acct ii ch 14 ungraded questions

Ivanhoe Inc. declared a $226000 cash dividend. It currently has 11700 shares of 4%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Ivanhoe distribute to the common stockholders? A. $132400 B. $179200 C. $0 D. $93600

A. $132400 (11700 × $100 × 0.04 = $46800 $226000 - ($46800 × 2) = $132400)

Blossom Company issues 3300 shares of its $5 par value common stock having a fair value of $20 per share and 5300 shares of its $10 par value preferred stock having a fair value of $30 per share for a lump sum of $204100 . What amount of the proceeds should be allocated to the preferred stock? A. $144231 B. $164300 C. $173931 D. $59868

A. $144231 (3300 × $20 ) + (5300 × $30 - $ 225000; ($159000 / $225000) x $204100 = $ 144231)

On January 1, 2026, Blossom Corporation had 105000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $13, the corporation declared a 16% stock dividend to be issued to stockholders of record on December 16, 2026. What was the impact of the 16% stock dividend on the balance of the retained earnings account? A. $197600 decrease B. No effect C. $84000 decrease D. $218400 decrease

A. $197600 decrease (95000 × 0.16 x $13 = $197600)

At the beginning of 2026, Ivanhoe Company had retained earnings of $318000. During the year Ivanhoe reported net income of $74900, sold treasury stock at a "gain" of $26700, declared a cash dividend of $44200, and declared and issued a small stock dividend of 1500 shares ($10 par value) when the fair value of the stock was $31 per share. The amount of retained earnings available for dividends at the end of 2026 was A. $302200. B. $328900. C. $351900. D. $325200.

A. $302200 ($318000 + $74900 - $44200 - (1500 × $31) = $302200)

Pharoah, Inc., has 14500 shares of 4%, $100 par value, cumulative preferred stock and 60700 shares of $1 par value common stock outstanding at December 31, 2026. There were no dividends declared in 2024. The board of directors declares and pays a $109000 dividend in 2025 and 2026. What is the amount of dividends received by the common stockholders in 2026? A. $44000 B. $109000 C. $58000 D. $0

A. $44000 (14500 × $100 x .04 = $58000 ($109000 × 2) - ($58000 × 3) = $44000)

Crane Corporation has 100000 shares of $10 par common stock authorized. The following transactions took place during 2025, the first year of the corporation's existence: Sold 20500 shares of common stock for $14.50 per share. Issued 20400 shares of common stock in exchange for a patent valued at $306000. At the end of Crane's first year, total paid-in capital was A. $603250. B. $306000. C. $297250. D. $120500.

A. $603250 ((20500 × $14.50) + $306000 = $603250)

Direct costs incurred to sell stock underwriting costs should be accounted for as 1. a reduction of additional paid - in capital. 2. an expense of the period in which the stock is issued. 3. an intangible asset . A. 1 B. 2 C. 3 D. 1 or 3

A. 1

Which of the following statements about property dividends is not true? A. The accounting for a property dividend is based on the book value of the nonmonetary assets transferred B. Property dividends may be merchandise or real estate C. A property dividend is usually in the form of securities of other companies D. A property dividend is also called a dividend in kind

A. The accounting for a property dividend is based on the book value of the nonmonetary assets transferred

Which of the following is not a legal restriction related to profit distributions by a corporation? A. The amount distributed in any one year can never exceed the net income reported for that year B. The amount distributed to owners must comply with the state laws governing corporations C. Profit distributions must be formally approved by the board of directors D. Dividends must be in full agreement with the capital stock contracts as to preferences and participation

A. The amount distributed in any one year can never exceed the net income reported for that year

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as A. a footnote B. an increase in current liabilities for the current portion and long-term liabilities for the long-term portion C. an increase in current liabilities D. an increase in stockholders ' equity

A. a footnote

Redeemable preferred stock is reported A. as a liability B. in stockholders' equity C. as a contra item in stockholders' equity D. with common stock

A. as a liability

Common stockholders of a business enterprise are said to be the residual owners which means that they A. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership B. have the rights to specific assets of the business C. can negotiate individual contracts on behalf of the enterprise D. are entitled to a dividend every year in which the business earns a profit

A. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership

Total stockholders ' equity represents A. claims against a portion of the total assets of a company B. the earnings that have been retained in the business C. a claim to specific assets contributed by the owners D. the maximum amount that can be borrowed by a company

A. claims against a portion of the total assets of a company

The residual interest in a corporation belongs to the A. common stockholders B. preferred stockholders C. creditors D. management

A. common stockholders

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding A. decreases retained earnings but does not change total stockholders' equity B. increases retained earnings and increases total stockholders' equity C. increases common stock outstanding and increases total stockholders' equity D. may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity

A. decreases retained earnings but does not change total stockholders' equity

Treasury shares are shares A. issued but not outstanding B. held as an investment of the corporation C. held as an investment by the treasurer of the corporation D. issued and outstanding .

A. issued but not outstanding

A dividend which is a return to stockholders of a portion of their original investments is a A. liquidating dividend B. liability dividend C. property dividend D. participating dividend

A. liquidating dividend

Younger Company has outstanding both common stock and nonparticipating , non-cumulative preferred stock . The liquidation value of preferred is equal to its par value . The book value per share of the common stock is UNAFFECTED by A. the payment of a previously declared cash dividend on the common stock B. the declaration of a stock dividend on common stock payable in common stock when the market price of the common is equal to its par value C. the declaration of a stock dividend on preferred payable in preferred stock when the market price of the preferred is equal to its par value D. a 4 - for - 1 split of the common stock .

A. the payment of a previously declared cash dividend on the common stock

Oriole Inc. has 4200 shares of 5%, $50 par value, cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31, 2026, and December 31, 2025. The board of directors declared and paid an $8400 dividend in 2025. In 2026, $35400 of dividends are declared and paid. What amount of dividends are received by the preferred stockholders in 2026? A. $29400 B. $12600 C. $21000 D. $10500

B. $12600 (4200 × $50 × 0.05 = $10500 ($10500 - $8400) + $10500 = $12600)

Blossom Corporation started business in 2020 by issuing 209000 shares of $21 par common stock for $28 each. In 2025, 25500 of these shares were purchased for $40 per share by Blossom Corporation and held as treasury stock. On June 15, 2026, these 25500 shares were exchanged for a piece of property that had an assessed value of $753000. Blossom's stock is actively traded and had a market price of $46 on June 15, 2026. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events is A. $229500. B. $153000. C. $459000. D. $765000.

B. $153000 (($46 - $40) × 25500 = $153000)

Crane Co. has outstanding 76000 shares of 5% preferred stock with a $10 par value and 145000 shares of $3 par value common stock. Dividends have been paid every year except last year and the current year. If the preferred stock is cumulative and nonparticipating and $249000 is distributed, the common stockholders will receive A. $211000. B. $173000. C. $249000. D. $0.

B. $173000 ($249000 - ($760000 × 5% × 2) = $173000)

Blossom, Inc. has outstanding 590000 shares of $2 par common stock and 121000 shares of no-par 6% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year. Assuming that $94000 will be distributed as a dividend in the current year, how much will the preferred stockholders receive? A. $31367. B. $94000. C. $35400. D. $73500.

B. $94000 (121000 × $5 × 0.06 × 3 = $108900 > $94000)

Which of the following could create a secret reserve by undervaluing assets? A. Inadequate depreciation is charged to income B. A capital expenditure is charged to expense C. Accrued expenses are recorded D. Impairment losses are reversed

B. A capital expenditure is charged to expense

A mining company declared a liquidating dividend. The journal entry to record the declaration will include a debit to A. Retained Earnings B. A paid-in capital account C. Accumulated Depletion D. Accumulated Depreciation

B. A paid-in capital account

Which of the following statements is true regarding an S Corporation? A. Stockholders in an S Corporation are subject to double taxation B. An S Corporation does not pay income tax C. An S Corporation typically has more than 100 stockholders D. All of these statements are true regarding S Corporations .

B. An S Corporation does not pay income tax

Which of the following best describes a possible result of treasury stock transactions by a corporation? A. May decrease but not increase net income B. May decrease but not increase retained earnings C. May increase but not decrease retained earnings D. May increase net income if the cost method is used

B. May decrease but not increase retained earnings

How should cumulative preferred dividends in arrears be reported in a corporation's balance sheet? A. Increase in current liabilities for the amount expected to be declared within the year or the corporation's operating cycle , and increase in long - term liabilities for the balance B. Note disclosure C. Increase in stockholders equity D. Increase in current liabilities

B. Note disclosure

The journal entry at the date of declaration of a small common stock dividend does NOT include A. a credit to Paid-in Capital in Excess of Par B. a credit to Common Stock C. a debit to Retained Earnings D. a credit to Common Stock Dividend Distributable

B. a credit to Common Stock

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? A. issued shares B. authorized shares C. unissued shares D. outstanding shares

B. authorized shares

The rate of return on common stockholders' equity calculated by dividing A. net income by average common stockholders' equity B. net income less preferred dividends by average common stockholders' equity C. net income less preferred dividends by ending common stockholders' equity D. net income by ending common stockholders' equity .

B. net income less preferred dividends by average common stockholders' equity

Cash dividends are paid on the basis of the number of shares A. authorized B. outstanding C. issued D. outstanding less the number of treasury shares

B. outstanding

Which of the following features of preferred stock makes it more like debt rather than equity? A. voting B. redeemable C. participating D. noncumulative

B. redeemable

The cumulative feature of preferred stock A. limits the cumulative dividends to the par value of the preferred stock B. requires that dividends not paid in any year must be paid in a later year before dividends are distributed to common shareholders C. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock D. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends .

B. requires that dividends not paid in any year must be paid in a later year before dividends are distributed to common shareholders

Cullumber Company issued 10200 shares of its $10 par value common stock having a fair value of $20 per share and 14600 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $513000 . How much of the proceeds would be allocated to the common stock? A. $302008 B. $230250 C. $210992 D. $204000

C. $210992 (10200 × $20 ) + (14600 × $20 ) = $496000 ; ($ 204000 + $496000) x $513000 = $210992)

Ivanhoe Company has 505000 shares of $10 par value common stock outstanding. During the year Ivanhoe declared a 13% stock dividend when the market price of the stock was $34 per share. Three months later Ivanhoe declared a $0.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by A. $476100. B. $499950. C. $2574490. D. $2232100.

C. $2574490 ((505000 × 0.13 x $34) + (505000 × 1.13 x $0.60) = $2574490)

On December 1, 2026, Sheridan Corporation exchanged 48000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired by Sheridan at a cost of $45 per share and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $60 per share (the shares were originally issued at $35 per share). As a result of this exchange, Sheridan's total stockholders' equity will increase by A. $480000. B. $2400000. C. $2880000 D. $2160000.

C. $2880000 (48000 × $60 = $2880000)

At the beginning of 2026, Sunland Company had retained earnings of $409000. During the year Sunland reported net income of $100000, sold treasury stock at a "gain" of $35300, declared a cash dividend of $58100, and declared and issued a small stock dividend of 3060 shares ($10 par value) when the fair value of the stock was $18 per share. The amount of retained earnings available for dividends at the end of 2026 was A. $455600. B. $431120. C. $395820. D. $420300.

C. $395820 ($409000 + $100000 - $58100 - (3060 × $18) = $395820)

Pharoah Corporation owned 907000 shares of Flounder Corporation stock. On December 31, 2026, when Pharoah's account "Equity Investments (Flounder Corporation) had a carrying value of $5 per share, Pharoah distributed these shares to its stockholders as a dividend. Pharoah originally paid $7 for each share. Flounder has 5090000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Flounder share was $7 on the declaration date and $8 on the distribution date. What would be the reduction in Pharoah's stockholders' equity as a result of the above transactions? A. $6349000 B. $2721000 C. $4535000 D. $7256000

C. $4535000 ((907000 × $7) - [($7 - $5) × 907000] = $4535000)

Cullumber Company has 629000 shares of $10 par value common stock outstanding. During the year Cullumber declared a 15% stock dividend when the market price of the stock was $47 per share. Two months later Cullumber declared a $0.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by A. $4434450. B. $434010. C. $4868460. D. $582000.

C. $4868460 ((629000 × 0.15 x $47) + (629000 x 1.15 × $0.60) = $4868460)

Marigold's Corporation has an investment in 20500 shares of Ivanhoe Corporation common stock with a cost of $879000. These shares are used in a property dividend to stockholders of Marigold's. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to stockholders of record on June 15. The fair value per share of Ivanhoe stock is $62 on May 25, $65 on June 15, and $67 on July 31. The net effect of this property dividend on retained earnings is a reduction of A. $1332500. B. $1373500. C. $879000. D. $1271000.

C. $879000 ((20500 × $62) = $1271000 $1271000 - ($1271000 - $879000) = $879000)

Carla Vista Co. issued 100000 shares of $10 par common stock for $1300000. A year later Carla Vista acquired 16200 shares of its own common stock at $14 per share. Three months later Carla Vista sold 7700 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 7700 treasury shares, Carla Vista should credit A. Treasury Stock for $77000 and Paid-in Capital from Treasury Stock for $69300. B. Treasury Stock for $107800 and Paid-in Capital in Excess of Par for $38500. C. Treasury Stock for $107800 and Paid-in Capital from Treasury Stock for $38500. D. Treasury Stock for $146300.

C. Treasury Stock for $107800 and Paid-in Capital from Treasury Stock for $38500. (7700 × $14 = $107800 7700 × $5 = $38500)

Pharoah Company acquired 19000 shares of its common stock at $22 per share on February 5, 2025, and sold 9500 of these shares at $29 per share on August 9, 2026. The fair value of Pharoah's common stock was $26 per share at December 31, 2025, and $27 per share at December 31, 2026. The cost method is used to record treasury stock transactions. What accounts) should Pharoah credit in 2026 to record the sale of 9500 shares? A. Treasury Stock for $247000 and Retained Earnings for $28500. B. Treasury Stock for $209000 and Retained Earnings for $66500. C. Treasury Stock for $209000 and Paid-in Capital from Treasury Stock for $66500. D. Treasury Stock for $275500.

C. Treasury Stock for $209000 and Paid-in Capital from Treasury Stock for $66500. (9500 x $22 = $209000 9500 × $7 = $66500)

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock , what account(s) should be debited? A. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value B. Paid - in capital in excess of par for the purchase price C. Treasury stock for the purchase price D. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value

C. Treasury stock for the purchase price

The balance in Common Stock Dividend Distributable is reported as a(n) A. deduction from common stock issued B. current liability C. addition to capital stock D. contra current asset

C. addition to capital stock

Riverbed Corp. purchased its own par value stock on January 1, 2025 for $ 18800 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $ 11200. The $ 7600 difference between the cost and sales price should be recorded as a deduction from A. additional paid-in capital without regard as to whether or not there have been previous net " gains " from sales of the same class of stock included therein B. net income C. additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings D. retained earnings

C. additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings

Common stock is the only class of stock outstanding in Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called A. fair value per share B. stated value per share C. book value per share D. par value per share

C. book value per share

The payout ratio is calculated by dividing A. dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends B. cash dividends by the market price per share C. cash dividends by net income less preferred dividends D. dividends per share by earnings per share

C. cash dividends by net income less preferred dividends

In January 2025 , Blue Corporation , a newly formed company , issued 11800 shares of its $ 0.10 par common stock for $ 15 per share . On July 1 , 2025 , Blue Corporation reacquired 1180 shares of its outstanding stock for $ 12 per share . The acquisition of these treasury shares A. increased total stockholders' equity B. did not change total stockholders' equity C. decreased total stockholders' equity D. decreased the number of issued shares

C. decreased total stockholders' equity

The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid - in capital an amount equal to the A. minimum legal requirements B. book value of the shares issued C. fair value of the shares issued D. par or stated value of the shares issued

C. fair value of the shares issued

How should a "gain" from the sale of treasury stock be reported when using the cost method of accounting for treasury stock transactions? A. ordinary earnings on the income statement B. an increase in the amount for common stock on the balance sheet C. paid-in capital from treasury stock transactions on the balance sheet D. an other revenue and gain on the income statement

C. paid-in capital from treasury stock transactions on the balance sheet

Sheridan Corporation owns 3700000 shares of stock in Oriole Corporation. On December 31 2025 Sheridan distributed these shares of stock as a dividend to its stockholders . This is an example of a A. stock dividend B. liquidating dividend C. property dividend D. cash dividend

C. property dividend

Which type of dividends do NOT reduce stockholders equity? A. cash dividends B. liquidating dividends C. stock dividends D. property dividends

C. stock dividends

In a corporate form of business organization , legal capital is best defined as A. the amount of capital the federal government allows a corporation to generate B. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission C. the par value of all capital stock issued D. the amount of capital the state of incorporation allows the company to accumulate over its existence

C. the par value of all capital stock issued

Dividends are NOT paid A. on noncumulative preferred stock B. nonparticipating preferred stock C. treasury stock D. cumulative preferred stock

C. treasury stock

Oriole Company issues 5800 shares of its $5 par value common stock having a fair value of $25 per share and 8800 shares of its $15 par value preferred stock having a fair value of $30 per share for a lump sum of $320000. The amount of the proceeds allocated to the common stock is A. $145000 B. $206553 C. $50200 D. $113447

D. $113447 ([(5800 × $25) ÷ [(5800 × $25) + 8800 × $30)]]× $320000= $113447)

Crane Company has outstanding 590000 shares of $2 par common stock and 110000 shares of no-par 5% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year. Assuming that $215000 will be distributed as a dividend in the current year, how much will the common stockholders receive? A. $0 B. $187500 C. $160000 D. $132500

D. $132500 ($215000 - (110000 × $5 × 0.05 × 3) = $132500)

Oriole Company issued 5900 shares of its $10 par value common stock having a fair value of $25 per share and 8400 shares of its $10 par value preferred stock having a fair value of $20 per share for a lump sum of $252000. The proceeds allocated to the preferred stock is A. $172116 B. $117813 C. $168000 D. $134187

D. $134187 ([(8400 × $20) ÷ [(5900 × $25) + (8400 × $20)]] × $252000 = $134187)

Sunland Company has 564000 shares of $10 par value common stock outstanding. During the year, Sunland declared a 16% stock dividend when the market price of the stock was $30 per share. Four months later Sunland declared a $0.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by A. $451200 B. $496320 C. $1353600 D. $3034320

D. $3034320 (564000 × 0.16 × $30 = $2707200 $2707200 + (564000 × 1.16 × $0.50) = $3034320)

Wildhorse, Inc. had net income for 2026 of $1580000 and earnings per share on common stock of $5. Included in the net income was $226000 of bond interest efpense related to its long-term debt. The income tax rate for 2026 was 29%. Dividends on preferred stock were $293000. The payout ratio on common stock was 26%. What were the dividends on common stock in 2026? A. $410800. B. $485199. C. $368120. D. $334620.

D. $334620 ((X / $1580000 - $293000) = 0.26, X = $334620)

Which of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements? A. Dividend preferences B. Call prices C. Conversion or exercise prices D. Liquidation preferences

D. Liquidation preferences

Quirk Corporation issued a 100 % stock dividend of its $ 10 par value common stock. What amount of retained earnings will be capitalized for the additional shares issued? A. Fair value on the declaration date B. Fair value on the payment date C. There should be no capitalization of retained earnings D. Par value

D. Par value

On September 1, 2025, Crane Company reacquired 28200 shares of its $10 par value common stock for $15 per share. Crane uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit A. Treasury Stock for $282000. B. Common Stock for $282000 and Paid-in Capital in Excess of Par for $141000. C. Common Stock for $282000. D. Treasury Stock for $423000.

D. Treasury Stock for $423000 (28200 × $15 = $423000)

Noncumulative preferred dividends in arrears A. are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend B. are disclosed as a liability until paid C. must be paid before any other cash dividends can be distributed D. are not paid or disclosed

D. are not paid or disclosed

A primary source of stockholders' equity is A. income retained by the corporation B. appropriated retained earnings C. contributions by stockholders D. both income retained by the corporation and contributions by stockholders

D. both income retained by the corporation and contributions by stockholders

With regard to cash dividends, an entry is not made on the A. date or payment and date of declaration B. date of payment C. date of declaration D. date of record

D. date of record

Stockholders ' equity is generally classified into two major categories which are A. appropriated capital and retained earnings B. contributed capital and appropriated capital C. retained earnings and unappropriated capital D. earned capital and contributed capital

D. earned capital and contributed capital

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities . An acceptable method of allocation is A. the pro forma method B. the proportional method C. the incremental method D. either the proportional method or the incremental method

D. either the proportional method or the incremental method

"Gains" on sales of treasury stock (using the cost method) should be credited to A. retained earnings B. capital stock C. other income D. paid-in capital from treasury stock

D. paid-in capital from treasury stock

When a corporation issues its capital stock in payment for services , the least appropriate basis for recording the transaction is the A. market value of the services received B. market value of the services received or the market value of the shares issued C. market value of the shares issued D. par value of the shares issued

D. par value of the shares issued

Stock that has a fixed per-share amount printed on each stock certificate is called A. stated value B. stock uniform value stock C. fixed value stock D. par value stock

D. par value stock

Common stock shares issued will exceed common stock shares outstanding as a result of the A. declaration of a stock dividend B. declaration of a stock split C. payment in full of subscribed stock D. purchase of treasury stock

D. purchase of treasury stock

The rights of common stockholders generally include the right A. to share proportionately in corporate assets upon liquidation B. receive cash dividends before they are distributed to preferred stockholders C. exclude preferred stockholders from voting rights D. share proportionately in any new issues of common stock

D. share proportionately in any new issues of common stock

In which of the following transactions is retained earnings capitalized? A. liquidating dividend B. property dividend C. cash dividend D. stock dividend

D. stock dividend

A feature common to both stock splits and stock dividends is A. a transfer to earned capital of a corporation B. an increase in total liabilities of a corporation C. a reduction in the contributed capital of a corporation D. that there is no effect on total stockholders' equity

D. that there is no effect on total stockholders' equity