Question

1. Amelia Corporation has the following information in its financial statement:

Preferred Stock 6%, $100 par, cumulative, 10,000 shares authorized	$	540,000
Common Stock, $2 par, 400,000 shares authorized, 320,000 issued		640,000
Paid-in-Capital – Preferred		760,000
Paid-in Capital – Common		2,560,000
Retained earnings		2,373,400

If Amelia did not pay a dividend for the last two years, but declared a $250,000 dividend this year, how much will the common stockholders receive?

2. Treasury stock:

a.Decreases total stockholders' equity.

b. Increases total stockholders' equity.

c.Is an asset.

d.Does not change total stockholders' equity.

3. The two basic characteristics of estimated liabilities are:

a.Known to exist and amount unable to be determined until a later date.

b.Probable and non-interest bearing.

c.Probable and reasonably estimated.

d.Known to exist and interest bearing.

Answer 1

1)Common stock holders will receive $250,000 as a dividend,since if a dividend is declared then it is a obligation for company to pay dividend.After declaration is a liability of the company to pay its shareholders.Common stock doesn't have a cumulative dividend nature,therefore common stockholder will receive only dividend which declared in current year.

2)Treasury Stock is an asset.Treasury stock is a company's own share which purchased by company from their shareholders.It becomes asset of the company when company invest in such type of shares.

3)Probable and reasonable estimated.Estimated liabilities are probable since it is quantifiable and there is a assurance that liability will be paid in near future.