Intermediate Accounting: Tests with grade A+ and accurate solutions

Question 1-1 How should cumulative preferred dividends in arrears be shown in a corporation's balance sheet? 1. Increase in stockholders' equity 2. Increase in current liabilities 3. Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in long-term liabilities for the balance 4. Note disclosure - ANSNote disclosure Question 1-2 A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to 1. Retained Earnings. 2. A paid-in capital account. 3. Accumulated Depletion. 4. Accumulated Depreciation. - ANS2 A paid-in capital account. Question 1-3 At the beginning of 2018, Hamilton Company had retained earnings of $320,000. During the year Hamilton reported net income of $75,000, sold treasury stock at a "gain" of $27,000, declared a cash dividend of $45,000, and declared and issued a small stock dividend of 1,500 shares ($10 par value) when the fair value of the stock was $30 per share. The amount of retained earnings available for dividends at the end of 2018 was: $354,500. $305,000. $332,000. $327,500. - ANSQuestion 3 $320,000 + $75,000 - $45,000 - (1,500 × $30) = $305,000. Question 1-4 At its date of incorporation, Sauder, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, Sauder acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on the following accounts? Retained Earnings...Additional Paid-in Capital 1.No effect...No effect 2.Decrease...Decrease 3.Decrease...No effect 4.No effect...Decrease - ANS3 Question 1-5 Glavine Company issues 6,000 shares of its $5 par value common stock having a fair value of $25 per share and 9,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $310,000. The proceeds allocated to the common stock is 1. $140,909 2. $150,000 3. $169,091 4. $124,000 - ANS1