218. Sandwick Corporation was organized on January 1, 2010, with authorized capital of 500,000 shares of $10 par value common stock. During 2010, Sandwick issued 20,000 shares at $12 per share, purchased 2,000 shares of treasury stock at $13 per share, and sold 2,000 shares of treasury stock at $14 per share. What is the amount of additional paid-in capital at December 31, 2010?
a.$0
b.$2,000
c.$40,000
d.$42,000
219. The purchase of treasury stock
a.decreases common stock authorized.
b.decreases common stock issued.
c.decreases common stock outstanding.
d.has no effect on common stock outstanding.
220.Preferred stockholders have a priority over common stockholders as to
a.dividends only.
b.assets in the event of liquidation only.
c.voting rights.
d.both dividends and assets in the event of liquidation.
221. On January 2, 2008, Pacer Corporation issued 30,000 shares of 6% cumulative preferred stock at $100 par value. On December 31, 2011, Pacer Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stockholders?
a.$0
b.$180,000
c.$540,000
d.$720,000
222. Which of the following statements about a cash dividend is
incorrect?
a.The legality of a cash dividend depends on state corporation laws.
b.The legality of a dividend does not indicate a company's ability to pay a dividend.
c.Dividends are not a liability until declared.
d.Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend.
223.The date a cash dividend becomes a binding legal obligation to a corporation is the
a.declaration date.
b.earnings date.
c.payment date.
d.record date.
224. Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock
a.remains the same.
b.is reduced to $2 per share.
c.is reduced to $5 per share.
d.is reduced to $20 per share.
225. Which of the following statements about retained earnings restrictions is
incorrect?
a.Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased.
b.Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan.
c.The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes.
d.Retained earnings restrictions are generally disclosed through a journal entry on the books of a company.
226.Prior period adjustments
a.may only increase retained earnings.
b.may only decrease retained earnings.
c.may either increase or decrease retained earnings.
d.do not affect retained earnings.
Net income$135,000
Average stockholders' equity500,000
Preferred dividends35,000
Par value preferred stock100,000
The 2011 rate of return on common stockholders' equity is
a.25.0%.
b.22.5%.
c.27.0%.
d.33.8%.
228.The return on common stockholders' equity is computed by dividing
a.net income by ending common stockholders' equity.
b.net income by average common stockholders' equity.
c.net income minus preferred dividends by ending common stockholders' equity.
d.net income minus preferred dividends by average common stockholders' equity.
a229.At December 31, the stockholders’
Common stock, $5 par value; 1,100,000 shares issued
and 1,000,000 shares outstanding$5,500,000
Additional paid-in capital 1,400,000
Retained earnings1,500,000
Treasury stock, (100,000 shares) (700,000)
Total stockholders' equity$7,700,000
The book value per share of common stock is
a.$7.00
b.$7.70
c.$8.40
d.$7.20