Practice Problems: Stockholders' Equity

Complete the demo problems, and self test true/false and multiple choice questions. Check your answers at the end after you finish.

Demonstration problem

Demonstration problem A Violet Company has paid all required preferred dividends through 2004 December 31. Its outstanding stock consists of 10,000 shares of USD 125 par value common stock and 4,000 shares of 6 percent, USD 125 par value preferred stock. During five successive years, the company's dividend declarations were as follows:

2005 $85,000
2006 52,500
2007 7,500
2008 15,000
2009 67,500

Compute the amount of dividends that would have been paid to each class of stock in each of the last five years assuming the preferred stock is:

a. Cumulative.
b. Noncumulative.

Demonstration problem B Terrier Company has been authorized to issue 100,000 shares of USD 6 par value common stock and 1,000 shares of 14 percent, cumulative, preferred stock with a par value of USD 12.

a. Prepare the entries for the following transactions that all took place in June 2009:

  • 50,000 shares of common stock are issued for cash at USD 24 per share. 
  • 750 shares of preferred stock are issued for cash at USD 18 per share. 
  • 1,000 shares of common stock are issued in exchange for legal services

b. Prepare the paid-in capital section of Terrier's balance sheet as of 2009 June 30.

Source: Textbook Equity,
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