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