Financial Accounting - Exam 4 - TF/MC

In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?

Annual preferred dividend

When stock dividends are distributed,

Common stock Dividends Distributable is decreased.

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectfully?

Decrease and increase

T/F A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

False

T/F All dividends, except for liquidating dividends, reduce the total stockholders' equity of a corporation.

False

T/F Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders' equity section.

False

T/F Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

False

Stock dividends and stock splits have the following effects on retained earnings: Stock Splits--Stock Dividends

No change--Decrease

Identify the effect the declaration and distribution of a stock dividend has on the par value per share

No effect

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

Ownership interest consisting solely of common stock.

Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

Par value

Which of the following show the proper effect of a stock split and a stock dividend? Item-----> Stock Split--Stock Dividend

Par value per share Decrease--No change

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Stock Dividends.

Which dividends do not reduce stockholders' equity?

Stock dividends

Which of the following statements about property dividends is NOT true?

The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

T/F A 10% stock dividend will increase the number of shares outstanding but the par value per share will stay the same.

True

T/F Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind.

True

T/F When a stock dividend is less than 20-25 percent of the common stock outstanding, a company is required to transfer the fair value of the stock issued from retained earnings.

True

A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is Dilutive? Antidilutive?

Yes No

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

a paid-in capital account.

The balance in Common Stock Dividend Distributable should be reported as a(n)

addition to capital stock.

In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the

annual preferred dividend.

When computing diluted earnings per share, convertible bonds are

assumed converted only if they are dilutive.

In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would

be antidilutive.

In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are

considered outstanding at the beginning of the earliest year reported.

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

decreases retained earnings but does not change total stockholders' equity.

Dilutive convertible securities must be used in the computation of

diluted earnings per share only.

Earnings per share data are required on the face of the

income statement.

The declaration of a stock dividend will

increase paid-in capital.

A small stock dividend is defined as

less than 20-25% of the corporation's issued stock.

A dividend which is a return to stockholders of a portion of their original investments is a

liquidating dividend.

Cash dividends are paid on the basis of the number of shares

outstanding.

Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2020, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a

property dividend.

Antidilutive securities

should be ignored in all earnings per share calculations.

If a stockholder receives a dividend that reduces retained earnings by the fair value of the stock, the stockholder has received a

small stock dividend.

Common Stock Dividends Distributable is classified as a(n)

stockholders' equity account.

A feature common to both stock splits and stock dividends is

that there is no effect on total stockholders' equity.

In calculating earnings per share, companies deduct preferred dividends from net income if:

the dividends are declared or cumulative.

The per share amount normally assigned by the board of directors to a SMALL stock dividend is

the market value of the stock on the date of declaration.

Which one of the following events would not require a formal journal entry on a corporation's books?

2 for 1 stock split

At the date of declaration of a small common stock dividend, the entry should not include

a credit to Common Stock.

The effect of a stock dividend is to

change the composition of stockholders' equity.

A stock split

may occur in the absence of retained earnings.

The declaration and distribution of a stock dividend will

have no effect on total assets.

Corporations generally issue stock dividends in order to

increase the marketability of the stock.

The per share amount normally assigned by the board of directors to a LARGE stock dividend is

the par or stated value of the stock.