Subsequent Share Transactions
True or False: A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation issues a 5-for-1 stock split, the number of shares outstanding after the split will be 40,000.
False
True or False: A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.
False
True or False: A sale of treasury stock may result in a decrease in paid-in-capital. All decreases should be charged to the Paid-In-Capital from Sale of Treasury account.
False
True or False: A stock split results in a transfer at market value from retained earnings to paid-in capital.
False
True or False: If 100 shares of treasury stock were purchased for $50 per share and then sold at $60 per share, $1,000 of income is reported in the income statement.
False
True or False: If 20,000 shares are authorized, 14,000 shares are issued, and 500 shares are held as treasury stock, a cash dividend of $1 per share would amount to $14,000.
False
True or False: If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 39,000.
False
True or False: Organizational expenses are classified as intangible assets on the balance sheet.
False
True or False: The amount of capital paid in by the stockholders of the corporation is called legal capital.
False
True or False: The issuance of ordinary share affects both paid-in capital and retained earnings.
False
True or False: The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.
False
True or False: The paid-in capital from sale of treasury stock account is debited if the sales price of the treasury stock sold is greater than its cost.
False
True or False: The par value of ordinary share must always be equal to its market value on the date the stock is issued.
False
True or False: The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.
False
True or False: Under the cost method, when treasury stock is purchased by the corporation, the par value and the price at which the stock was originally issued are important.
False
True or False: When a corporation issues stock at a premium, it reports the premium as an other income item on the income statement.
False
True or False: When no-par ordinary share with a stated value is issued for cash, the ordinary share account is credited for an amount equal to the cash proceeds.
False
True or False: When ordinary share is issued in exchange for land, the land should be recorded in the accounts at the par amount of the stock issued.
False
True or false: By-laws are part of the business's charter or articles of incorporation.
False
True or False: Since a stock split changes information of a business, this transaction needs to be recorded.
Since a stock split changes information of a business, this transaction needs to be recorded.
True or False: For accounting purposes, stated value is treated the same way as par value.
True
True or False: Paid-in capital may originate from real estate donated to the corporation.
True
True or False: Some corporations have stopped issuing stock certificates to stockholders.
True
True or False: The cost method of accounting for the purchase and sale of treasury stock is a commonly used method..
True
True or False: The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.
True
True or False: The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.
True
True or False: The journal entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury stock.
True
True or False: The main source of paid-in-capital is from issuing stock.
True
True or False: The par value of stock is an arbitrary per share amount defined in many states as legal capital.
True
True or False: The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.
True
True or False: The two main sources of stockholders' equity are investments contributed by stockholders and net income retained in the business.
True
True or False: Treasury Stock is listed in the stockholders' equity section on the balance sheet.
True
True or False: When no-par stock is issued, the ordinary share account is credited for the selling price of the stock issued.
True
True or False: When no-par value stock does not have a stated value, the entire proceeds from the issuance of the stock becomes legal capital in some states.
True
