AC Chapter 11

Stockit, Inc. issued 100,000 shares of the 1,000,000 shares it is allowed to issue. Stockit has repurchased 10,000 of its own shares. The number of shares authorized equals ______ shares.

1,000,000

The entry to record the issuance of 100,000 shares of $0.10 par value common stock for $10 per share is debit ______.

Cash for $1,000,000 and credit Common Stock for $10,000 and Additional Paid-in Capital for $990,000

The money a corporation receives from investors by issuing stock is called ______.

Contributed Capital

True or false: No gain or loss is reported when treasury stock is reissued because GAAP does not consider transactions between a corporation and its owners to be profit-making activities.

True

Advantages of equity financing over debt financing include that ______. (Check all that apply.)

dividends are optional equity financing does not require repayment

Earnings per share (EPS) may be determined by ______. (Check all that apply.)

dividing the stock price by the P/E ratio dividing net income less preferred dividends by the average common shares outstanding

When a shareholder of Limited, Inc. sells its shares to another investor on the stock exchange, Limited, Inc.'s accounting equation ______.

is not affected because the corporation is separate from its owners

Dew Drop Inn, Inc. has a current ratio of 0.9 to 1.0 and $4 of debt for every $1 of equity. If Dew Drop Inn needs additional financing, it would best improve its financial situation with ______.

equity financing

Which of the following line item amounts would be under the Retained Earnings column of a statement of stockholders' equity? (Select all that apply.)

Dividends: Common Dividends: Preferred Net Income

When does a corporation record an increase in Dividends Payable?

On the declaration date

Select those statements below that are true about cash dividends. (Check all that apply.)

On the declaration date, liabilities are increased. On the payment date, current assets are decreased.

A common stock's______value is typically set at a low amount and has little meaning today other than being used to by some states to assess fees. (Enter only one word per blank.)

Par

Which of the following line items would be found on a statement of stockholders' equity that would not be on the statement of retained earnings? (Select all that apply.)

Treasury Stock Additional Paid-in Capital Common Stock

Which of the following would be found on a statement of stockholders' equity? (Select all that apply.)

Treasury Stock Stock Issuances Net Income Additional Paid-in Capital Dividends

When a corporation buys back its own stock, the stock is reported on the balance sheet as ______.

Treasury stock

The declaration of a dividend results in ______. (Select all that apply.)

a decrease in Retained Earnings after temporary accounts are closed an increase in Dividends an increase in liabilities

Refurbish, Inc. reissued 1,000 shares of its treasury stock for $10,000. Prior to the reissuance, the Treasury Stock balance was $12,000, which included the $8,000 cost of the 1,000 shares reissued. As a result of this transaction, Refurbish's ______. (Check all that apply.)

treasury stock on the balance sheet will equal $4,000 stockholders' equity on the balance sheet will be $10,000 higher

Stock options are expensed ______.

when granted and are recorded at the estimated cost of the options

Investors earn a return on stock investments by ______. (Check all that apply.)

receiving dividends selling the stock for more than its cost

Diva, Inc. declared and paid $10,000 of dividends. Dividends of $10,000 may be found on the ______.

statement of retained earnings

Treasury stock is reported in the ______.

stockholders' equity section of the balance sheet

The number of shares outstanding equals the number of shares ______.

issued minus the number of shares in treasury

Retained Earnings of $100,000 represent a corporation's cumulative earnings ______ and is shown on the ______.

kept; balance sheet and statement of retained earnings

Dividends Payable is a(n ...account with a normal.....balance and is initially recorded on the.......date.

liability;credit;declaration

Treasures, Inc. repurchased 1,000 shares of its $1 par value common stock for $100,000. The journal entry to record this transaction includes a ______. (Check all that apply.)

$100,000 credit to Cash $100,000 debit to Treasury Stock

EPS

net income-preffered dividends/avg. # of common shares outstanding

In an IPO, Ima Rich purchased 1,000 shares of BMI, Inc. for $5,000. Five years later, Ima Rick sold the 1,000 shares for $8,000 to Ralph Loring. What is the effect of this sale?

BMI, Inc., will not be directly affected by this transaction.

Refurbish, Inc., bought 1,000 shares of its own stock for $8,000. Later it reissued the shares for $10,000. The journal entry to record the sale of treasury stock includes a(n) ______. (Select all that apply.)

$2,000 credit to Additional Paid-in Capital $8,000 credit to Treasury Stock

When a corporate charter does not specify a legal value per share, then the stock issued is referred to as ______.

no-par value stock

Refurbish, Inc., bought 1,000 shares of its own stock for $8,000. Later it reissued the shares for $10,000. The journal entry to record the sale of treasury stock includes a(n) ______. (Select all that apply.)

$8,000 credit to Treasury Stock $2,000 credit to Additional Paid-in Capital

A stock dividend ______. (Check all that apply.)

causes retained earnings to decrease. distributes additional shares of stock to existing stockholders on a pro rata basis.

When a company issues of shares of $0.10 par value common stock for $10 per share, it will record a ______.

credit to Additional Paid-in Capital for the difference between the $10 price and the $0.10 par value

Dilution Solutions, Inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. The journal entry to record this transaction includes a $5,000 ________ to treasury stock

debit

Any difference between the cost of the treasury stock and the price when it is re-issued is recorded as a ______.

debit to Additional Paid-in Capital when the price is below the cost

The declaration and payment of a cash dividend ultimately causes a(n) ______. (Check all that apply.)

decrease in Cash decrease in stockholders' equity decrease in Retained Earnings

The declaration and payment of a cash dividend ultimately causes a(n) ______. (Check all that apply.)

decrease in Retained Earnings decrease in Cash decrease in stockholders' equity

Mega Corporation repurchased 1,000 shares of its $1 par value common stock for $8,000. The effect of this transaction on the accounting equation includes a(n) ______. (Check all that apply.)

decrease in stockholders' equity decrease in assets

The effect of repurchasing stock using the cost method is to ______. (Check all that apply.)

decrease stockholders' equity decrease assets increase Treasury Stock