Chapter 14

Which of the following types of stock is accounted for similar to par-value stock?

Stated-value

If 1,000 shares of $10 par-value common stock are issued in exchange for land with a fair market value of $25,000, the land and common stock (along with any additional paid-in capital) should be recorded at:

$25,000

Magic Corporation paid $100,000 in dividends. The corporation had 10,000 shares of common stock outstanding and 5,000 shares of $100 par value 5% preferred stock. The preferred stock was two years in arrears prior to the current year. How much was paid to the common stockholders?

$25,000

If a corporation has dividends in arrears on preferred stock for two years ($5,000 per year), and declares $20,000 of dividends during the current (third) year, how much will be paid to the common shareholders?

$5,000

In preparing the stockholders' equity section (and related footnotes), how much detail is required?

Significant

Treasury stock should be reported as:

A reduction of stockholders' equity

In reviewing corporate equity on a balance sheet, what would be included in the description "Total Capital Stock"?

Both (a) and (b)

The _____________ _____________ _____________ is the date that corporate records are reviewed to determine who will receive a previously declared dividend.

Date of Record

For a cash dividend, stockholders' equity would be reduced on the:

Date of declaration

The appropriate journal entry to record the issue of 1,000 shares of $1 par-value common stock, which is issued for $4 per share would be:

Debit Cash for 4,000, Credit Common Stock for 1,000, and Credit Paid-in Capital in Excess of Par for 3,000

Jackson Corporation has 500,000 shares of common stock outstanding. On April 10, the board of directors declared a $0.60 per share cash dividend, to be paid to stockholders of record on April 25. The dividend was distributed on June 6. The proper journal entry to record on June 6 is:

Debit Dividends Payable for 300,000, and Credit Cash for 300,000

Elmer Company has 500,000 shares of common stock authorized. The stock has a par value of $1.50 per share, and 150,000 shares are outstanding. The company declared a 5% stock dividend at a time when the market value was $7 per share. What entry, if any, should Elmer record for the declaration?

Debit Retained Earnings for 52,500, Credit Stock Dividend Distributable for 11,250, and Credit Paid-in Capital in Excess of Par for 41,250

Accounting for a small stock dividend is based on _____________ value.

Fair

A small stock dividend (one that is less than 20-25%) should be accounted for based on:

Fair value

The accounting for a stock split requires the recording of a journal entry.

False

The feature of limited liability means that stockholders can never lose more than the par value of the stock in which they have invested.

False

Treasury stock is stock of one corporation that is owned by another corporation.

False

The reissuance of treasury stock would never result in a credit to:

Gain on Sale

Which of the following statements about treasury stock is false?

Gains are not recorded on treasury stock transactions, but losses are.

Dividends omitted on preferred shares that must be paid before common shareholders are entitled to be paid are referred to as:

In arrears

Dividends that have not been paid on cumulative preferred stock are said to be:

In arrears

Which of the following characteristics is considered to be an advantage of the corporate form of organization?

Limited liability of stockholders

Total paid-in capital equals the par value of capital stock plus:

Paid-in capital in excess of par value

Which of the following features would be associated with common stock?

Preemptive rights

Of the following characteristics, which is not generally regarded as a right of common shareholders?

Preference in liquidation

In the event dividends are paid to only one class of stock, which class is ordinarily paid?

Preferred stock

In lieu of the Statement of Retained Earnings, many companies will prepare an expanded Statement of Stockholders' Equity.

True

Stock dividends are reported on the statement of retained earnings.

True

A _____________ is an artificial being, existing only in contemplation of law.

corporation

A debit balance in Retained Earnings is commonly referred to as a _____________ .

deficit

The taxing of income to the corporation, and the subsequent taxing of dividends to the stockholders is commonly termed _____________ _____________ .

double taxation

The number of shares that a corporation is permitted to issue is termed the authorized shares, whereas the number of shares actually issued and held by stockholders is termed _____________ shares.

outstanding

When a corporation reissues treasury stock at more than its cost, the _____________ -_____________ _____________ From Treasury Stock account should be increased.

paid in capital

The _____________ _____________ allows existing shareholders the opportunity to maintain their respective interests in a corporate entity by acquiring additional shares on a pro rata basis.

preemptive right

A _____________ _____________ involves increasing the number of shares outstanding and reducing the stock's par or stated value per share.

stock split

Corporations frequently purchase shares of their own stock. These shares are termed _____________ _____________ .

treasury stock