Accounting II, Chapter 13

The three important dates for cash dividends declarations are ___, ___, and ___.

Declaration date, date of record, and payment date

___ is debited and ___ is credited on the payment date of a cash dividend.

Dividends Payable and Cash

How are cash dividends distributed if a company's preferred stock is cumulative and the dividend was passed the previous year?

Dividends in arrears as well as the current years preferred dividends must be paid before common stockholders receive any cash dividend

True or false? Stock dividends and stock splits change total assets, liabilities, and stockholders' equity.

False.

What is the difference between recording a small stock dividend and recording a large stock dividend?

For small stock dividends, the Stock Dividends account is debited for the market value of the stock. For large stock dividends, the Stock Dividends account is debited for the par value of the stock.

What happens to par value of stock when a stock split occurs?

It is proportionately decreased

How does the income statement of a corporation difference from that of a sole proprietorship?

It reports income tax expense

Price/Earnings Ratio

Market price per share of common stock/earnings per share

Rate of return on common stockholders' equity

Net Income - Preferred Dividends/Average common stockholders' equity

Earnings Per Share

Net Income - Preferred Dividends/Average number of common shares outstanding

What journal entry is recorded on the date of record for a cash dividend?

None

What columns are used in the Statement of Stockholder's Equity?

Number of shares, amount/value of shares, paid-in capital in excess of par, retained earnings, and total stockholders' equity

What is the difference between issued and outstanding stock?

Outstanding stock is stock that is held by stockholders; whereas issued stock may or may not be outstanding

The two types of stockholders' equity are ___ and ___.

Paid-in capital and retained earnings

Stock certificate

Paper evidence of ownership in a corporation

What are the three types of value a corporation may assign to shares of stock at issuance?

Par value, no-par stock, and stated value stock

What are the advantages of being a preferred stockholder?

Preferred stockholders receive dividend preference and the right to receive assets before common stockholders in the event of liquidation

Treasury stock

Previously issued stock that has been repurchased by the corporation

Banks may place ___ on the balance of retained earnings that must be reported in the notes to the ___.

Restrictions, financial statements

The Stock Dividends account is closed to ___.

Retained Earnings

To what account is Cash Dividends closed at the end of the period?

Retained Earnings

When selling treasury stock below cost, which account is debited if Paid-In Capital from Treasury Stock Transactions cannot handle the entire difference?

Retained Earnings

The two types of stock dividends are as follows: ___ and ___.

Small stock dividends and large stock dividends

To record the declaration of a small stock dividend, ___ is debited for the market value of the stock, ___ is credited for the par value of the stock, and ___ is credited for the difference between par value and market value.

Stock Dividends, Common Stock Dividend Distributable, and Paid-In Capital in Excess of Par

Authorized stock

The maximum number of shares a corporations charter allows to be issued

Small stock dividend

A stock dividend that is less than 20-25% of issued and outstanding stock

Large stock dividend

A stock dividend that is greater than 20-25% of issued and outstanding stock

What are the basic components of a statement of retained earnings?

Beginning balance, prior period adjustments, net income or loss, dividends declared, ending balance

On the declaration date for a cash dividend ___ is debited and ___ is credited.

Cash Dividends and Dividends Payable

How is the issuance of common stock at par value accounted for?

Cash is debited and Common Stock is debited

How is the sale of treasury stock at cost recorded?

Cash is debited and Treasury Stock is credited

How is the issuance of common stock above par value accounted for?

Cash is debited, Common Stock is debited for the par value, and Paid-In Capital in Excess of Par is Credited for the difference

How is the sale of treasury stock below cost recorded?

Cash is debited, Paid-In Capital from Treasury Stock Transactions is debited for the difference between the amount received and the cost, and Treasury Stock is credited for the cost of the stock

How is the sale of treasury stock above cost recorded?

Cash is debited, Treasury Stock is credited for the cost, and Paid-In Capital from Treasury Stock Transactions is credited for the difference

How is the distribution of a stock dividend recorded?

Common Stock Dividend Distributable is Debited and Common Stock is Credited

What are the two major types of capital stock?

Common stock and preferred stock

What happens if the declared stock dividend is only large enough to cover preferred dividends?

Common stockholders receive no dividend

___ and ___ are two types of preferred stocks in regards to dividend payments.

Cumulative and Noncumulative

How is the purchase of treasury stock recorded?

Treasury Stock is debited and Cash is credited

How is a stock split recorded?

With a memorandum entry