Reading 33: Understanding the Balance Sheet - LOS h ～ Q1-4 纪念日

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Q1. Consider the following statements.

Statement #1:    Par value is a nominal dollar value assigned to shares of stock in a corporation’s charter.

Statement #2:    The par value of common stock represents the amount the corporation received when the stock was issued.

With respect to these statements:

A)   both statements are correct.

B)   only statement #2 is correct.

C)   only statement #1 is correct.

Q2. Carpenter Corporation reported the following statement of shareholders’ equity as of December 31, 2006:

Common stock at par                                                           $600,000

Additional paid-in-capital                                                     900,000

Treasury stock                                                                        (200,000)

Retained earnings                                                                 10,500,000

Accumulated other comprehensive income                    450,000

                                                                                                   $12,250,000

During 2007, Carpenter:

• earned net income of $1,700,000.

• declared dividends of $300,000. $75,000 of the dividends remain unpaid.

• purchased held-to-maturity securities for $100,000. The securities have a fair value of $110,000 at year-end.

• purchased available-for-sale securities for $250,000. The securities have a fair value of $225,000 at year-end.

• translated the financial statements of a foreign subsidiary and calculated a $90,000 unrealized gain.

• purchased treasury stock for $75,000. The stock was valued at $60,000 when issued.

Calculate Carpenter’s retained earnings and accumulated other comprehensive income as of December 31, 2007.

          Retained earnings      Accumulated other comprehensive income

 

A) $11,900,000                             $515,000

B) $11,900,000                            $65,000

C) $12,125,000                            $515,000

Q3. Ascot Corporation has 4 million shares of common stock authorized, 2.4 million shares of common stock issued, and 1.8 million shares of common stock outstanding. How many shares of treasury stock does Ascot own and is the treasury stock reported as an asset in Ascot’s balance sheet?

          Treasury shares                          Reported as an asset

 

A)                                                      600,000         No

B)                                                     600,000         Yes

C)                                                     1.6 million     No

Q4. Earlier this year, Slayton Corporation repurchased 5% of its total shares outstanding. At the time, the book value of Slayton shares exceeded their market value. The shares are expected to be reissued in the future when the market price of Slayton’s stock increases. Do Slayton’s repurchased shares continue to have voting rights and to pay cash dividends?

          Voting rights                Cash dividends paid

 

A) No                                              No

B) Yes                                             No

C) No                                              Yes

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