ACCT 284 LS: Stockholder's Equity

_______ capital, also called paid-in capital, reports the amount of capital the company received from investors. (Enter only one word per blank.)

Contributed

When a company reissues shares at higher price than the cost to previously purchase the treasury stock, it records a ______.

credit to Additional Paid-in Capital

Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The effect of this transaction on the accounting equation, using the cost method, includes a ______. (Check all that apply.)

$10,000 decrease in Cash $10,000 increase in Treasury Stock

Refurbish, Inc. bought 1,000 shares of its own stock at $8 a share. Later, it reissued the shares for $10,000. The effect of the entry to record the sale of treasury stock on the accounting equation includes a(n) ______.

$10,000 increase in stockholders' equity

Treasures, Inc. repurchased 1,000 shares of its $1 par value common stock for $100,000. The journal entry to record this transaction includes a ______. (Check all that apply.)

$100,000 credit to Cash $100,000 debit to Treasury Stock

Just In Thyme, Inc. has the following December 31 equity balances: Common Stock of $20,000; Additional Paid-in Capital of $30,000; and Retained Earnings of $50,000. If Just In Thyme repurchases $10,000 of its stock, the total stockholders' equity balance would equal ______.

$90,000

Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. The journal entry to record this transaction includes a ______. (Select all that apply.)

$90,000 credit to Additional Paid-in Capital $10,000 credit to Common Stock $100,000 debit to Cash

Treasure This, Inc. had total assets of $100,000, liabilities of $60,000 and stockholders' equity of $40,000 before repurchasing 1,000 shares of its $1 par value common stock for $5 each. After this repurchase, total assets equal _____, liabilities equal ______ and stockholders' equity equals ______.

$95,000; $60,000; $35,000

During the year, Squid Roe Inc.'s revenues were $200,000 and its net income was $60,000. It had not preferred shares, and its stockholders' equity and total assets were $380,000 and $780,000 at the beginning of the year and $420,000 and $900,000 at year-end, respectively. ROE (rounded to the nearest tenth of a percent) equals ______.

15.0%

During the year, Lox, Stock and Bagel Inc.'s net income was $60,000. Its average stockholders' equity was $240,000, and it had 120,000 shares outstanding the entire year. Its stock was selling for $10 per share. Its P/E ratio equals ______. The company has no preferred stock.

20.00

Lox, Stock and Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

45,000

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares outstanding equals ______ shares.

90,000

Which of the following line items would be found on a statement of stockholders' equity that would not be on the statement of retained earnings? (Select all that apply.)

Additional Paid-in Capital Common Stock Treasury Stock

In an IPO, Ima Rich purchased 1,000 shares of BMI, Inc. for $5,000. Five years later, Ima Rick sold the 1,000 shares for $8,000 to Ralph Loring. What is the effect of this sale?

BMI, Inc., will not be directly affected by this transaction.

______ ______ reports the cumulative amount of net income earned by the company less the cumulative amount of dividends since the corporation began. (Enter one word per blank.)

Blank 1: Retained Blank 2: Earnings

______ ______ represents the earned capital and ______ Capital represents the paid-in capital.

Blank 1: Retained Blank 2: Earnings Blank 3: Contributed

Dividends Payable is a(n) ______ account with a normal ______ balance and is initially recorded on the ______ date. (Enter one word per blank.)

Blank 1: liability or liabilities Blank 2: credit or cr Blank 3: declaration or declared dividend

The entry to record the issuance of 100,000 shares of $0.10 par value common stock for $10 per share is debit ______.

Cash for $1,000,000 and credit Common Stock for $10,000 and Additional Paid-in Capital for $990,000

True or false: When a corporation declares a dividend its Net Income on the income statement is reduced.

False

Earnings per share (EPS) equals ______ divided by the average shares of common stock outstanding. (Assume no preferred stock has been issued.)

Net Income

When does a corporation record an increase in Dividends Payable?

On the declaration date

Select those statements below that are true about cash dividends. (Check all that apply.)

On the declaration date, liabilities are increased. On the payment date, current assets are decreased.

_____ is an insignificant value per share of capital stock specified in the corporate charter.

Par value

Which of the following would be found on a statement of stockholders' equity? (Select all that apply.)

Stock Issuances Dividends Net Income Treasury Stock Additional Paid-in Capital

Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following is true?

This entry is correct.

Mega Corporation repurchased 1,000 shares of its $1 par value common stock for $8,000 and recorded the entry with a debit to ______. (Check all that apply.)

Treasury Stock and a credit to Cash of $8,000

True or false: Some states allow corporations to issue no-par value common stock.

True

An accumulated deficit means a company has ______.

accumulated more net losses than net income

Transactions between a company and its stockholders affect the company's _____ accounts only.

balance sheet

A stock dividend ______. (Check all that apply.)

causes retained earnings to decrease. distributes additional shares of stock to existing stockholders on a pro rata basis.

Sea the World Cruises issued 400,000, $1 par value shares of the 1,000,000 shares authorized for $1,000,000. The entry to record the issuance of the stock includes ______. (Check all that apply.)

debit Cash $1,000,000 credit Common Stock $400,000 credit Additional Paid-in Capital $600,000

The declaration and payment of a cash dividend ultimately causes a(n) ______.

decrease in Retained Earnings decrease in Cash decrease in stockholders' equity

Mega Corporation repurchased 1,000 shares of its $1 par value common stock for $8,000. The effect of this transaction on the accounting equation includes a(n) ______. (Check all that apply.)

decrease in assets decrease in stockholders' equity

Similar to a stock split, a stock ______ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders. (Enter one word per blank.)

dividend

Earnings per share (EPS) may be determined by ______. (Check all that apply.)

dividing net income less preferred dividends by the average common shares outstanding dividing the stock price by the P/E ratio

The P/E ratio is calculated by ______.

dividing the stock price by EPS

A corporation ______ have a legal obligation to pay dividends.

does not

When a stockholder sells its shares to another person for more than its original cost, the corporation ______.

does not make a journal entry

When shares of stock that were issued to the public are later bought and sold among investors on the stock exchange, the issuing corporation ______.

does not record any entry because it does not receive or give anything of value

An advantage of _______ financing is that dividends are optional. (Enter only one word per blank.)

equity

Preferred stock generally ______ preference as to dividends.

has

Earnings per share (EPS) appears on the ______.

income statement

Investors acquire common stock because they expect a return on their investment from ______. (Select all that apply.)

increases in stock prices distributions of dividends

Accumulated Deficit ______. (Check all that apply.)

is shown in parentheses on the balance sheet indicates accumulated net losses means that Retained earnings has a debit balance

Stockit, Inc. issued 100,000 shares of the 1,000,000 shares authorized. Stockit has repurchased 10,000 of its shares. The number of shares authorized represents the ______.

maximum number of shares Stockit is allowed to issue

ROE relates ______.

net income to the average common stockholders' equity

When a stockholder sells its shares of ABC Co. to another person at a price higher than what the stockholder purchased it for, ABC records ______.

nothing

A stock _______, typically given to employees as part of their compensation that gives them the opportunity to buy the company's stock at a predetermined price, is recorded as an expense at the time it is granted. (Enter one word per blank.)

option

A common stock's ________ value is typically set at a low amount and has little meaning today other than being used to by some states to assess fees. (Enter only one word per blank.)

par

Stock options are given to ______.

provide incentives for employees to work harder.

Stock options ______. (Check all that apply.)

provide the holder with the option to purchase stock at a specified price during a specified period of time are often given to employees as part of their compensation

Treasury Stock ______. (Check all that apply.)

reduces total stockholders' equity is shares of stock no longer outstanding is a contra-equity account

Investors earn a return on stock investments by ______. (Check all that apply.)

selling the stock for more than its cost receiving dividends

The number of shares issued represents the number of shares ______.

sold

Advantages of debt financing over equity financing include that ______. (Check all that apply.)

stockholders' control will not be diluted interest payments are tax deductible

Refurbish, Inc. reissued 1,000 shares of its treasury stock for $10,000. Prior to the reissuance, the Treasury Stock balance was $12,000, which included the $8,000 cost of the 1,000 shares reissued. As a result of this transaction, Refurbish's ______. (Check all that apply.)

stockholders' equity on the balance sheet will be $10,000 higher treasury stock on the balance sheet will equal $4,000

Treasury stock is reported in the ______.

stockholders' equity section of the balance sheet

When a company has both common and preferred stock, its ROE must be adjusted by ______. (Select all that apply.)

subtracting preferred stock dividends from net income subtracting the preferred stock balance from total stockholders' equity

Stock options are expensed ______.

when granted and are recorded at the estimated cost of the options