38. The effect of the declaration of a cash dividend by the board of directors i
ID: 2496520 • Letter: 3
Question
38. The effect of the declaration of a cash dividend by the board of directors is to
Increase Decrease
a. Stockholders’ equity Assets
b. Assets Liabilities
c. Liabilities Stockholders’ equity
d. Liabilities Assets
39. Racer Corporation’s December 31, 2014 balance sheet showed the following:
8% preferred stock, $20 par value, cumulative,
40,000 shares authorized; 20,000 shares issued $ 400,000
Common stock, $10 par value, 4,000,000 shares authorized;
2,600,000 shares issued, 2,560,000 shares outstanding 26,000,000
Paid-in capital in excess of par value – preferred stock 80,000
Paid-in capital in excess of par value – common stock 36,000,000
Retained earnings 10,200,000
Treasury stock (30,000 shares) 840,000
Racer’s total stockholders’ equity was
a. $73,520,000.
b. $62,480,000.
c. $72,680,000.
d. $71,840,000.
Explanation / Answer
38.
The effect of declaration o payadividend:
Dividend (Retained earnings)
Dividend payable (Liability)
Due to above entry, stockholders' equity decreases as retained earnings decreased and also liability increases.
Therefore, option c is correct.
39.
8% preferred stock, $20 par value, cumulative,
40,000 shares authorized; 20,000 shares issued $ 400,000
Common stock, $10 par value, 4,000,000 shares authorized;
2,600,000 shares issued, 2,560,000 shares outstanding 26,000,000
Paid-in capital in excess of par value – preferred stock 80,000
Paid-in capital in excess of par value – common stock 36,000,000
Retained earnings 10,200,000
Treasury stock (30,000 shares) (840,000)
Total stockholders' equity 71,840,000
Therefore, option d is correct.
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