accounting chapter 12 terms/concept questions

Dividends-in-arrears (unpaid in prior years) on cumulative preferred stock: A. Are considered to be a non-current liability. B. Are considered to be a current liability. C. Only occur when preferred dividends have been declared. D. Are normally disclosed in the notes to the financial statements

D. Are normally disclosed in the notes to the financial statements

What affect does the declaration and issuance of a common stock dividend have on the accounting equation?

None!

____ 29. How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?

Note disclosure

dividends in arrears

preferred stock dividends that have not been paid in the past

what does issued stock equal?

sum of outstanding and treasury stock

Paid in capital definition

total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock (this is not just the paid in capital excess par account)

On September 1, 2013, Sterling Company had 25,000, $2 par value common shares issued and outstanding. On that day, the company declared and issued a 15 percent common stock dividend. The market value of the stock was $20 per share at the time the dividend was issued. As a result of this stock dividend, the total stockholders' equity

D. did not change

Earnings per share

net income - preferred dividends/ average number of common shares outstanding

Which of the following statements about treasury stock is correct? A. When a company reissues treasury stock for more than it originally paid for the stock, it does not report a gain. B. When a company purchases treasury stock, it increases total stockholders' equity. C. Treasury stock is reported as an asset on the balance sheet. D. Treasury stock is reported as issued and outstanding stock.

A. When a company reissues treasury stock for more than it originally paid for the stock, it does not report a gain.

Miller Company plans to issue a 10% stock dividend. In accounting for this transaction, what effects will occur to the stockholders' equity? A. Common stock increases by the total market value of the dividend. B. Common stock increases by the number of dividend shares × par value per share, and retained earnings decreases by the total market value of the dividend. C. Common stock increases by the number of dividend shares × par value per share, and retained earnings decreases by the same amount. D. Retained earnings decreases by the number of dividend shares × par value per share, and additional paid-in capital increases by the same amount.

B. Common stock increases by the number of dividend shares × par value per share, and retained earnings decreases by the total market value of the dividend.

On October 1, 2014, Chief Corporation declared and issued a 20% stock dividend. Prior to this date, Chief had 40,000 shares of common stock outstanding with a $5 par value. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief's retained earnings will: A. Decrease by $40,000. B. Increase by $40,000 C. Decrease by $80,000. D. Increase by $80,000.

C. Decrease by $80,000.

Christina Corporation acquired a new manufacturing building by issuing 10,000 shares of its $50 par value preferred stock with a $75 per share market price. The building has recently been appraised for $780,000. What are the effects of this transaction on the accounting equation for Museum? A. Building and Preferred Stock increase $780,000. B. Building and Preferred Stock increase $500,000. C. Building increases $780,000; Preferred Stock increases $500,000; Additional Paid-in Capital—Preferred increases $280,000. D. Building increases $750,000; Preferred Stock increases $500,000; Additional Paid-in Capital—Preferred increases $250,000.

D. Building increases $750,000; Preferred Stock increases $500,000; Additional Paid-in Capital—Preferred increases $250,000.

outstanding shares

Issued shares - treasury shares

Dividend in arrears A. are common stock dividends that have been declared but not paid. B. must be legally paid in the future. C. are dividends that have not been declared on cumulative preferred stock. D. are reported as a liability on the balance sheet until paid.

are dividends that have not been declared on cumulative preferred stock.