Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 15: Question 11Q (page 810)

What features or rights may alter the character of preferred stock?

Short Answer

Expert verified

Preferred stock or shares are issued to business owners and other investors as proof of funds they have contributed to a business. They are part of a company's equity, the other two being common stock and retained earnings.

Step by step solution

01

Meaning of Preferred Stock

Preferred stock is a type of share capital that has various characteristics not found in common stock, such as traits of both an equity and a debt instrument, and is classified as a hybrid instrument.

02

Features or Rights that Alter the Character of Preferred Stock

Cumulative or noncumulative preferred stock,participating or nonparticipatingpreferred stock,convertible or nonconvertible preferred stock, callable or nonsalable preferred stock, and redeemable preferred stock can all change the character of preferred stock.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Use the information from BE15-13, but assume Green Day Corporation declared a 100% stock dividend rather than a 5% stock dividend. Prepare the journal entries for both the date of declaration and the date of distribution.

Satchel Inc. purchases 10,000 shares of its own previously issued \(10 par common stock for \)290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders’ equity?

(Analysis of Equity Data and Equity Section Preparation) For a recent 2-year period, the balance sheet of Santana Dotson Company showed the following stockholders’ equity data on December 31 (in millions).

2017

2016

Additional paid-in capital

\( 931

\) 817

Common stock

545

540

Retained earnings

7,167

5,226

Treasury stock

1,564

918

Total stockholders’ equity

\(7,079

\)5,665

Common stock shares issued

218

216

Common stock shares authorized

500

500

Treasury stock shares

34

27

Instructions

  1. Answer the following questions
  2. What is the par value of the common stock?
  3. What is the cost per share of treasury stock on December 31, 2017, and on December 31, 2016?
  4. Prepare the stockholders’ equity section on December 31, 2017.

(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders’ equity as of January 1, 2017

Common stock, \(5 par value, 20,000 shares issued \)100,000

Paid-in capital in excess of par—common stock 300,000

Retained earnings 320,000

Total stockholders’ equity \(720,000

During 2017, the following transactions occurred.

Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19

per share.

Mar.1 800 shares of treasury stock repurchased above were reissued at \(17

per share.

Mar.18 500 shares of treasury stock repurchased above were reissued at \)14

per share.

Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20

per share.

Instructions

  1. Prepare the journal entries to record the treasury stock transactions in 2017, assuming Clemson uses the cost method.
  2. Prepare the stockholders’ equity section as of April 30, 2017. Net income for the first 4 months of 2017 was \)130,000.

(Treasury Stock—Ethics) Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a “good” offer. Kenseth knows the corporation’s cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.)

Instructions

Answer the following questions.

  1. Who are the stakeholders in this situation?
  2. What are the ethical issues involved?
  3. Should Kenseth authorize the transaction?
See all solutions

Recommended explanations on Business Studies Textbooks

Strategic Direction

Read Explanation

Business Case Studies

Read Explanation

Human Resources

Read Explanation

Nature of Business

Read Explanation

Organizational Communication

Read Explanation

Influences On Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free