Question

The 12/31/2018 balance sheet of Despot Inc. included the following: Common stock, 25 million shares at $20 par 500 million 3,000 million 980 million Paid-in capital-excess of par Retained earnings In January 2018, Despot recorded a transaction with this journal entry: Cash 150 million Common stock Paid-in capital-excess of par 100 million 50 million Despot declared a property dividend to give marketable equity securities to its common stockholders. The securities had cost Despot $7 million and currently have a fair value of $16 million. Which of the following would be included in recording the property dividend declaration? a. Increase in a liability for $16 million. b. Decrease in retained earnings for $7 million. c. Decrease in marketable securities by $16 million. d. All of these answer choices are correct. 6. The shareholders' equity of Green Corporation includes $200,000 of $1 par common stock and $400,000 par of6% cumulative preferred stock. The board of directors of Green declared cash dividends of s50,000 in 2018 after paying $20,000 cash dividends in each of 2017 and 2016. What is the amount of dividends common shareholders will receive in 2018? a. $18,000 b. $22,000 c. $28,000. d. $32,000.
9. Olsson Corporation received a check from its new issue of share for for the issue per share. Which is the correct entry to record the issue of A) Debit Cash 72,000,000 Credit Stock issue expense Credit Stock contract receivable ot one million of its $5 par stock that the underwriters expect to sell the stock? 20,000,000 52,000,000 B) Debit Cash 72,000,000 Credit Deferred stock issue revenue Credit Common stock Credit Paid-in capital-excess of par 20,000,000 5,000,000 47,000,000 C) Debit Cash 72,000,000 Credit Common stock 72,000,000 D) Debit Cash 72,000,000 Credit Common stock Credit Paid-in capital-excess of par 5,000,000 67,000,000

Answer 1

Answer:All of these answer choices are correct.

The increase in liability of $16m which is a credit entry is the double entry for the C choice of the answer. Also the reduction in retained earnings of $7 which is a debit entry is the double entry for the cost of security of $7m

2. B. $18,000

The preference stock dividend is cummulative which means dividend not paid in the year will paid in the following year.

The total dividend for preference shareholders should be $72,000 for 2016 to 2018 and having only received $40,000 leaves them with a balance of $32,000 and subtracting this from the $ 50,000 declared in 2018 leaves a balance of $18,000 for common stock holders.

3. Debit cash $72,000 and credit common stock $72,000

The stock was issued in par and this is the par value.