CH 18
Distributions of stock to current shareholders of a corporation are called what type of distribution?
stock dividend
When a corporation issues shares of common stock for an amount above par, which of the following entries occur?
credit to additional paid-in capital credit to common stock
When a company repurchases shares held as treasury stock, the number of shares outstanding _____.
decreases
When a corporation repurchases its stock as treasury stock, the number of shares outstanding
decreases.
Disadvantages of the corporate form of business are
double taxation. government regulation.
A company that repurchases its own securities accounts for the shares of stock a
retired shares or treasury shares.
Which of the following accounts are classified as shareholders' equity?
Additional paid-in capital Preferred stock Net unrealized holding gains on investments
When common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded?
Credit common stock for the par amount.
True or false: A corporation is owned by debt and equity holders.
False
True or false: Treasury stock represents investments in treasury securities of the U.S. government.
False
True or false: When investors purchase shares of stock from a corporation, it is recorded by the corporation as investments in securities.
False
What type of corporations include churches, hospitals, universities, and charities?
Not-for-profit
When a company repurchases its own shares of stock, what are the two acceptable accounting choices for the transaction?
The shares can be formally retired. The shares can be called treasury shares.
Which account is a stockholders' equity account?
additional paid in capital
Which of the following accounts are classified as shareholders' equity?
additional paid-in capital retained earnings common stock
A frequent reason for a stock split is to
cause the market price per share to decline.
A restriction of retained earnings
communicates the portion of retained earnings not available for dividends indicates management's intention to withhold assets for a specified purpose
If preferred shares must be redeemed by a certain date, they should be classified as
debt.
A liquidating dividend means that
dividends exceeds
When a corporation repurchases its stock as treasury stock, the number of shares authorized
does not change.
Corporations raise equity capital by
issuing stock operating at a profit.
The most important advantage to the corporate form of business is
limited liability.
In a corporation, shareholders' liability is
limited to the amount of the investment.
The effect of share issue costs is to
reduce paid-in capital in excess of par.
A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as
retained earning
A corporation is owned by its
shareholders
The costs for legal, promotional, and accounting services to issue stock should be
subtracted from the proceeds of issuing stock.
Shares of stock previously sold by the corporation that are repurchased are called
treasury stock.
When a corporation distributes assets of the company to its investors, it is referred to as a(n)
dividend.
Preferred stockholders usually have preference over common stockholders with respect to which items?
dividends distribution of assets in liquidation
A liquidating dividend means that
dividends exceed retained earnings.
When a company repurchases its stock and immediately retires the stock, which of the following occurs?
The equity accounts are reduced for the amount in which the shares were originally sold.
Which of the following accounts might a corporation use to record changes in its ownership interests during a reporting period?
accumulated other comprehensive income retained earnings common stock
Retained earnings is typically reported on the balance sheet
as a single amount.
A business that has equity accounts labeled "common stock" and "retained earnings" is a
corporation.
The date on which a cash dividend becomes a liability to a corporation is the
declaration date.
In year 1, Rim Corporation purchases 1,000 shares of treasury stock for $10 per share. In year 2, Rim reissues 100 shares of the treasury stock for $12 per share. In year 3, Rim reissues 500 shares of its treasury stock for $9 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?
Credit treasury stock $5,000 Debit cash $4,500 Debit retained earnings $300. Debit paid-in capital—share repurchase $200.
Which of the following items are included in other comprehensive income?
deferred gains and losses on derivatives gains and losses from amendments to postretirement programs net holding gains and losses on certain types of investments
If more than one class of shares is authorized, what type of information must be specified?
designation to distinguish each class specific rights for each class
A company that is distributing liquidating dividends tends to be in the process of:
dissolving
When a company issues different classes of shares, it must
distinguish the rights for each class of stock.
A distribution of assets to shareholders is referred to as a
dividend
Which type of stock usually has a high par value and a percentage of par value dividend rate?
Preferred stock
The two types of corporations are
profit and not-for-profit.
Which of the following items are included in other comprehensive income?
net holding gains and losses on certain types of investments adjustments from foreign currency translations
Which of the following may be a source of paid-in capital?
Share-based compensation activities Company repurchases some of its outstanding common stock Company sells stock to investors
Preferred stock is similar to a bond when it has which of the following features?
a dividend rate a mandatory redeemable feature
When investors purchase shares of stock, it is classified as
paid-in capital.
The ownership interests of the investors in a corporation are referred to as
shareholders' equity.
Historically, par value was considered to be
the amount of net assets that were not available for distribution to shareholders.
The statement of shareholders' equity reports
the changes in each shareholder equity account for the period.
Which of the following is subject to double taxation?
Corporations
If a corporation issues its shares of stock for a noncash asset, at what amount should the transaction be recorded?
The fair value of the stock
Mandatorily redeemable preferred stock is reported as
a liability on the balance sheet.
A restriction of retained earnings signifies that
a portion of retained earnings is not available for dividends.
When a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction?
an independent appraisal of the value of the asset the amount of cash that would be paid to purchase the asset the quoted market price for the shares
In year 1, Goal Corp. purchases 1,000 shares of treasury stock for $10 per share. In year 2, Goal reissues 500 shares of the treasury stock for $13 per share. In year 3, Goal reissues 200 shares of its treasury stock for $8 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?
Debit paid-in capital—treasury shares $400.
Which of the following transactions are classified as a stock dividend?
A distribution of additional shares of a corporation's stock to current shareholders of the corporation.
When a corporation repurchases its stock as treasury stock, the number of shares issued
remains the same.
The purpose of the statement of shareholders' equity is to
report the changes and the sources of the changes in shareholder equity accounts.
A corporation's accumulated, undistributed net income or loss is referred as
retained earnings.
When the dividend exceeds the balance in retained earnings, the excess is referred to as a
liquidating dividend
Which of the following accurately describes shareholders' equity?
Ownership interests of the shareholders
A 2-for-1 stock split increases the marketability of the stock because
the market price per share decreases.
A company originally issues par value common stock at an amount above par. Subsequently, the company reacquires the shares for more than the issue price and immediately retires the shares. The company has no previous transactions for stock repurchases. Which of the following accounts would be reduced for the repurchase and retirement of the shares?
common stock paid-in capital in excess of par retained earnings
When does a dividend become a liability to a corporation?
When it is declared by the board of directors
Corporations raise capital by
operating at a profit. issuing stock issuing debt.
Amounts earned by the corporation on behalf of its shareholders are referred to as
retained earnings.
A company that repurchases its own securities accounts for the shares of stock as
retired shares or treasury shares.
Historically, par value indicated
the amount of net assets that were not available for distribution to shareholders. the issue price of all shares the real value of shares