Acct 461 Chapter 18 SB
Farley Corp. has 50,000 shares of $1 par value common stock issued and outstanding. Farley declares a 10% stock dividend when the fair value of the stock is $9 per share. Which of the following entries will be included in the entries required to record the declaration and payment of the stock dividend? (Select all that apply.)
Credit common stock $5,000. Debit retained earnings $45,000. Credit additional paid-in capital $40,000.
Which type of dividend does not reduce the assets of the firm or create a liability?
stock dividend
Royce has 100,000 shares of $10 par issued and outstanding. Royce declares a 2-for-1 stock split in the form of a stock dividend. Which of the following are true? (Select all that apply)
The par value will not change. The number of shares outstanding increases.
A frequent reason for a stock split is to
cause the market price per share to decline
The earnings-price ratio is ______ divided by ______.
earnings per share; market price per share
Mueller Company issues one share in exchange for two outstanding shares of common shares. Mueller must have had a:
reverse stock split
When a company decreases its outstanding shares of stock by exchanging 1 share of stock for 10 shares, this is referred to as a(n)
reverse stock split.
Which of the following dividends has no effect on total owners' equity?
stock dividend
When stock splits or stock dividends result in fractional shares, companies issue _____ payments along with the additional shares to compensate for the fractions.
Cash
On April 1, Rawlings declares a dividend of $0.30 per share. Rawlings has 100,000 shares authorized, and 40,000 issued and outstanding. The date of record is April 28, and the payment date is May 15. Which of the following entries is included in the journal entry on April 1?
Debit retained earnings $12,000.
A ______ stock dividend is less than 25% of the outstanding shares of stock.
Small
The return on shareholders' equity ratio is computed by dividing
net income by average shareholders' equity.
When a small stock dividend is declared and distributed,
retained earnings is reduced by the market value of the shares issued
A property dividend is recorded at
the fair value of the assets at the dividend declaration date.
A 2-for-1 stock split increases the marketability of the stock because
the market price per share decreases.
A small stock dividend is usually less than ______% of the number of shares of stock outstanding.
25
On March 1, Fresh Corp. declared a dividend of $3,000. The record date is March 20, and the payment date is April 1. The journal entry required on March 1, will include which of the following entries? (Select all that apply.)
Debit retained earnings $3,000. Credit dividends payable $3,000.
On September 1, the board of directors of Mayor Corp. declares a property dividend of 10,000 shares of Plum Corp.'s preferred stock that Mayor had purchased in May for $5 per share. On September 1, the market value of the shares is $6 per share. The date of record is September 30, and the shares will be distributed on October 15. The journal entry on September 1 will include which of the following entries? (Select all that apply.)
Debit retained earnings $60,000. Credit gain on appreciation of securities $10,000.
True or false: The return on shareholders' equity ratio is calculated as net income divided by common stock.
False
Which of the following describe the ways in which companies may record stock splits effected in the form of dividends? (Select all that apply.)
Reduce the paid-in capital in excess of par account. Capitalize retained earnings.
If a company has preferred stock outstanding, a variation of calculating return on shareholders' equity can be made by making which adjustments to the ratio? (Select all that apply.)
Subtract preferred dividends from net income. Use average common shareholders' equity in the denominator.
Property dividends are valued at
fair value
The most likely reason for a company to declare a reverse stock split is to
increase the market value of the shares
The most likely reason for a company to declare a reverse stock split is to
increase the market value of the shares.
Reynolds Corp. has 100,000 shares of $1 par value common stock issued and outstanding. Reynolds declares a 20% stock dividend when the fair value of the stock is $8 per share. The debit to retained earnings for the stock dividend is
$160,000. Reason: 100,000 x 20% = 20,000 shares x $8 = $160,000
When stock splits or stock dividends result in fractional shares, the situation is handled by
issuing cash payments for the fractional shares.
A limitation of the return on shareholders' equity ratio is that
it uses book value of equity
The return to common shareholders' equity is calculated by subtracting ______ from net income and dividing that amount by average ______.
preferred dividends; shareholders' equity attributed to common shareholders
When a small stock dividend is declared and distributed,
earned capital is reclassified as invested capital.
In year 1, Boise purchased 10,000 shares of treasury stock for $5 per share. In year 3, Boise reissued 1,000 shares of treasury stock for $8 per share. The journal entry to record the transaction in year 3 will include (Select all that apply.)
credit to paid-in capital from treasury stock for $3,000. credit treasury stock for $5,000.
On April 1, the board of directors of Waspi Corp. declares a property dividend of 100,000 shares of Rourke Corp.'s preferred stock that Waspi had purchased in January for $10 per share. On April 1, the market value of the shares is $12 per share. The date of record is April 30, and the shares will be distributed on May 15. The journal entry on April 1 will include which of the following entries?
Credit gain on appreciation of securities $200,000.
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.
The journal entry to record a stock split effected in the form of dividends may include which of the following? (Select all that apply.)
debit to paid-in-capital credit to common stock debit to retained earnings
The earnings-price ratio is calculated as ______ divided by the market price per share.
earnings per share
A nonreciprocal transfer to owners is referred to as a
property dividend.
Because the return on shareholders' equity is based on the book value of equity, analysts often supplement their understanding of the return to shareholders with the
earnings-price ratio
Return on shareholders' equity indicates the percent of corporate earnings for each dollar of total equity invested in the corporation, whereas the earnings-price ratio reflects the percentage earned for each dollar of
market value of common stock
Miles Corp. declares and distributes a 3-for-1 stock split effected in the form of a 200% stock dividend. Miles had 10,000 shares of $1 par value common stock valued at $8 per share before the stock split. If Miles does not capitalize retained earnings, the journal entry required to record the split would include a debit to
paid-in capital in excess of par $20,000.
Fantastic Gold Inc. declares and distributes to its shareholders 1 gram of gold in lieu of a cash dividend. Fantastic Gold is distributing a(n)
property dividend.
A stock split effected in the form of a large stock dividend (select all that apply)
reduces paid in capital - excess of par. has no effect on the par value of the stock.
Miles Corp. declares and distributes a 3-for-1 stock split effected in the form of a 200% stock dividend. Miles had 10,000 shares of $1 par value common stock valued at $8 per share before the stock split. If Miles wishes to capitalize retained earnings, the journal entry required to record the stock split would include a debit to
retained earnings $20,000.
If a company wishes to increase its stock price, it might declare a(n) ______ stock split.
reverse
Distributions of stock to current shareholders of a corporation are called what type of distribution?
stock dividend