Accounting Unit 7 Discussion
Ethics in financial reporting is critical to the reliability of financial statements. Corporate Managers are under enormous pressure to provide high earnings and dividend amounts. After reading the Ethics Case on page 664 of your text discuss the following:
- Who are the stakeholders in this situation?
- Is there anything unethical about Henson’s intentions or actions?
- What is the effect of a stock dividend on a corporation’s stockholders’ equity accounts? Which would you rather receive as a stockholder — a cash dividend or a stock dividend? Why?
- This is page 664
Critical Thinking
Decision Making Across the Organization
The stockholders’ equity accounts of Fernandez, Inc., at January 1, 2012, are as follows.
|
Preferred Stock, no par, 4,000 shares issued |
$400,000 |
|
Common Stock, no par, 140,000 shares issued |
700,000 |
|
Retained Earnings |
500,000 |
During 2012, the company had the following transactions and events.
|
July |
1 |
Declared a $0.50 cash dividend on common stock. |
|
Aug. |
1 |
Discovered a $72,000 overstatement of 2011 depreciation expense. (Ignore income taxes.) |
|
Sept. |
1 |
Paid the cash dividend declared on July 1. |
|
Dec. |
1 |
Declared a 10% stock dividend on common stock when the market value of the stock was |
|
|
|
$12 per share. |
|
|
15 |
Declared a $9 per share cash dividend on preferred stock, payable January 31, 2013. |
|
|
31 |
Determined that net income for the year was $320,000. |
Instructions
With the class divided into groups, answer the following questions.
