000 × 6% = $12,000 (current year)
$200,000 × 10%* = 20,000 (participating)
*$54,000 – $12,000 – (10,000 × .6 × 2) = $30,000
———— = 10%.
107. b $100,000 – (20,000 × .8 × 2) = $68,000.
108. b Common Shares
$300,000 × 8% = $24,000 (current year)
$300,000 × 6%* = 18,000 (participating)
*$70,000 – $24,000 – (20,000 × .8) = $30,000
———— = 6%.
109. b Common Shares
$300,000 × 8% = $24,000 (current year)
$300,000 × 9%* = 27,000 (participating)
*$101,000 – $24,000 – (20,000 × .8 × 2) = $45,000
———— = 9%.
110. a = .25, X = $1,075,000.
111. b = .26 = 26%
= $160 ÷ 800
114. a = $860 ÷ 24.
*115. a $364,000. Amount of the deficit.
No. Answer Derivation
*116. b $101,800 – $5,800 = $96,000.