Question 8

The shareholders' equity of Pluto Inc. includes $420,000 of $1 par common stock and

$600,000 par of 7% cumulative preferred stock. The board of directors of Pluto declared

cash dividends of $70,000 in 2021 after paying $40,000 cash dividends in each of 2020

and 2019.

What is the amount of dividends common shareholders will receive in 2021?

O $15,900.

$17,700.

None of the options listed.

O $46,000.

O $24,000.

9-Captain Hook, Inc. was organized on January 1, 2021. The firm was authorized to issue

150,000 shares of $1 par common stock. During 2021, Captain Hook had the following

transactions relating to shareholders' equity:

Issued 40,000 shares of common stock at $9 per share

Issued 50,000 shares of common stock at $7 per share

Reported a net income of $200,000

Paid dividends of $60,000

Purchased 5,000 shares of treasury stock at $10

What was the retained earnings amount reported in the company's shareholders' equity

section at the end of 2021?

$140,000

$850,000

O $800,000

O None of the options listed.

$710,000

10-Winnie-the-Pooh Inc. issued 6,000 shares of its no-par common stock to Honey Corp. in

exchange for 1,000 of Honey's extra sweet honeypots that normally sell for $500 each.

What is the journal entry that Winnie-the-Pooh should record for this transaction?

O dr. inventory (honey pots) $3,000,000; cr. Common Stock $3,000,000.

dr. Inventory (honey pots) $500,000; cr. Common Stock $500,000.

O None of the options listed.

dr. Cash $3,000,000; cr. Common Stock $3,000,000.

O dr. Cash $500,000; cr. Common Stock $500,000.

11-Jasmine, Inc. offered an incentive stock option plan to its employees. On January 1, 2021,

options were granted for 63,000 $1 par common shares. The exercise price equals the $5

market price of the common stock on the grant date. The options cannot be exercised

before January 1, 2024, and expire December 31, 2025. Each option has a fair value of $1

based on an option pricing model.

Which is the correct entry to record Jasmine's compensation expense for the year ended

December 31, 2021?

O dr. Compensation expense $21,000; cr. Common stock $21,000.

dr. Compensation expense $84,000; cr. Paid-in capital - stock options $84,000.

dr. Compensation expense $21,000; cr. Paid-in capital - stock options $21,000.

dr. Compensation expense $12,600; cr. Paid-in capital - stock options $12,600.

None of the options listed.

12-Mufasa, Inc. granted options for 1 million shares of its $1 par common stock at the

beginning of the current year. The exercise price is $33 per share, which was also the

market value of the stock on the grant date. The fair value of the options was estimated at

$9.00 per option.

If the options have a vesting period of five years, what would be the balance in "Paid-in

Capital- Stock Options" three years after the grant date?

O debit of $5.4 million.

O A credit of $5.4 million.

O A credit of $15.0 million.

A debit of $15.0 million.

O None of the options listed.

13-Baloo Corp. granted restricted stock units (RSs) representing 52 million of its $1 par

common shares to executives, subject to forfeiture if employment is terminated within

four years. After the recipients of the RSs satisfy the vesting requirement, Baloo will

distribute the shares. The common shares had a market price of $11 per share on the

grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are

granted to executives?

O $143 million.

$52 million.

O $0.

None of the options listed.

$572 million.

Question 14

On December 31, 2020, Ratatouille Corp. had 269,000 shares of common stock issued

and outstanding. On March 31, 2021, Ratatouille sold 69,000 additional shares for cash.

The company's net income for the year ended December 31, 2021, was $890,000. During

2021, Ratatouille declared and paid $99,000 in cash dividends on its nonconvertible

preferred stock. What is the 2021 basic earnings per share?

$2.47.

O $4.45.

O $3.31.

O None of the options listed.