ACCN-4110 Int Accn 2 Chp 18

Which of the following accounts are classified as shareholders' equity?

> common stock > additional paid-in capital > retained earnings > Additional paid-in capital > Net unrealized holding gains on investments > Preferred stock

When does a dividend become a liability to a corporation?

When it is declared by the board of directors

If more than one class of shares is authorized, what type of information must be specified? (Select all that apply) annual dividends per share issued to each class designation to distinguish each class specific rights for each class

designation to distinguish each class specific rights for each class

Linx Corp. has the following classes of equity: Preferred stock, $10 par, 8% dividend rate $100,000 Common stock, $1 par $50,000 The preferred stock is cumulative and nonparticipating. No dividends were paid in 2016 or 2017. In 2018, Linx declared a dividend of $90,000. The common stockholders will receive a dividend of $90,000. $74,000. $66,000. $82,000.

$66,000. Preferred Dividend $24,000 ($100,000 x 8%) = 8,000 for each of 3 years (since it is cumulative) Common Dividend $90,000 - 24,000 = $66,000

A small stock dividend is usually less than ______% of the number of shares of stock outstanding.

25%

Formally retiring shares reduces these accounts to their pre-issuance condition: common stock paid-in capital - share repurchase paid-in capital in excess of par retained earnings

common stock paid-in capital in excess of par

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 revenue credit to retained earnings credit to additional paid-in capital credit to common stock

credit to additional paid-in capital credit to common stock

When a corporation issues a stock dividend, the fair value of the shares should normally remain the same. decrease. increase.

decrease. Market price per share will decline in proportion to the increase in the number of shares distributed in a stock dividend > they will have the same percentage change in their stocks

Disadvantages of the corporate form of business are (Select all that apply.) government regulation. less paperwork. double taxation. ease of raising capital.

government regulation. double taxation.

The number of shares a specific corporation is authorized to issue is set forth in its articles of incorporation. the model business act. SEC regulations. its stock indenture.

its articles of incorporation.

The most important advantage to the corporate form of business is limited liability. ease of formation. regulation. double taxation.

limited liability

When a share repurchase is viewed as treasury stock, the cost of the treasury stock _______ shareholders' equity.

reduces

A company that repurchases its own securities accounts for the buyback as: a reduction of retained earnings. retired shares or treasury shares. an expense on the income statement. a contra-asset on the balance sheet.

retired shares or treasury shares.

A 2-for-1 stock split increases the marketability of the stock because > investors have twice as many shares to sell. > the new shares are restricted. > shareholders receive cash. > the market price per share decreases.

the market price per share decreases.

Cash and property dividends ______ total equity, and stock dividends _______ total equity.

decrease; do not effect

Property dividends are valued at fair value. net realizable value. book value. net present value.

fair value.

Canton has 60,000 shares of $10 par issued and outstanding. Canton declares a 2-for-1 stock split. What is the par value and number of shares outstanding after the stock split? $10 par; 60,000 shares $10 par; 120,000 shares $5 par; 60,000 shares $5 par; 120,000 shares

$5 par; 120,000 shares

The effect of share issue costs is to > reduce retained earnings when the stock is issued. > increase the common stock account. > reduce net income for the period. > reduce paid-in capital in excess of par.

> reduce paid-in capital in excess of par.

True or false: When investors purchase shares of stock from a corporation, it is recorded by the corporation as investments in securities.

False When investors purchase shares of stock in a corporation, the corporation records the transaction as paid-in capital.

In year 1, Frill Corp. issued 1,000 shares of $1 par value common stock for $10 per share. In year 3, Frill repurchased and immediately retired 100 shares of the stock at $12 per share. Which of the following entries would be included in the journal entry to retire the shares? (Select all that apply.) Credit paid-in capital—share repurchase $1,200. Debit paid-in capital in excess of par $900. Debit retained earnings $200. Debit retained earnings $1,200. Debit common stock $100.

__debit__ paid-in capital in excess of par $900. retained earnings $200. common stock $100. __credit__ cash $12,000

Mandatorily redeemable preferred stock is reported as other comprehensive income. a contra account to common stock. a liability on the balance sheet. a contra account to retained earnings.

a liability on the balance sheet.

When a business incorporates, it must file its ______ with the state in which it incorporates. federal tax return articles of incorporation proxy statement initial public offering

articles of incorporation

Formally retiring shares reduces these accounts to their pre-issuance condition: paid-in capital - share repurchase retained earnings common stock paid-in capital in excess of par

common stock paid-in capital in excess of par

When a corporation distributes assets of the company to its investors, it is referred to as a(n)

dividend.

A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as ______ earnings.

retained

Amounts earned by the corporation on behalf of its shareholders and recorded as a single amount are referred to as: shareholders' equity. paid-in capital. retained earnings. common stock.retained earnings.

retained earnings.

When treasury shares are reissued for an amount less than cost and no paid-in capital from treasury shares account exists, the amount that is less than the cost decreases

retained earnings.

The ownership interests of the investors in a corporation are referred to as net income. retained earnings. assets. shareholders' equity.

shareholders' equity.

A ______ stock dividend is less than 25% of the outstanding shares of stock. intermediary large small treasury

small

A corporation is owned by its _____ . (Enter one word per blank)

stockholders

A corporation is owned by its _____.

stockholders

In year 1, Boise purchased 10,000 shares of treasury stock for $5 per share. In year 3, Boise reissued 1,000 shares of treasury stock for $8 per share. The journal entry to record the transaction in year 3 will include (Select all that apply.) debit to common stock for $2,000. credit treasury stock for $5,000. credit treasury stock for $8,000. credit to retained earnings for $3,000. credit to paid-in capital from treasury stock for $3,000.

> (debit cash for $8,000.) > credit treasury stock for $5,000. > credit to paid-in capital from treasury stock for $3,000.

On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. The journal entry required on April 1, 2018, will include which of the following entries? (Select all that apply.) Debit dividends payable $3,000. Debit cash $3,000. Credit dividends payable $3,000. Credit cash $3,000. Debit retained earnings $3,000.

4-1-18 Debit Dividends payable $3K Credit Cash $3K

Historically, par value indicated (select all that apply) > the issue price of all shares > 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 two types of corporations are government and nongovernment. investing and financing. federal and state. profit and not-for-profit.

profit and not-for-profit.

A frequent reason for a stock split is to > shift amounts from retained earnings to other equity accounts. > issue more shares of stock so investors have more value. > cause the market price per share to decline. > give the investors an extra dividend for the year.

> cause the market price per share to decline.

A property dividend is recorded at > the fair value of the assets at the record date. > the book value of the assets at the date of distribution. > the fair value of the assets at the dividend declaration date. > the fair value of the assets at the date of distribution.

> the fair value of the assets at the dividend declaration date.

Property dividend

Reduce retained earnings, recognize gain on appreciation on income statement.

Royce has 100,000 shares of $10 par issued and outstanding. Royce declares a 2-for-1 stock split in the form of a stock dividend. Which of the following are true? (Select all that apply) > Treasury stock increases. > The number of shares outstanding increases. > A loss is recorded for the amount of the stock dividend. > The par value will not change.

> The number of shares outstanding increases. > The par value will not change.

In year 1, Sofia Corp. issued 1,000 shares of $1 par value common stock for $10 per share. In year 4, Sofia repurchased and immediately retired 100 shares of the stock at $6 per share. Which of the following entries would be included in the journal entry to retire the shares? (Select all that apply.) Debit common stock $100. Credit retained earnings $400. Debit common stock $600. Debit paid-in capital in excess of par $900. Credit paid-in capital—share repurchase $400.

__debit__ common stock $100 paid-in capital in excess of par $900 __credit__ paid-in capital—share repurchase $400.

Which of the following items are included in other comprehensive income? (Select all that apply.) > nonoperating loss from hurricane damage > net holding gains and losses on investments that are available for sale > restructuring charges > adjustments from foreign currency translations

> net holding gains and losses on investments that are available for sale > adjustments from foreign currency translations

Shares of stock previously sold by the corporation that are repurchased are called available for sale securities. treasury stock. investments in securities. additional paid-in capital.

treasury stock.

A business that has equity accounts labeled "common stock" and "retained earnings" is a proprietorship. corporation. partnership.

corporation

Which of the following is true regarding the issuance of a stock dividend? > Shareholders will still own the same percentage of the company as before the distribution > The fair value per share decreases in proportion to the additional shares issued > The fair value per share increases in proportion to the additional shares issued The company will increase its market value by distributing additional stock certificates

>Shareholders will still own the same percentage of t he company as before the distribution > The fair value per share decreases in proportion to the additional shares issued

Farley Corp. has 50,000 shares of $1 par value common stock issued and outstanding. Farley declares a 10% stock dividend when the fair value of the stock is $9 per share. Which of the following entries will be included in the entries required to record the declaration and payment of the stock dividend? (Select all that apply.) Credit common stock $45,000. Debit retained earnings $45,000. Credit common stock $5,000. Credit additional paid-in capital $40,000. Debit retained earnings $5,000.

payment Debit retained earnings $45,000 Credit additional paid in Capital $40000 Credit common stock $5000

Which of the following is true regarding the issuance of a stock dividend? (Select all that apply.) > The company will increase its market value by distributing additional stock certificates > The fair value per share increases in proportion to the additional shares issued > The fair value per share decreases in proportion to the additional shares issued > Shareholders will still own the same percentage of the company as before the distribution

> The fair value per share decreases in proportion to the additional shares issued > Shareholders will still own the same percentage of the company as before the distribution

A corporation's accumulated, undistributed net income or loss is referred as retained earnings. corporate dividends. comprehensive income. accumulated comprehensive income.

retained earnings.

What are the effects of a stock split? (Select all that apply.) Par value decreases. The number of shares outstanding increases. The number of shares outstanding decreases. Par value increases.

Par value decreases. The number of shares outstanding increases.

On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. The journal entry required on March 1, 2018, will include which of the following entries? (Select all that apply.) Debit retained earnings $3,000. Credit cash $3,000. Debit cash $3,000. Credit dividends payable $3,000.

3-1-2018 Debit retained earnings $3,000. Credit dividends payable $3,000.

The costs for legal, promotional, and accounting services to issue stock should be > subtracted from the proceeds of issuing stock. > added to the additional paid-in capital account. > treated as an expense on the income statement. > treated as an asset and expensed over the life of the stock.

> subtracted from the proceeds of issuing stock.

How should cash dividends be reported on the statement of shareholders' equity? As a reduction of treasury stock. As a reduction of common stock. As a reduction of comprehensive income. As a reduction of retained earnings.

As a reduction of retained earnings.

A company has available-for-sale debt securities in its portfolio that have increased in value at year-end. How should the unrealized gain on the available-for-sale securities be reported on the statement of shareholders' equity? (Assume the fair value option is not elected.) As an increase in treasury stock. As an increase in common stock. As an increase in retained earnings. As an increase in comprehensive income.

As an increase in comprehensive income.

Which type of stock usually has a high par value and a percentage of par value dividend rate? Preferred stock Common stock Both preferred and common stock

Preferred stock

True or false: The return on shareholders' equity ratio is calculated as net income divided by common stock.

False: Return on shareholders' equity is net income divided by average total shareholders' equity.

Corporations raise equity capital by > operating at a profit. > issuing stock > borrowing debt from creditors.

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 The par value of the stock The book value of the asset

The fair value of the stock

A restriction of retained earnings signifies that

a portion of retained earnings is not available for dividends.

When a company issues different classes of shares, it must > reduce the additional paid-in capital account for the new class of stock. > designate which classes have preference over debt in liquidation. > distinguish the rights for each class of stock. > charge more for higher classes of stock.

distinguish the rights for each class of stock. > Debt always has preference to equity in liquidation.

Which of the following items are included in other comprehensive income? (Select all that apply.) > deferred gains and losses on derivatives > nonoperating loss from flood damages > net holding gains and losses on certain types of investments > gains and losses from amendments to postretirement programs

> deferred gains and losses on derivatives > net holding gains and losses on certain types of investments > gains and losses from amendments to postretirement programs

When a corporation repurchases its stock as treasury stock, the number of shares authorized increases. does not change. decreases.

does not change.

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? > Each security is valued at par value with the remainder recorded in additional paid-in capital. > 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. > The cash received is allocated first to common stock based on its prorated par value, and the remainder is allocated to the other security. > The cash received is allocated to each security based on the number of shares issued.

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.

A corporation may repurchase its shares of stock because management > wants to increase its investments in trading securities. > needs additional current assets on the balance sheet. > believes the market price of the stock is undervalued. > wants to manipulate the price of the stock and record gains on the income statement

believes the market price of the stock is undervalued.

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 amount in excess of par. > Credit common stock for the par amount. > Credit common stock for the proceeds.

Credit common stock for the par amount.

Gosling Corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of $0.10 share. Which of the following entries is required at the date of declaration? Debit retained earnings $6,000. Credit cash $8,000. Credit dividends payable $8,000. Debit retained earnings $10,000.

Debit retained earnings $6,000. 80,000 shares issued - 20,000 treasury = 60,000 outstanding x $.10 per share

Formally retiring shares has what effect on total shareholders' equity? Increase Decrease None

Decrease

Which of the following accurately describes shareholders' equity? Ownership interests of the shareholders Amounts repaid to investors Amounts owed to shareholders Proceeds from the issuance of bonds

Ownership interests of the shareholders

Large stock dividend

Reduce retained earnings by par; increase common stock by par.

Cash dividend

Reduce retained earnings; reduce a current asset.

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.

S

Retained earnings is typically reported on the balance sheet as a single amount. as a multi-line item. showing its various components.

as a single amount.

The ex-dividend date is usually 1 day before the payment date. after the declaration date. before the date of record. before the declaration date.

before the date of record.

The right of a shareholder to exchange their preferred stock for another class of stock is referred to as a right of ______ , whereas the right of the preferred shareholder to have their stock repurchased by the corporation for cash is referred to as a ______ privilege.

conversion redemption/redeemable

The journal entry to record a stock split effected in the form of dividends may include which of the following? (Select all that apply.) credit to common stock credit to paid-in-capital debit to paid-in-capital debit to common stock debit to retained earnings

debit to paid-in-capital credit to common stock or debit to retained earnings credit to common stock

For U.S. GAAP reporting purposes, mandatorily redeemable preferred stock is classified as

debt.

The date on which a cash dividend becomes a liability to a corporation is the

declaration date.

The date on which the board of directors announces that a dividend will be paid is referred to as the ex-dividend date. payment date. record date. declaration date.

declaration date.

Preferred stockholders usually have preference over common stockholders with respect to which items? (Select all that apply.) distribution of assets in liquidation issuance of additional debt dividends issuance of additional shares

distribution of assets in liquidation dividends

True or false: Stock dividends typically are paid on treasury shares.

false Stock dividends usually not paid on treasury shares Treasury shares are essentially the same as shares that have never been issued so they usually do not receive stock dividends.

Preferred stock that has contractual rights in which the company is obligated to repurchase the stock at a specified future date is called preemptive preferred stock. preferred liability stock. convertible preferred stock. mandatorily redeemable preferred stock.

mandatorily redeemable preferred stock.

Treasury shares are the same as shares that have never been issued; therefore, treasury shares must be subtracted from retained earnings. may not be reissued at a later date. may not vote or receive cash dividends. must be accounted for as a trading security.

may not vote or receive cash dividends.

Which of the following are sources of shareholders' equity? (Select all that apply.) liabilities assets paid-in capital retained earnings

paid-in capital retained earnings

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)_______ fair value dividend stock dividend inventory dividend property dividend.

property dividend.

When a corporation repurchases its stock as treasury stock, the number of shares issued remains the same. decreases. increases.

remains the same.

The purpose of the statement of shareholders' equity is to > reconcile net income with taxable income and retained earnings. > reconcile the balance sheet with the statement of cash flows. > report the changes and the sources of the changes in shareholder equity accounts. > report the additional expenses of the company that were not accrued during the year.

report the changes and the sources of the changes in shareholder equity accounts.

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 to assets over the period. > assets, liabilities, and owners' equity for the period. > the changes in each shareholder equity account for the period.

the changes in each shareholder equity account for the period.

When a property dividend is declared, a gain or loss is recognized for > the book value of the assets distributed. > the net book value of the dividend. > the difference between the fair value and the book value of the assets distributed. > the fair value of the asset distributed.

the difference between the fair value and the book value of the assets distributed.

In year 1, Clark purchased 1,000 shares of treasury stock for $10 per share. In year 2, Clark reissued 200 shares of treasury stock for $14 per share. The journal entry to record the transaction in year 2 will include a credit to common stock for $2,000. treasury stock for $2,000. treasury stock for $2,800. retained earnings for $800.

treasury stock for $2,000.

True or false: No journal entry is required on the date of record.

true No entry is necessary, but a list of registered owners of the stock is made.

When a company believes the market price of its stock is _______, it may attempt to support the price by ______ the supply of stock through stock repurchases. overvalued; increasing overvalued; decreasing undervalued; decreasing undervalued; increasing

undervalued; decreasing

Which of the following is subject to double taxation? Partnerships Corporations Sole Proprietorships Corporations and partnerships

Corporations

Small stock dividend

Reduce retained earnings for fair value; increase common stock by par value; increase additional paid-in capital.

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. > The cash received is allocated equally to each security. > The cash received is allocated based on the par value of each security. > The cash received is allocated to the security with the highest classification.

The cash received is allocated based on the relative market value of each security.

When a company repurchases shares held as treasury stock, the number of shares outstanding: remains the same decreases increases

decreases

In order to receive a dividend, investors must purchase shares of stock before the payment date. treasury date. ex-dividend date.

ex-dividend date. which is the day before date of record

The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the

record date.

The feature that shares of preferred stock may be exchanged for cash at the option of the corporation or the shareholders is referred to as what? participating redeemable conversion preemptive

redeemable

A stock split effected in the form of a large stock dividend (select all that apply) > increases retained earnings by the fair value of the dividend. > decreases the par value of the stock. > reduces paid in capital - excess of par. > has no effect on the par value of the stock.

reduces paid in capital - excess of par. has no effect on the par value of the stock.

In year 1, Frill Corp. issued 1,000 shares of $1 par value common stock for $10 per share. In year 3, Frill repurchased and immediately retired 100 shares of the stock at $12 per share. Which of the following entries would be included in the journal entry to retire the shares? (Select all that apply.) > Credit paid-in capital—share repurchase $1,200. > Debit retained earnings $1,200. > Debit paid-in capital in excess of par $900. > Debit retained earnings $200. > Debit common stock $100.

Debit paid-in capital in excess of par $900. Debit retained earnings $200. Debit common stock $100.

In year 1, Boise purchased 10,000 shares of treasury stock for $5 per share. In year 3, Boise reissued 1,000 shares of treasury stock for $8 per share. The journal entry to record the transaction in year 3 will include credit treasury stock for $5,000. credit treasury stock for $8,000. credit to paid-in capital from treasury stock for $3,000. credit to retained earnings for $3,000. debit to common stock for $2,000.

Debit 8000 credit treasury stock for $5,000. credit to paid-in capital from treasury stock for $3,000.

On April 1, the board of directors of Waspi Corp. declares a property dividend of 100,000 shares of Rourke Corp.'s preferred stock that Waspi had purchased in January for $10 per share. On April 1, the market value of the shares was $12 per share. The date of record is April 30, and the shares will be distributed on May 15. The journal entry on May 15 will include which of the following entries? Credit common stock $1,000,000. Credit gain on appreciation of securities $200,000. Credit investment in Rourke securities $1,200,000. Debit retained earnings $1,200,000.

5-15 Property dividends payable $1,200,000. Credit investment in Rourke securities $1,200,000.

Bell Corp. has the following classes of equity: Preferred stock, $10 par, 8% dividend rate = $100,000 Common stock, $1 par = $50,000 The preferred stock is noncumulative and nonparticipating. No dividends were paid in 2016 or 2017. In 2018, Bell declared a dividend of $90,000. The common stockholders will receive a dividend of $74,000. $66,000. $90,000. $82,000.

$100,000 x 8% = $8,000 for preferred, remainder goes to common

A distribution of assets to shareholders is referred to as a ____

dividends

Miles Corp. declares and distributes a 3-for-1 stock split effected in the form of a 200% stock dividend. Miles had 10,000 shares of $1 par value common stock valued at $8 per share before the stock split. If Miles does not capitalize retained earnings, the journal entry required to record the split would include a debit to paid-in capital in excess of par $20,000. common stock $20,000. stock investment $30,000. retained earnings $30,000.

10K Shares x 2.0 x 1.0 par = 20K D: paid-in capital in excess of par $20K. C: Common Stock $20K

On September 1, the board of directors of Mayor Corp. declares a property dividend of 10,000 shares of Plum Corp.'s preferred stock that Mayor had purchased in May for $5 per share. On September 1, the market value of the shares was $6 per share. The date of record is September 30, and the shares will be distributed on October 15. The journal entry on October 15 will include which of the following entries? (Select all that apply.) Credit gain on appreciation of securities $10,000. Debit property dividends payable $60,000. Debit retained earnings $60,000. Debit loss on stock $60,000. Credit investment in Plum $60,000.

9-1 D: Investment in equity securities $10,000 C: Gain on investment $10,000 = ((6-5)*10,000) D: Retain Earnings $60,000 C: Property dividend payment $60,000 10-15 Debit property dividends payable $60,000. Credit investment in Plum $60,000.

Which of the following describe the ways in which companies may record stock splits effected in the form of dividends? (Select all that apply.) > Increase the treasury stock account. > Record the stock dividend at fair value and recognize a gain. > Capitalize retained earnings. > Reduce the paid-in capital in excess of par account.

> Capitalize retained earnings. > Reduce the paid-in capital in excess of par account. D: Paid n Capital - Excess of Par C: Common Stock Paid-in capital is the actual investment by the stockholders; -------------------------- D: retained earnings C: Common Stock retained earnings is the investment by the stockholders through earnings not yet withdrawn.

Which of the following may be a source of paid-in capital? (Select all that apply.) > Company generates profit from its operations > Company repurchases some of its outstanding common stock > Share-based compensation activities > Company sells stock to investors

> Company repurchases some of its outstanding common stock > Share-based compensation activities > Company sells stock to investors

When a company repurchases its own shares of stock, what are the two acceptable accounting choices for the transaction? The shares can be called treasury shares. The shares are a contra-asset. The shares can be treated as an investment security. The shares can be formally retired.

> The shares can be called treasury shares. > The shares can be formally retired.

True or false: Treasury stock represents investments in treasury securities of the U.S. government.

False Treasury stock represents shares of stock previously issued by the corporation that are repurchased by the corporation.

Miles Corp. declares and distributes a 3-for-1 stock split effected in the form of a 200% stock dividend. Miles had 10,000 shares of $1 par value common stock valued at $8 per share before the stock split. If Miles wishes to capitalize retained earnings, the journal entry required to record the stock split would include a debit to > retained earnings $30,000. > paid-in capital in excess of par $20,000. > retained earnings $20,000. > common stock $20,000. > stock investment $30,000.

D: 20K retained earnings C: 20K Common Stock

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 cash $4,500 Debit paid-in capital—share repurchase $200. Debit retained earnings $300. Credit treasury stock $5,000 In year 2, the company will debit cash for $1,200 and credit treasury stock for $1,000 and paid-in capital-share repurchase for $200. In year 3, the company must debit the share repurchase account for $200 and the balance of $300 is debited to retained earnings.

On April 1, 2018, Rawlings declares a dividend of $0.30 per share. Rawlings has 100,000 shares authorized, and 40,000 issued and outstanding. The date of record is April 28, and the payment date is May 15. Which of the following entries is included in the journal entry on May 15? Credit common stock $30,000. Credit cash $30,000. Debit dividends payable $12,000. Debit retained earnings $12,000.

Debit dividends payable $12,000. >See Cash Dividend

In year 1, Pride Corp. issued 10,000 shares of $1 par value common stock for $8 per share. In year 3, Pride repurchased and immediately retired 1,000 shares of the stock at $6 per share. Which of the following entries would be required to retire the shares? > Debit paid-in capital in excess of par $7,000. > Debit retained earnings $6,000. > Debit common stock $6,000. > Credit paid-in capital $7,000. > Credit common stock $6,000.

Debit paid-in capital in excess of par $7,000.

On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. What is the journal entry required on March 20, 2018? Debit retained earnings $3,000. Credit dividends payable $3,000. No entry is required. Credit cash $3,000.

No entry is required.

What type of corporations include churches, hospitals, universities, and charities? Not-for-profit Professional Federal Business

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 C corporation proprietorship partnership

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.

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 > Municipality of origin of the corporation > Securities and Exchange Commission > Treasury Department

The state in which the corporation is incorporated

When a company repurchases its own securities without formally retiring them, the stock is recorded in which account? Trading securities Common stock Investments Treasury stock

Treasury stock

In year 1, Pride Corp. issued 10,000 shares of $1 par value common stock for $8 per share. In year 3, Pride repurchased and immediately retired 1,000 shares of the stock at $6 per share. Which of the following entries would be required to retire the shares? Credit common stock $6,000. Debit common stock $6,000. Credit paid-in capital $7,000. Debit paid-in capital in excess of par $7,000. Debit retained earnings $6,000.

__Debit__ paid-in capital in excess of par $7,000 https://www.chegg.com/homework-help/questions-and-answers/year-1-pride-corp-issued-10-000-shares-1-par-value-common-stock-8-per-share-year-3-pride-r-q34206390

Preferred stock is similar to a bond when it has which of the following features? a mandatory redeemable feature a dividend rate a participating feature a noncumulative feature

a mandatory redeemable feature a dividend rate

When treasury stock is purchased, the cost of treasury stock is reported as > reduction of common stock. > contra-asset account. > reduction to retained earnings. > reduction in shareholders' equity.

a reduction in shareholders' equity.

When a small stock dividend is declared and distributed, > the fair value is transferred to the treasury stock account. > a loss is recorded in other comprehensive income. > expense is recognized on the income statement. > earned capital is reclassified as invested capital.

earned capital is reclassified as invested capital. >Dividends paid to investors are never recorded on the income statement.

True or false: Cash dividends are paid on treasury shares.

false Treasury shares are essentially the same as shares that have never been issued so they do not receive cash dividends. see stock splits

When the dividend exceeds the balance in retained earnings, the excess is referred to as a ______ dividend.

liquidating

Which of the following dividends has no effect on total owners' equity? property dividend cash dividend stock dividend

stock dividend

Which type of dividend does not reduce the assets of the firm or create a liability? property dividend cash dividend stock dividend

stock dividend

Historically, par value was considered to be > the maximum amount of money the company could borrow. > the amount of retained earnings that must be appropriated for future dividends. > the amount of cash that must be maintained in the corporation for contingencies. > the amount of net assets that were not available for distribution to shareholders.

the amount of net assets that were not available for distribution to shareholders.

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 $1,500. > Debit common stock $1,000. > Debit retained earnings $1,600. > Debit paid-in capital—treasury shares $400.

> Debit paid-in capital—treasury shares $400. The shares were originally purchased for $10 per share. They were sold for $8 per share. Therefore the debit to paid-in capital is $400 (($10-$8) x 200 shares)

Shareholders' equity consists of which of the following items? (Select all that apply.) amounts of assets purchased by the corporation amounts borrowed by the corporation amounts invested by shareholders amounts earned by the corporation

> amounts invested by shareholders > amounts earned by the corporation

A restriction of retained earnings (select all that apply) > signifies cash may not be used for stock repurchases. > communicates the portion of retained earnings not available for dividends > indicates management's intention to withhold assets for a specified purpose > indicates that cash has been set aside for future dividends.

> communicates the portion of retained earnings not available for dividends > indicates management's intention to withhold assets for a specified purpose

A stock split effected in the form of a large stock dividend (select all that apply) > reduces paid in capital - excess of par. > decreases the par value of the stock. > increases retained earnings by the fair value of the dividend. > has no effect on the par value of the stock.

> reduces paid in capital - excess of par. > has no effect on the par value of the stock. slide 67

When a small stock dividend is declared and distributed > retained earnings is reduced by the market value of the shares issued > paid-in-capital is reduced by the par value of the shares issued > paid-in-capital is reduced by the market value of the shares issued > retained earnings is reduced by the par value of the shares issued

> retained earnings is reduced by the market value of the shares issued

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.) > the quoted market price for the shares > the amount of cash that would be paid to purchase the asset > the net book value of the asset > the book value of the existing shares

> the quoted market price for the shares > the amount of cash that would be paid to purchase the asset

Which of the following transactions are classified as a stock dividend? > A distribution of stock options to current employees as incentive compensation. > A distribution of additional shares of a corporation's stock to current shareholders of the corporation. > A distribution of shares of stock held as an investment to stockholders of the corporation. > A distribution of stock to corporate executives as an inducement to extend their contract with the corporation.

A distribution of additional shares of a corporation's stock to current shareholders of the corporation. > neither the assets nor the liabilities of the firm are affected and Shareholders' proportional interest are unchanged > A corporation cannot increase its market value simply by distributing additional stock certificates

In year 1, Tallon Corp. issued 10,000 shares of $1 par value common stock for $10 per share. In year 2, Tallon repurchased and immediately retired 1,000 shares of the stock at $15 per share. Which of the following entries would be included in the journal entry to retire the shares? Debit paid-in capital in excess of par $9,000. Debit paid-in capital in excess of par $14,000. Debit retained earnings $5,000. Debit common stock $1,000. Credit cash $15,000. Credit common stock $1,000. Credit retained earnings $5,000.

Debit paid-in capital in excess of par $9,000. Debit retained earnings $5,000. Debit common stock $1,000. Credit cash $15,000.

True or false: A corporation is owned by debt and equity holders.

False corporation is owned by its shareholders, who are equity holders.

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. Debit cash $19,500. Credit additional paid-in capital $19,500. Credit common stock $20,000. Credit common stock $5,000. Credit additional paid-in capital $14,500. Credit additional paid-in capital $15,000.

__Debit__ Cash $19.5K 1K * 20 - 0.5K = 19.5K __Credit__ common stock $5K add. paid-in capital $14.5K

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. credit to retained earnings for $300. common stock for $100,000. additional paid-in capital for $90,000.

__debit__ Cash for $100,000 __credit__ Common Stock $10,000 Issue cost $3,000 additional paid-in capital for $87,000. https://www.chegg.com/homework-help/questions-and-answers/ople-tab-window-help-7d-fri-7-58-pm-areholders-equity-x-chapter-18-x-w-connecthtml-lanager-q46574478

A business that has equity accounts labeled "common stock" and "retained earnings" is a partnership. corporation. proprietorship.

corporation.

Reynolds Corp. has 100,000 shares of $1 par value common stock issued and outstanding. Reynolds declares a 20% stock dividend when the fair value of the stock is $8 per share. The debit to retained earnings for the stock dividend is $10,000. $160,000. $140,000. $20,000.

declare Debit retained earnings $160,000. Credit Common Stock $160,000 100K x 20% x $8 = $160K see Stock Split Effected in the Form of a Stock Dividend

A company that is distributing liquidating dividends tends to be in the process of:

dissolving

Corporations can raise capital by: (Select all that apply.) issuing stock. operating at a profit. merging with a proprietorship firm. borrowing. repurchasing treasury stock.

issuing stock. operating at a profit. borrowing.

In a corporation, shareholders' liability is > unlimited with responsibility for all corporate losses. > limited to the amount of aggregate corporate earnings. > limited to the amount of the investment.

limited to the amount of the investment.

When treasury shares are reissued for an amount greater than cost, the amount over the cost increases the investment account.v retained earnings. paid-in capital—treasury shares. gain on sale of treasury stock.

paid-in capital—treasury shares.

A nonreciprocal transfer to owners is referred to as a property dividend. treasury stock. stock dividend. stock split.

property dividend. as no cash is involved

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 > investment in securities > retained earnings > common stock > paid-in capital in excess of par

retained earnings common stock paid-in capital in excess of par

In year 1, Clark purchased 1,000 shares of treasury stock for $10 per share. In year 2, Clark reissued 200 shares of treasury stock for $14 per share. The journal entry to record the transaction in year 2 will include a credit to

treasury stock for $2,000. >See Resale of Shares