Question 1

Which of the following would be included in the entry to record a 2-for-1 stock split?

Accepted Answer

In a 2-for-1 stock split, the company doubles the number of shares outstanding but the overall value of the shares remains the same, so there is no actual financial transaction to record. Therefore, no journal entry is made.

Question 2

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.  What will the total number of shares issued be after the declaration of a 10% stock dividend?

Accepted Answer

The answer of Gordon Corporation reported the following equity section...

Question 3

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.  After a 2-for-1 stock split, what would the number of shares issued be?

Accepted Answer

The answer of Gordon Corporation reported the following equity section...

Question 4

Which of the following occurs when a 2-for-1 stock split is declared?

Accepted Answer

A 2-for-1 stock split means that each share is split into two shares, so the number of shares outstanding doubles but the par value and the common stock balance remain the same. Therefore, there is no change in the balance in common stock.

Question 5

On January 1, 2013, Parquet Sales issued 40,000 shares of common stock at a price of $22 per share. The stock has a par value of $1.00 per share. In mid-2014, due to dramatic increases in profits, the stock reached a market value of $90 per share. The board of directors approved a 2-for-1 stock split. After the stock split, what will the market value of the stock be?

Accepted Answer

A) Calculations: 90 × 1/2 = 45

Question 6

Apira has 2,000 shares of common stock outstanding. A stockholder has 100 shares. If Apira distributes a 20% stock dividend, how many shares of Apira will the stockholder have?

Accepted Answer

A) Calculations: 100 + (100 × 20%) = 120

Question 7

Which of the following does NOT require a formal journal entry?

Accepted Answer

A stock split does not require a formal journal entry as it merely involves a reduction in the par value per share and an increase in the number of outstanding shares. Cash dividends, stock dividends, and issuance of new shares all require formal journal entries to reflect the impact on the company's balance sheet and equity accounts.

Question 8

A 3-for-1 stock split will:

Accepted Answer

In a 3-for-1 stock split, the company will cut the par value by one-third and triple the number of outstanding shares. This means that the total value of shares outstanding remains the same, but each individual share will be worth one-third of its previous value. This is often done to make the stock more accessible to investors or to increase liquidity.

Question 9

Which of the following occurs when the board of directors declares a 2-for-1 stock split on 20,000 outstanding shares of $15 par common stock?

Accepted Answer

A 2-for-1 stock split means that each existing share will be split into two new shares, effectively doubling the number of outstanding shares. Therefore, the outstanding shares increase from 20,000 to 40,000. The par value of the stock remains at $15 per share, as the split does not change the underlying value of the company or its shares.

Question 10

Which of the following is a TRUE statement?

Accepted Answer

Neither a stock split nor a stock dividend will affect total assets or total liabilities. A stock split only changes the number of shares outstanding and the per-share price, while a stock dividend only distributes a portion of earnings to shareholders in the form of additional shares. Both transactions do not affect the overall financial position of a company.

Question 11

Which of the following is a reason why a company would do a stock split?

Accepted Answer

A stock split is a strategy used by companies to increase the number of shares outstanding while decreasing the price per share. This is done to make the stock more accessible to investors who may not be able to afford shares at their current price. By reducing the market price, more investors can purchase the stock, thus increasing liquidity and overall demand. This can also increase the company's visibility and attract more shareholders, which can ultimately benefit the company's stock price in the long-term.

Question 12

ABC has 45,000 shares of $10 par common stock outstanding. They offer a stock split of 4-for-1. The effect of the split will be:

Accepted Answer

A 4-for-1 stock split means that for every one share of stock an investor has, they will receive four new shares. Therefore, after the split, there will be 180,000 shares (45,000 x 4) outstanding. The par value of the stock will also decrease since the total value of the shares remains the same. The new par value will be $2.50 ($10/4). Therefore, choice C is the correct answer.

Question 13

On January 1, 2013, Parquet Sales issued 40,000 shares of common stock at a price of $22 per share. The stock has a par value of $1.00 per share. In mid-2014, due to dramatic increases in profits, the stock reached a market value of $90 per share. The board of directors approved a 2-for-1 stock split. After the stock split, what will the balance sheet show as the par value of common stock?

Accepted Answer

D) Calculations: 1 × 1/2 = 0.50

Question 14

Which of the following occurs due to a 4-for-1 stock split?

Accepted Answer

In a 4-for-1 stock split, each share is divided into four, making the par value of each new share 25% of the original par value before the split.

Question 15

Which of the following statements is TRUE?

Accepted Answer

C) Neither a stock dividend nor a stock split will result in net gains or losses. These actions are designed to adjust the number of shares outstanding and the per-share price, but they do not affect the overall market value of the company.

Question 16

On January 1, 2013, Parquet Sales issued 40,000 shares of common stock at a price of $22 per share. The stock has a par value of $1.00 per share. In mid-2014, due to dramatic increases in profits, the stock reached a market value of $90 per share. The board of directors approved a 2-for-1 stock split. After the stock split, what will the balance sheet show as the number of shares issued?

Accepted Answer

A 2-for-1 stock split doubles the number of shares outstanding. Therefore, after the stock split, there will be 80,000 shares issued (40,000 x 2).

Question 17

Which of the following is a TRUE statement?

Accepted Answer

Neither a stock split nor a stock dividend increases total stockholders' equity. A stock split simply increases the number of shares outstanding while reducing the price per share accordingly, with no impact on equity. A stock dividend redistributes a portion of retained earnings to additional shares, also not increasing total equity.

Question 18

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.  Which of the following would be TRUE if the company issued a 2-for-1 stock split?

Accepted Answer

The answer of Gordon Corporation reported the following equity section...

Question 19

Which of the following would have the same effect on the number of shares issued and outstanding as a 2-for-1 stock split?

Accepted Answer

A 100% stock dividend would increase the number of outstanding shares by the same amount as a 2-for-1 stock split. So, if the company had 100 shares outstanding before the stock split or stock dividend, it would have 200 shares outstanding after the split or dividend. A 20% or 120% stock dividend would not have the same effect as a 2-for-1 stock split, and a 200% stock dividend would actually triple the number of outstanding shares, which is not the same as doubling it.

Question 20

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.  What would the balance in Paid-in capital in excess of par be after a 2-for-1 stock split?

Accepted Answer

The answer of Gordon Corporation reported the following equity section...

Quiz 13: Corporations: Effects on Retained Earnings and the Income Statement

Which of the following would be included in the entry to record a 2-for-1 stock split?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. What will the total number of shares issued be after the declaration of a 10% stock dividend?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. After a 2-for-1 stock split, what would the number of shares issued be?

Which of the following occurs when a 2-for-1 stock split is declared?

Apira has 2,000 shares of common stock outstanding. A stockholder has 100 shares. If Apira distributes a 20% stock dividend, how many shares of Apira will the stockholder have?

Which of the following does NOT require a formal journal entry?

A 3-for-1 stock split will:

Which of the following occurs when the board of directors declares a 2-for-1 stock split on 20,000 outstanding shares of $15 par common stock?

Which of the following is a TRUE statement?

Which of the following is a reason why a company would do a stock split?

ABC has 45,000 shares of $10 par common stock outstanding. They offer a stock split of 4-for-1. The effect of the split will be:

Which of the following occurs due to a 4-for-1 stock split?

Which of the following statements is TRUE?

Which of the following is a TRUE statement?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. Which of the following would be TRUE if the company issued a 2-for-1 stock split?

Which of the following would have the same effect on the number of shares issued and outstanding as a 2-for-1 stock split?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. What would the balance in Paid-in capital in excess of par be after a 2-for-1 stock split?