Chapter 11 ACCT

Which of the following statements is not true about a 2-for-1 split?

Total contributed capital increases.

treasury stock represents reaquired shares of a company stock so the corporation can pay dividends to itself

false

when a cash dividend is paid, the cash outflow is classified as an operating activity

false

when a company acquires treasury stock, it creates cash outflow from an investing activity

false

cash dividends usually involve the transfer of some amount of retained earnings

false (stock dividends)

which of the following represents the shares currently in the hands of investors

outstanding shares

A stock dividend

results in a transfer of retained earnings to contributed capital

common stock holders have the right to

sell their stock hare in any dividends distributed to common stockholders. have the first opportunity to purchase any additional shares of common stock issued by the corporation. vote at stockholders' meetings.

Dividends in arrears on cumulative preferred stock

should be disclosed in the notes to the financial statements.

The most common reason a company would declare a stock split is to reduce the market price of its stock to increase the trading activity.

true

common stock represents the residual equity of a company because it ranks after the preferred stock in terms of a claim to dividends or the liquidation value of assers

true

stockholders have limited liability which means that they are not liable for the corporations debts beyond their investment

true

What is the total stockholders' equity based on the following account balances? Common Stock $1,000,000 Paid-In Capital in Excess of Par 80,000 Retained Earnings 380,000 Treasury Stock 40,000

$1,420,000

Sun Inc. has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2007. What is the annual dividend on the preferred stock?

$30,000 in total

The balance sheet of Warner Company showed the following data about its common stock, par $1: authorized shares, 5,000,000; outstanding shares, 2,300,000; and issued shares 2,500,000. Therefore, the number of treasury stock shares was

200,000

the treasury stock account may have a credit balance

False

On January 1, Bluefield Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,

Bluefield's Paid-in Capital in Excess of Par Value account increased $400,000. Bluefield's total stockholders' equity was unaffected. Bluefield's Retained Earnings account decreased $1,200,000.

If Lynch Corporation sells and issues 100 shares of its $10 par value common stock at $11 per share, the entry to record the sale will not include a

Credit to retained earnings of $100

A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Decrease by $700,000

Stock dividends and stock splits have the following effects on retained earnings: Stock Splits v. Stock Dividends

No change Decrease

The date on which a cash dividend becomes a binding legal obligation is on the

declaration date.