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Chapter 13: Q25RQ (page 707)
What does the rate of return on common stock show, and how is it calculated?
The rate of return on common stock is computed by dividing a corporate's net income by the average common stockholders' equity.
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Identifying advantages and disadvantages of a corporation
Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.
b. Entity has continuous life.
Computing dividends on preferred and common stock and journalizing
Northern Communications has the following stockholders鈥� equity on December 31,
2018:
Preferred Stock鈥�5%, \(11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding
Paid-In Capital:
\) 220,000
760,000
Stockholders鈥� Equity
Paid-In Capital in Excess of Par鈥擟ommon 680,000
Total Paid-In Capital 1,660,000
Retained Earnings 200,000
Total Stockholders鈥� Equity \( 1,860,000
Common Stock鈥擻)2 Par Value; 575,000 shares
authorized, 380,000 shares issued and outstanding
Requirements
2. Record the journal entries for 2018, assuming that Northern Communications declared the dividend on December 1 for stockholders of record on December 10. Northern Communications paid the dividend on December 20.
A Identifying sources of equity, stock issuance, and dividends
Voyage Comfort Specialists, Inc. reported the following stockholders鈥� equity on its balance sheet at June 30, 2018:
Preferred Stock鈥�7%, ? Par Value; 625,000 shares
authorized, 280,000 shares issued and outstanding
Paid-In Capital:
\( 1,400,000
1,340,000
Stockholders鈥� Equity
Paid-In Capital in Excess of Par鈥擟ommon 2,900,000
Total Paid-In Capital 5,640,000
Retained Earnings 12,000,000
Total Stockholders鈥� Equity \) 17,640,000
Common Stock鈥�$1 Par Value; 3,000,000 shares
authorized, 1,340,000 shares issued and outstanding
Requirements
1. Identify the different classes of stock that Voyage Comfort Specialists has outstanding.
Determining paid-in capital for a corporation
Aruba Corporation recently organized. The company issued common stock to an inventor in exchange for a patent with a market value of \(57,000. In addition, Aruba received cash for 6,000 shares of its \)10 par preferred stock at par value and 6,500 shares of its no-par common stock at $20 per share. Without making journal entries, determine the total paid-in capital created by these transactions.
Question: Journalizing a large stock dividend
Nelly, Inc. had 320,000 shares of \(2 par value common stock issued and outstanding as of December 15, 2018. The company is authorized to issue 1,300,000 common shares. On December 15, 2018, Nelly declared a 40% stock dividend when the market value for Nelly鈥檚 common stock was \)7 per share. The stock was issued on Dec. 30.
Requirements
1. Journalize the declaration and distribution of the stock dividend.
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