1. The stockholder\'s equity section of the Canner Co. balance sheet contains th
ID: 2456610 • Letter: 1
Question
1. The stockholder's equity section of the Canner Co. balance sheet contains the following information: 4% Preferred Stock, $100 par value, cumulative, 5,000 shares issued $ 500,000 Common Stock, $1 Par Value, 20,000 shares issued $ 20,000 Dividends were not declared or paid in 2004 or 2005. The board of directors declares and pays a $50,000 dividined in 2006. In 2006, stockholders should receive dividends of: Preferred Stockholders Common Stockholders A $20,000 $30,000 B $40,000 $10,000 C $50,000 $0 D $60,000 $0 2. West Coast, Inc. has a net income of $600,000 for 2005. There are 500,000 weighted average shares of common stock outstanding. Dividents declared and paid during the year amounted to $40,000 on Preferred Stock and $160,000 on Common Stock. The earnings per share reported for 2005 is: A $0.80 B $1.12 C $1.20 D $1.40 3. In 2005 Crawfish Inc. discovered that its new accountant reported depreciation expense on Land on the 2004 financial statements. To correct this error in 2005, we must: A Increase retained earnings with a prior period adjustment B Decrease retained earnings with a prior period adjustment C Increase net ncome with a change in an accounting principle D Do nothing - it is not an error to depreciate Land. 4. Which of the following events will cause an increase in retained earnings? A A 2 for 1 stock split B The declaration of a 40% stock dividend C Net income for the year D All of the above 1. The stockholder's equity section of the Canner Co. balance sheet contains the following information: 4% Preferred Stock, $100 par value, cumulative, 5,000 shares issued $ 500,000 Common Stock, $1 Par Value, 20,000 shares issued $ 20,000 Dividends were not declared or paid in 2004 or 2005. The board of directors declares and pays a $50,000 dividined in 2006. In 2006, stockholders should receive dividends of: Preferred Stockholders Common Stockholders A $20,000 $30,000 B $40,000 $10,000 C $50,000 $0 D $60,000 $0 2. West Coast, Inc. has a net income of $600,000 for 2005. There are 500,000 weighted average shares of common stock outstanding. Dividents declared and paid during the year amounted to $40,000 on Preferred Stock and $160,000 on Common Stock. The earnings per share reported for 2005 is: A $0.80 B $1.12 C $1.20 D $1.40 3. In 2005 Crawfish Inc. discovered that its new accountant reported depreciation expense on Land on the 2004 financial statements. To correct this error in 2005, we must: A Increase retained earnings with a prior period adjustment B Decrease retained earnings with a prior period adjustment C Increase net ncome with a change in an accounting principle D Do nothing - it is not an error to depreciate Land. 4. Which of the following events will cause an increase in retained earnings? A A 2 for 1 stock split B The declaration of a 40% stock dividend C Net income for the year D All of the aboveExplanation / Answer
1.
The preferred shareholders are due $20,000 per year. The preferred shares are "cumulative" meaning that any amounts not paid in a year are rolled over into the next year.
The preferred shareholders should have received $20,000 in 2004 and 2005, but received zero. So in 2006 they should have been paid $60,000. But the company only paid out $50,000, so $10,000 rolls over into 2007.
2.
$1.20
Earning per share = Net earnings/ Weighted no of shares= $600000/500000 =1.20
3.
Increase retained earnings with a prior period adjustment
As land is not a depreciable asset and depreciation on land in past decreased the retained earning.
4.
Net income for the year
Net income will increase the retained earning and will add on the same.
C $50,000 $0Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.