How should cumulative preferred dividends in arrears be shown in a corporation’s statement of
financial position?
Footnote.
Increase in stockholders’ equity.
Increase in current liabilities.
Increase in current liabilities for the amount expected to be declared within the year or
operating cycle, and increase in longterm liabilities for the balance.
On January 1, year 1, Rodriguez Corp. granted stock options to corporate executives for the
purchase of 10,000 shares of the company’s $20 par value common stock at 70% of the market
price on the exercise date, December 30, year 1. On January 1, year 1, no market price or
estimate could be made for the value of the options. All stock options were exercised on
December 30, year 1. The quoted market prices of Rodriguez Corp.’s $20 par value common
stock were as follows:
m
er as
January 1, year 1 $50 per share
co
eH w
December 30, year $60 per share
1
o.
rs e
ou urc
As a result of the exercise of the stock options and the issuance of the common stock, Rodriguez
should record additional paidin capital of
$180,000
o
$200,000
aC s
$400,000
vi y re
$600,000
ed d
A clearly identified appropriation of retained earnings for reasonably possible loss contingencies
ar stu
should be
Charged with all losses related to that contingency.
Transferred to income as losses are realized.
is
Classified in the liability section of the balance sheet.
Shown within the stockholders’ equity section of the balance sheet.
Th
Weaver Company had 100,000 shares of common stock issued and outstanding at December 31,
sh
year 1. On July 1, year 2, Weaver issued a 10% stock dividend. Unexercised stock options to
purchase 20,000 shares of common stock (adjusted for the year 2, stock dividend) at $20 per
share were outstanding at the beginning and end of year 2. The average market price of Weaver’s
common stock (which was not affected by the stock dividend) was $25 per share during year 2.
Net income for the year ended December 31, year 2 was $550,000. What should be Weaver’s
year 2, diluted earnings per common share, rounded to the nearest penny?
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, $4.82
$5.00
$5.05
$5.24
Cross Corp. had outstanding 2,000 shares of 11% preferred stock, $50 par. On August 8, year 1,
Cross redeemed and retired 25% of these shares for $22,500. On that date, Cross’ additional
paidin capital from preferred stock totaled $30,000. To record this transaction, Cross should
debit (credit) its capital accounts as follows:
Additional
Preferred stock Retained earnings
paidin capital
$25,000 $7,500 ($10,000)
m
$25,000 ($ 2,500)
er as
$25,000 ($ 2,500)
co
$22,000
eH w
o.
rs e
On January 2, year 3, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights
ou urc
for past services. Those rights are exercisable immediately and expire on January 1, year 4. On
exercise, Dean is entitled to receive cash for the excess of the stock’s market price on the
exercise date over the market price on the grant date. Dean did not exercise any of the rights
o
during year 3. The market price of Morey’s stock was $30 on January 2, year 3, and $45 on
aC s
December 31, year 3. Morey should recognize compensation expense under the stock
vi y re
appreciation rights plan for year 3 of
$0
$100,000
ed d
$300,000
ar stu
$600,000
is
On April 30, year 1, Witt Corp. had outstanding 8%, $1,000,000 face amount, convertible bonds
maturing on April 30, year 5. Interest is payable on April 30 and October 31. On April 30, year 1,
Th
all these bonds were converted into 40,000 shares of $20 par common stock. On the date of
conversion
sh
Unamortized bond discount was $30,000.
Each bond had a market price of $1,080.
Each share of stock had a market price of $28.
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financial position?
Footnote.
Increase in stockholders’ equity.
Increase in current liabilities.
Increase in current liabilities for the amount expected to be declared within the year or
operating cycle, and increase in longterm liabilities for the balance.
On January 1, year 1, Rodriguez Corp. granted stock options to corporate executives for the
purchase of 10,000 shares of the company’s $20 par value common stock at 70% of the market
price on the exercise date, December 30, year 1. On January 1, year 1, no market price or
estimate could be made for the value of the options. All stock options were exercised on
December 30, year 1. The quoted market prices of Rodriguez Corp.’s $20 par value common
stock were as follows:
m
er as
January 1, year 1 $50 per share
co
eH w
December 30, year $60 per share
1
o.
rs e
ou urc
As a result of the exercise of the stock options and the issuance of the common stock, Rodriguez
should record additional paidin capital of
$180,000
o
$200,000
aC s
$400,000
vi y re
$600,000
ed d
A clearly identified appropriation of retained earnings for reasonably possible loss contingencies
ar stu
should be
Charged with all losses related to that contingency.
Transferred to income as losses are realized.
is
Classified in the liability section of the balance sheet.
Shown within the stockholders’ equity section of the balance sheet.
Th
Weaver Company had 100,000 shares of common stock issued and outstanding at December 31,
sh
year 1. On July 1, year 2, Weaver issued a 10% stock dividend. Unexercised stock options to
purchase 20,000 shares of common stock (adjusted for the year 2, stock dividend) at $20 per
share were outstanding at the beginning and end of year 2. The average market price of Weaver’s
common stock (which was not affected by the stock dividend) was $25 per share during year 2.
Net income for the year ended December 31, year 2 was $550,000. What should be Weaver’s
year 2, diluted earnings per common share, rounded to the nearest penny?
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, $4.82
$5.00
$5.05
$5.24
Cross Corp. had outstanding 2,000 shares of 11% preferred stock, $50 par. On August 8, year 1,
Cross redeemed and retired 25% of these shares for $22,500. On that date, Cross’ additional
paidin capital from preferred stock totaled $30,000. To record this transaction, Cross should
debit (credit) its capital accounts as follows:
Additional
Preferred stock Retained earnings
paidin capital
$25,000 $7,500 ($10,000)
m
$25,000 ($ 2,500)
er as
$25,000 ($ 2,500)
co
$22,000
eH w
o.
rs e
On January 2, year 3, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights
ou urc
for past services. Those rights are exercisable immediately and expire on January 1, year 4. On
exercise, Dean is entitled to receive cash for the excess of the stock’s market price on the
exercise date over the market price on the grant date. Dean did not exercise any of the rights
o
during year 3. The market price of Morey’s stock was $30 on January 2, year 3, and $45 on
aC s
December 31, year 3. Morey should recognize compensation expense under the stock
vi y re
appreciation rights plan for year 3 of
$0
$100,000
ed d
$300,000
ar stu
$600,000
is
On April 30, year 1, Witt Corp. had outstanding 8%, $1,000,000 face amount, convertible bonds
maturing on April 30, year 5. Interest is payable on April 30 and October 31. On April 30, year 1,
Th
all these bonds were converted into 40,000 shares of $20 par common stock. On the date of
conversion
sh
Unamortized bond discount was $30,000.
Each bond had a market price of $1,080.
Each share of stock had a market price of $28.
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