Module 8

What percentage distribution is considered a "small" stock dividend?

< 25%

What percentage distribution is considered a "large" stock dividend?

> 25%

500 shares of 6%, $100 par callable preferred stock are called at $101. The shares were issued at $103 per share. The journal entry to record the retirement includes which of the following? A. Cr. paid in capital from retirement of preferred stock, $1,000. B. Dr. paid in capital from retirement of preferred stock $1,500. C. Cr. retained earnings $1,000 D. Dr. preferred stock $51,500

A

A property dividend should be recorded in retained earnings at the property's: A. Market value at date of declaration. B. Market value at date of issuance (payment). C. Book value at date of declaration. D. Book value at date of issuance (payment).

A

Jones Co. had 50,000 shares of $5 par value common stock outstanding at January 1. On August 1, Jones declared a 5% stock dividend followed by a two-for-one stock split on September 1. What amount should Jones report as common shares outstanding at December 31? A. 105,000 B. 100,000 C. 52,500 D. 50,000

A

Rudd Corp. had 700,000 shares of common stock authorized and 300,000 shares outstanding at December 31, Year 1. The following events occurred during Year 2: January 31 Declared 10% stock dividend June 30 Purchased 100,000 shares August 1 Reissued 50,000 shares November 30 Declared 2-for-1 stock split At December 31, Year 2, how many shares of common stock did Rudd have outstanding? A. 560,000 B. 600,000 C. 630,000 D. 660,000

A

The owners' equity section of a firm includes (1) $10,000 of 8%, $100 par cumulative preferred stock, and (2) $40,000 of $5 par common stock. There is additional paid-in capital on both issues. The preferred participates up to an additional 4% and there are two years of dividends in arrears as of the beginning of the current year. If the firm pays $7,100 in dividends, what amount is allocated to common? A. $4,400 B. $3,200 C. $4,700 D. $6,000

A

During the current year, Onal Co. purchased 10,000 shares of its own stock at $7 per share. The stock was originally issued at $6. The firm sold 5,000 of the treasury shares for $10 per share. The firm uses the cost method to account for treasury stock. What amount should Onal report in its income statement for these transactions? A. $0 B. $ 5,000 gain. C. $10,000 loss. D. $15,000 gain

A (Treasury stock has NO effect on the income statement)

Long Co. had 100,000 shares of common stock issued and outstanding at January 1, 20X6. During 20X6, Long took the following actions: March 15 - Declared a 2-for-1 stock split, when the fair value of the stock was $80 per share. December 15 - Declared a $.50 per share cash dividend. In Long's statement of stockholders' equity for 20X6, what amount should Long report as dividends? A. $50,000 B. $100,000 C. $850,000 D. $950,000

B

The following stock dividends were declared and distributed by Sol Corp: Percentage of common shares outstanding at declaration date Fair value Par value 10 $15,000 $10,000 28 40,000 30,800 What aggregate amount should be debited to retained earnings for these stock dividends? A. $40,800 B. $45,800 C. $50,000 D. $55,000

B

The owners' equity section of a firm includes (1) $10,000 of 8%, $100 par cumulative preferred stock, and (2) $40,000 of $5 par common stock. There is additional paid-in capital on both issues. The preferred is fully participating and there are two years of dividends in arrears as of the beginning of the current year. If the firm pays $30,000 in dividends, what amount is allocated to common? A. $23,360 B. $22,720 C. $22,080 D. $24,320

B

When collectability of stock issued on subscription is reasonably assured, the excess of the subscription price over the stated value of the no par common stock subscribed should be recorded as: A. No par common stock. B. Additional paid-in capital when the subscription is recorded C. Additional paid-in capital when the subscription is collected D. Additional paid-in capital when the common stock is issued

B

A company whose stock is trading at $10 per share has 1,000 shares of $1 par common stock outstanding when the board of directors declares a 30% common stock dividend. Which of the following adjustments should be made when recording the stock dividend? A. Treasury stock is debited for $300. B. Additional paid-in capital is credited for $2,700. C. Retained earnings is debited for $300. D. Common stock is debited for $3,000.

C

An entity authorized 500,000 shares of common stock. At January 1, year 2, the entity had 110,000 shares of common stock issued and 100,000 shares of common stock outstanding. The entity had the following transactions in year 2: March 1 Issued 15,000 shares of common stock June 1 Resold 2,500 shares of treasury stock September 1 Completed a 2-for-1 common stock split What is the total number of shares of common stock that the entity has outstanding at the end of year 2? A. 117,500 B. 230,000 C. 235,000 D. 250,000

C

Arp Corp.'s outstanding capital stock at December 15, 20X5 consisted of the following: 30,000 shares of 5% cumulative preferred stock, par value $10 per share, fully participating as to dividends. No dividends were in arrears. 200,000 shares of common stock, par value $1 per share. On December 15, 20X5, Arp declared dividends of $100,000. What was the amount of dividends payable to Arp's common stockholders? A. $10,000 B. $34,000 C. $40,000 D. $47,500

C

The owners' equity section of a firm includes (1) $10,000 of 8%, $100 par cumulative preferred stock, and (2) $40,000 of $5 par common stock. There is additional paid-in capital on both issues. The preferred participates up to an additional 4% and there are two years of dividends in arrears as of the beginning of the current year. If the firm pays $30,000 in dividends, what amount is allocated to common? A. $27,600 B. $28,800 C. $27,200 D. $24,000

C

On December 31, 20X4, Pack Corp.'s Board of Directors canceled 50,000 shares of $2.50 par value common stock held in treasury at an average cost of $13 per share. Before recording the cancellation of the treasury stock, Pack had the following balances in its stockholders' equity accounts: Common stock $540,000 Additional paid-in capital 750,000 Retained earnings 900,000 Treasury stock, at cost 650,000 In its balance sheet at December 31, 20X4, Pack should report common stock outstanding of: A. $0 B. $250,000 C. $415,000 D. $540,000

C (540,000 - (50,000*2.50))

Term for a feature of preferred stock that says the company can "call" back the stock in exchange for cash

Callable

What are the two major types of owners equity?

Contributed capital and earned capital

Term for a feature of preferred stock that gives the ability to convert preferred stock into common stock

Convertible

Bal Corp. declared a $25,000 cash dividend on May 8, 20X5, to stockholders of record on May 23, 20X5, payable on June 3, 20X5. As a result of this cash dividend, working capital: A. Was not affected. B. Decreased on June 3. C. Decreased on May 23. D. Decreased on May 8.

D

When a company goes through a quasi-reorganization, its balance sheet carrying amounts are stated at: A. Original cost. B. Original book value. C. Replacement value. D. Fair value.

D

Term for the distribution of cash to shareholders

Dividend

Which type of preferred stock is classified as debt?

Mandatory Redeemable Preferred Stock

Type of dividend where the transfer to shareholders is something besides cash, usually securities in other entities (not a stock dividend)

Property dividends

Term for a feature of preferred stock that gives the ability to redeem the stock for cash

Redeemable

Term for the cumulative amount of earnings kept in a business

Retained Earnings

Which account do you debit to capitalize a stock dividend?

Retained Earnings

Term that informs shareholders that dividends may be reduced

Retained Earnings Appropriation

Type of dividend that basically works as an "I.O.U.", cash dividend is paid at a later date with interest

Scrip dividends

Term for the distribution of stock to shareholders in proportion to existing holdings

Stock Dividend

Term for a company giving an option to purchase a certain number of shares, at a specified price, during a specified time period

Stock Rights

Term for outstanding stock that a firm repurchases

Treasury Stock

True or False: The number of common shares issued equals the number of shares outstanding plus the number in the treasury

True