Questions- Rosewell Company has had 5,000 shares of 9%, $100 par-value preferred stock and 10,000
shares of $10 par-value common stock outstanding for the last two years. During the most recent year,
dividends paid totaled $65,000; in the prior year, dividends paid totaled $40,000.
Compute the amount of dividends that must have been paid to preferred stockholders and common
stockholders in each year, given the following independent assumptions:
Preferred stock is fully participating and cumulative
Preferred stock is nonparticipating and noncumulative
Preferred stock participates up to 10% of its par value and is cumulative
Preferred stock is nonparticipating and cumulative
Question- You have just started as a staff auditor for a small CPA firm. During the course of the audit, you
discover the following items related to a single client firm:
a. During the year, the firm declared and paid $10,000 in dividends
b. Your client has been named defendant in a legal suit involving a material amount. You have
received from the client’s counsel a statement indicating little likelihood of loss.
c. Because of cost control actions and general employee dissatisfaction, it is likely that the client
will suffer a costly strike in the near future.
d. Twenty days after closing, the client suffered a major fire in one of its plants.
e. The cash account includes a substantial amount set aside for payment for pension obligation
f. Marketable securities include a large quantity of shares of stock purchased for control purposes.
g. Land is listed on the balance sheet as its market value $1,000,000. It cost $670,000 to purchase
12 years ago
h. During the year, the Government of Uganda expropriated a plant located in that country. The
was substantial loss.
Required: How would each of these items be reflected in the year-end balance sheet, including notes?