ACCT 222 Chapter 8

Fontaine Incorporated declared to issue a 10% stock dividend on its $20 par value common stock. On the distribution date, the market value of the stock was $25; there were 12,000 shares of stock issued; and 10,000 shares of stock outstanding. Recognizing the stock dividend will cause an increase in the amount of additional paid-in capital in excess of par value of

$50,000 $25 - $20 = $5 x 10,000 shares = $50,000

Cloud company has 5,000 shares of 6%, $20 par value cumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid $30,000 of cash dividends in a year when no dividends were in arrears. Based on this information.

$6,000 would be paid to preferred stockholders and $24,000 would be paid to common stockholders. 5,000 shares x $20 x 6% = $6,000 $30,000 - $6,000 = $24,000

a stock split will (3 answers)

1) decrease the market value per share 2) increase the number of shares outstanding 3) have no affect on cash flows

a stock split will (2 answers)

1) have no affect on total stockholders' equity 2) have no affect on the total assets

_____ stock is normally listed before _____ stock in the stockholders' section of the balance sheet

1) preferred 2) common

which of the following are privileges that are frequently assigned to preferred stockholders (2 answers)

1) preferred stock has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders 2) preferred stock dividends are paid before dividends are distributed to common stockholders

common reasons corporations purchase treasury stock include which of the following (3 answers)

1) to keep the price of the stock high when it appears to be falling 2) to avoid a hostile takeover 3) to have stock available to satisfy the requirements of employee stock option plans

_____ held companies can generally be controlled with smaller percentages of ownership than _____ held companies (widely/closely)

1) widely 2) closely

Cloud company has 5,000 shares of 6%, $20 par value cumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. In Year 3, Cloud paid $30,000 of cash dividends. What was the amounts of dividends paid to common stockholders?

5,000 shares x $20 x 6% = $6,000 x 3 years = $18,000 $30,000 - $18,000 = $12,000 the answer is $12,000

which of the following is not normally included in the articles of incorporation

a forecast of projected profitability

the number of shares _____ is the maximum number of stock corporations are legally permitted to issue

authorized

assume that Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's

balance sheet would show $90,000 of paid-in-cash excess of par value $24 - $15 = $9 x 10,000 shares = $90,000

because a _____ is legally separate from its owners, creditors cannot claim owners' personal assets as payment for the company's debts

corporation

appropriating retained earnings is a(n)

equity exchange event

stock dividends are based on the number of shares

outstanding

when a corporation issues a stock dividend, the amount of

retained earnings decreases and the amount of paid-in-cash increases

authorized stock

the maximum number of shares a company can legally issue

outstanding stock

the number of shares currently owned by the investors

treasury stock

the number of shares of stock that a company has repurchased from its investors

issued stock

the total number of share the company has sold to investors

how will paying a cash dividend that was previously declared affect a corporation's financial statements

total assets and total liabilities will decrease