Ch. 10

When a company declares a 3-for-1 stock split, the number of outstanding shares:

triples

Which of the following should be considered when a company decides to declare a cash dividend on common stock?

the cash available and the retained earnings balance

As a result of a stock split,

the par value of the stock is changed in the reverse proportion as the stock split.

When a company declares a cash dividend, which of the following is true?

Liabilities are increased.

Which of the following is not a component of stockholders' equity?

dividends payable

Ames Corporation repurchases 10,000 shares of its common stock for $12 per share. The shares were originally issued at an average price of $10 per share. Later it resells 6,000 of the shares for $15 per share and the remaining 4,000 shares for $17 per share. How much gain or loss should Ames report on its income statement as a result of these transactions?

$0

When a company purchases treasury stock, which of the following statements is true?

The cost of the treasury stock reduces stockholders' equity.

What is the effect of a stock dividend on stockholders' equity?

Total stockholders' equity stays the same.

The shares that are in the hands of the stockholders are said to be outstanding. True or false

True

When a company retires its own common stock, the company must:

decrease the Common Stock account balances by the original issue price.

. A company would repurchase its own stock for all of the following reasons except

it believes the stock is overvalued.

With regard to preferred stock,

its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared.

Authorized stock represents the:

maximum number of shares that can be issued.

If a company purchases treasury stock for $6,000 and then reissues it for $5,000, the difference of $1,000 is:

a decrease in stockholders' equity.