intermedia Ch. 18 SB
Which of the following transactions are classified as a stock dividend?
A distribution of additional shares of a corporation's stock to current shareholders of the corporation.
Which account is a stockholders' equity account?
Additional paid-in capital
Owners of _____ corporations have the limited liability of a corporation, but income and expenses are passed through the owners as in a partnership, avoiding double taxation.
Blank 1: S
A distribution of assets to shareholders is referred to as a ______.
Blank 1: dividend or dividends
When the dividend exceeds the balance in retained earnings, the excess is referred to as a ______ dividend.
Blank 1: liquidating or liquidation
A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as ____ earnings.
Blank 1: retained or reinvested
A corporation is owned by its _____ .
Blank 1: stockholders, shareholders, or investors
Which of the following may be a source of paid-in capital? (Select all that apply.) Company repurchases some of its outstanding common stock Company sells stock to investors Share-based compensation activities Company generates profit from its operations
Company repurchases some of its outstanding common stock Company sells stock to investors Share-based compensation activities
Which of the following is subject to double taxation?
Corporations
Brandon issues 1,000 shares of $5 par value common stock for $20 per share. Stock issue costs are $500. The journal entry to record the issuance of stock will include which of the following entries? (Select all that apply.) Debit common stock issue expense $500. Credit additional paid-in capital $19,500. Credit common stock $20,000. Credit common stock $5,000. Credit additional paid-in capital $15,000. Credit additional paid-in capital $14,500. Debit cash $19,500.
Credit common stock $5,000. Credit additional paid-in capital $14,500. Debit cash $19,500.
When common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded?
Credit common stock for the par amount.
In year 1, Goal Corp. purchases 1,000 shares of treasury stock for $10 per share. In year 2, Goal reissues 500 shares of the treasury stock for $13 per share. In year 3, Goal reissues 200 shares of its treasury stock for $8 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?
Debit paid-in capital—treasury shares $400.
True or false: A corporation is owned by debt and equity holders.
False
True or false: Treasury stock represents investments in treasury securities of the U.S. government.
False
True or false: When investors purchase shares of stock from a corporation, it is recorded by the corporation as investments in securities.
False
Which type of stock usually has a high par value and a percentage of par value dividend rate?
Preferred stock
When a corporation issues two securities for a single price and the market value of only one security is known, how is the cash received allocated?
The cash received is allocated first to the security for which the fair value is known, and the remainder is allocated to the other security.
When does a dividend become a liability to a corporation?
When it is declared by the board of directors
Mandatorily redeemable preferred stock is reported as
a liability on the balance sheet.
A restriction of retained earnings signifies that
a portion of retained earnings is not available for dividends.
When a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction? (Select all that apply.) an independent appraisal of the value of the asset the book value of the existing shares the amount of cash that would be paid to purchase the asset the quoted market price for the shares the net book value of the asset
an independent appraisal of the value of the asset the amount of cash that would be paid to purchase the asset the quoted market price for the shares
Retained earnings is typically reported on the balance sheet
as a single amount.
Which of the following accounts might a corporation use to record changes in its ownership interests during a reporting period? (Select all that apply) owner's capital account common stock accumulated other comprehensive income retained earnings
common stock accumulated other comprehensive income retained earnings
When a corporation issues shares of common stock for an amount above par, which of the following entries occur? (Select all that apply.) credit to retained earnings credit to additional paid-in capital credit to common stock credit to revenue
credit to additional paid-in capital credit to common stock
If preferred shares must be redeemed by a certain date, they should be classified as
debt.
The date on which a cash dividend becomes a liability to a corporation is the
declaration date.
Cash and property dividends ______ total equity, and stock dividends _______ total equity.
decrease; do not effect
When a company repurchases shares held as treasury stock, the number of shares outstanding _____.
decreases
If more than one class of shares is authorized, what type of information must be specified? (Select all that apply) designation to distinguish each class specific rights for each class annual dividends per share issued to each class
designation to distinguish each class specific rights for each class
A company that is distributing liquidating dividends tends to be in the process of:
dissolving
When a corporation distributes assets of the company to its investors, it is referred to as a(n)
dividend.
When a corporation repurchases its stock as treasury stock, the number of shares authorized
does not change.
Disadvantages of the corporate form of business are (Select all that apply.) ease of raising capital. government regulation. double taxation. less paperwork.
government regulation. double taxation.
A restriction of retained earnings (select all that apply) indicates management's intention to withhold assets for a specified purpose communicates the portion of retained earnings not available for dividends indicates that cash has been set aside for future dividends. signifies cash may not be used for stock repurchases.
indicates management's intention to withhold assets for a specified purpose communicates the portion of retained earnings not available for dividends
The most important advantage to the corporate form of business is
limited liability.
Treasury shares are the same as shares that have never been issued; therefore, treasury shares Multiple choice question.
may not vote or receive cash dividends.
The return to common shareholders' equity is calculated by subtracting ______ from net income and dividing that amount by average ____________.
preferred dividends; shareholders' equity attributed to common shareholders
The two types of corporations are
profit and not-for-profit.
A nonreciprocal transfer to owners is referred to as a
property dividend.
Fantastic Gold Inc. declares and distributes to its shareholders 1 gram of gold in lieu of a cash dividend. Fantastic Gold is distributing a(n)
property dividend.
The effect of share issue costs is to
reduce paid-in capital in excess of par.
A property dividend (Select all that apply.) is the issuance of common stock to investors. reduces retained earnings. reduces the common stock account. is a noncash distribution to owners.
reduces retained earnings. is a noncash distribution to owners.
When a corporation repurchases its stock as treasury stock, the number of shares issued
remains the same.
The purpose of the statement of shareholders' equity is to
report the changes and the sources of the changes in shareholder equity accounts.
A corporation's accumulated, undistributed net income or loss is referred as
retained earnings.
A company that repurchases its own securities accounts for the shares of stock as
retired shares or treasury shares.
Mueller Company issues one share in exchange for two outstanding shares of common shares. Mueller must have had a:
reverse stock split
When a company decreases its outstanding shares of stock by exchanging 1 share of stock for 10 shares, this is referred to as a(n)
reverse stock split.
Distributions of stock to current shareholders of a corporation are called what type of distribution?
stock dividend
The statement of shareholders' equity reports
the changes in each shareholder equity account for the period.
A 2-for-1 stock split increases the marketability of the stock because
the market price per share decreases.
Shares of stock previously sold by the corporation that are repurchased are called
treasury stock.
A quasi-reorganization allows a firm that is undergoing financial difficulties to
write-down inflated assets and reduce an accumulated deficit
Which of the following are characteristics of treasury stock? (Select all that apply.) It is retired when it is purchased. It has no voting rights. It is stock that is repurchased by the company. It does not receive a dividend.
It has no voting rights. It is stock that is repurchased by the company. It does not receive a dividend.
When a corporation issues two securities for a single price, how is the issue price usually allocated?
The cash received is allocated based on the relative market value of each security.
Who regulates the nature of shares that can be authorized, the issuance and repurchase of those shares, and the distributions to shareholders?
The state in which the corporation is incorporated
Preferred stockholders usually have preference over common stockholders with respect to which items? (Select all that apply.) issuance of additional debt dividends distribution of assets in liquidation issuance of additional shares
dividends distribution of assets in liquidation
A liquidating dividend means that
dividends exceed retained earnings.
Corporations raise capital by issuing stock operating at a profit. repurchasing treasury stock. issuing debt.
issuing stock operating at a profit. issuing debt.
In a corporation, shareholders' liability is
limited to the amount of the investment.
Which of the following accounts are classified as shareholders' equity? investments in securities retained earnings additional paid-in capital common stock
retained earnings additional paid-in capital common stock
Which of the following accurately describes shareholders' equity?
Ownership interests of the shareholders
The costs for legal, promotional, and accounting services to issue stock should be
subtracted from the proceeds of issuing stock.
Which of the following accounts are classified as shareholders' equity? Preferred stock Investments in securities Net unrealized holding gains on investments Additional paid-in capital
Preferred stock Net unrealized holding gains on investments Additional paid-in capital
A frequent reason for a stock split is to
cause the market price per share to decline.
A business that has equity accounts labeled "common stock" and "retained earnings" is a
corporation.
Amounts earned by the corporation on behalf of its shareholders are referred to as
retained earnings.
Historically, par value was considered to be
the amount of net assets that were not available for distribution to shareholders.
Corporations raise equity capital by operating at a profit. borrowing debt from creditors. issuing stock
operating at a profit. issuing stock
If a corporation issues its shares of stock for a noncash asset, at what amount should the transaction be recorded?
The fair value of the stock
When a company repurchases its own shares of stock, what are the two acceptable accounting choices for the transaction? The shares are a contra-asset. The shares can be formally retired. The shares can be treated as an investment security. The shares can be called treasury shares.
The shares can be formally retired. The shares can be called treasury shares.
The purposes of a quasi reorganization are to (Select all that apply.) file for bankruptcy. write down inflated assets. reduce the deficit in retained earnings. acquire additional investment from stockholders.
write down inflated assets. reduce the deficit in retained earnings.
In year 1, Rim Corporation purchases 1,000 shares of treasury stock for $10 per share. In year 2, Rim reissues 100 shares of the treasury stock for $12 per share. In year 3, Rim reissues 500 shares of its treasury stock for $9 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries? Debit retained earnings $300. Debit paid-in capital—share repurchase $200. Credit treasury stock $5,000 Debit paid-in capital—treasury shares $500. Debit cash $4,500 Credit treasury stock $4,500 Credit paid-in capital treasury shares $500.
Debit retained earnings $300. Debit paid-in capital—share repurchase $200. Credit treasury stock $5,000 Debit cash $4,500
If a company has preferred stock outstanding, a variation of calculating return on shareholders' equity can be made by making which adjustments to the ratio? (Select all that apply.) Use average common shareholders' equity in the denominator. Add preferred dividends to net income. Subtract preferred dividends from the denominator. Subtract preferred dividends from net income.
Use average common shareholders' equity in the denominator. Subtract preferred dividends from net income.
Carnival issues 10,000 shares of $1 par value common stock for $10 per share. Stock issue costs are $3,000. The journal entry to record the issuance of stock will include a credit to
additional paid-in capital for $87,000.
What element of the financial statements is described by the following definition? "Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions."
assets
A company originally issues par value common stock at an amount above par. Subsequently, the company reacquires the shares for more than the issue price and immediately retires the shares. The company has no previous transactions for stock repurchases. Which of the following accounts would be reduced for the repurchase and retirement of the shares? (Select all that apply.) other comprehensive income common stock retained earnings investment in securities paid-in capital in excess of par
common stock retained earnings paid-in capital in excess of par
State laws regulate which of the following corporate activities? (Select all that apply.) repurchase of stock issuance of stock amount of debt allowed nature of share authorization acquisition of assets
repurchase of stock issuance of stock nature of share authorization
The ownership interests of the investors in a corporation are referred to as
shareholders' equity.
The term treasury stock refers to
stock that is repurchased and not retired.
What type of corporations include churches, hospitals, universities, and charities?
Not-for-profit
Which of the following has limited liability for its owners, but passes income through to its investors and avoids double taxation?
S corporation
When a company repurchases its stock and immediately retires the stock, which of the following occurs?
The equity accounts are reduced for the amount in which the shares were originally sold.
When a company issues different classes of shares, it must
distinguish the rights for each class of stock.
When investors purchase shares of stock, it is classified as
paid-in capital.
Historically, par value indicated (select all that apply) the amount of net assets that were not available for distribution to shareholders. the amount of retained earnings that must be set aside for future dividends. the real value of shares the issue price of all shares
the amount of net assets that were not available for distribution to shareholders. the real value of shares the issue price of all shares