51.When a company declares and distributes a 40% stock dividend, which of the following usually occur?
Retained Earnings Contributed Capital
Increases Decreases
a.Yes Yes
b.Yes No
c.No Yes
d.No No
52.The effect of a stock dividend is that it
a.reduces owner's equity
b.increases the number of outstanding shares
c.increases retained earnings
d.reduces liabilities of the corporation
e.reduces assets of the corporation
53.The issuance of a common stock dividend
a.reduces a company's retained earnings balance
b.brings new owners into a corporation
c.decreases the number of shares of outstanding stock
d.increases a company's retained earnings balance
54.Winters Company has announced that it will distribute a 15% common stock dividend on its $10 par value common stock that is currently selling for $75 per share. Upon receiving the new shares, a common stockholder will have increased his/her ownership value by
a.zero
b.15% of the par value of shares owned before the stock dividend
c.15% of the market value of the shares owned before the stock dividend
d.15% of the difference between par value and market value of the shares owned before the stock dividend
55.Fletcher Company commenced business on January 1, 2007 but has never declared or paid any dividends. The following are account balances after closing the books at December 31, 2009:
Cash$18,000
Common stock, $1 par1,000
Paid-in capital in excess of par value49,000
Preferred stock, $100 par, 10%, cumulative50,000
Retained earnings75,000
Net income during 2009 totaled $30,000 and the Board of Directors wishes to distribute a total of $15,000 in cash dividends. The common stockholders will receive what amount per share?
a.$15
b.$11
c.$ 3
d.$ 0
56.Which of the following will decrease stockholders' equity?
a.an issuance of stock
b.the transfer of net income to retained earnings
c.the distribution of dividends
d.the issuance of callable bonds
57.Stock with a higher claim on dividends and assets than common stock is called
a.Voting stock
b.Preferred stock
c.Senior stock
d.Treasury stock
58.The term "cumulative" is used to describe a feature of which of the following?
a.common stock
b.preferred stock
c.stock splits
d.stock dividends
59.Frostbite Cold Storage Company was incorporated early in 2007 Since then, the following stock has been outstanding:
Preferred stock, 5%, $25 par8,000 shares
Common stock, $20 par10,000 shares
On December 31, 2009, the company declared and paid a total of $50,000 in dividends. This was the first dividend declared by the business. That is, until this date no dividends had been declared or paid during the first two years of operations.
If the preferred stock is cumulative, what is the most that will be available out of the $50,000 dividend for payment to the COMMON shareholders?
a.$50,000
b.$42,500
c.$30,000
d.$20,000
60.When a holder of preferred stock has the right to receive all previously omitted dividends before common stockholders receive any dividends, the preferred stock is known as
a.participating preferred
b.cumulative preferred
c.compensating preferred
d.ex post rights preferred
61.Which of the following is a FALSE statement?
a.common stock can be issued at a price greater than its par value
b.treasury stock can be sold at a price less than its cost
c.the claims of owners are honored before those of creditors
d.retained earnings is profit reinvested in a corporation
62.Preferred stock
a.has a higher claim on dividends and assets than common stock
b.is preferred by stockholders as a potentially better investment
c.stockholders have more voting rights than common shareholders
d.has a higher claim on assets in liquidation than creditors do