Question 1

An increase in the number of issued and outstanding shares of stock along with a proportional reduction in the stock's par value is a:

Accepted Answer

A stock split is when a company increases the number of shares outstanding but reduces the stock's par value per share. This usually results in the stock becoming more affordable and attractive to a larger number of investors. A deficit is a negative balance or shortfall in funds. A stock dividend is when a company issues additional shares of stock as a dividend to its existing shareholders. A cash dividend is when a company gives a portion of its profits to its shareholders in the form of cash payments.

Question 2

On February 1,a corporation has 30,000 shares of $1 par value common stock issued and outstanding.The corporation also has Additional Paid-in Capital of $100,000 and Retained Earnings of $100,000.On February 1,the corporation declared a 2-for-1 stock split.After the split,what is the total par value of the common stock and the total stockholders' equity,respectively?

Accepted Answer

A 2-for-1 stock split doubles the number of shares and halves the par value per share, so the total par value remains $30,000. The total stockholders' equity is the sum of common stock, additional paid-in capital, and retained earnings, which remains $230,000 as the stock split does not affect total equity.

Question 3

To record a 10% stock dividend,accountants use ________.To record a 40% stock dividend,accountants use ________.

Accepted Answer

For a small stock dividend (less than 20-25%), like a 10% stock dividend, accountants use the market price per share to record the transaction. For a large stock dividend (more than 20-25%), like a 40% stock dividend, accountants use the par value per share.

Question 4

How does the declaration and distribution of a 10% stock dividend affect stockholders' equity?

Accepted Answer

Declaration and distribution of a stock dividend will not affect the total stockholders' equity, but it will change the balances of different accounts within the equity section. The retained earnings account will be reduced, as that amount will be distributed to stockholders as dividend, and the common stock account will increase by the same amount. However, the total amount of stockholders' equity will remain the same. Therefore, choice C is the correct answer.

Question 5

A stock split:

Accepted Answer

A stock split does not affect the total stockholders' equity. It simply increases the number of shares outstanding while proportionally decreasing the price per share, leaving the overall market value of the company unchanged.

Question 6

The chronological order of dates for cash dividends are:

Accepted Answer

The chronological order of cash dividends starts with the declaration of the dividend by the company's board of directors, followed by the date of record, which is the date on which shareholders must hold the shares to receive the dividend, and finally, the date of payment, when the dividend is actually paid out to the shareholders. Therefore, the correct chronological order of cash dividend dates is date of declaration, date of record, and date of payment. Option D contains this chronological order.

Question 7

Zeman,Inc.declares and distributes a 10% common stock dividend when it has 20,000 shares of $10 par value common stock outstanding.If the market value of the common stock is $25,the journal entry to record the stock dividend would include a:

Accepted Answer

The answer of Zeman,Inc.declares and distributes a 10% common stock...

Question 8

Burkert Company has 50,000 shares of $1 par value common stock issued and outstanding.The company also has 2,000 shares of $100 par value,5% cumulative preferred stock outstanding.Burkert did not pay the preferred dividends in 2014 and 2015.What amount of dividends must the company declare in 2016 for the common stockholders to receive a dividend of $1?

Accepted Answer

To calculate the amount of dividends that must be declared for the common stockholders to receive a dividend of $1, we need to use the formula: 
Total amount of dividends = (Number of common shares * Common dividend per share) + (Number of preferred shares * Preferred dividend per share)
We know that the number of common shares is 50,000 and the common dividend per share is $1, so the first part of the equation is 50,000 * 1 = $50,000.
The number of preferred shares is 2,000 and the preferred dividend rate is 5%, which means the preferred dividend per share is $5 ($100 * 5%). The total amount of preferred dividends that were not paid in 2014 and 2015 is $20,000 (2,000 * $5 * 2).
Therefore, the total amount of dividends that must be declared in 2016 to ensure that common stockholders receive a dividend of $1 is:
Total amount of dividends = $50,000 + $20,000 = $70,000
However, since the company did not pay preferred dividends in 2014 and 2015, it must first pay those dividends before declaring any dividends for the common stockholders. This means that the company needs to pay $20,000 (2,000 * $5 * 2) in preferred dividends before it can pay any dividends to the common stockholders. Therefore, the amount of dividends that must be declared in 2016 for the common stockholders to receive a dividend of $1 is $50,000, which is answer choice C.

Question 9

On December 31,2015,Pilozzi Company has the following information available:  On December 31,2015,the Board of Directors wants to declare a cash dividend of $2 million.Can it be done?

Accepted Answer

The answer of On December 31,2015,Pilozzi Company has the following...

Question 10

How does the payment of a previously declared dividend affect the accounting equation?

Accepted Answer

Paying a previously declared dividend decreases assets (cash) and decreases liabilities (dividends payable).

Question 11

A company has 500,000 shares issued and outstanding of $1 par common stock.After a 2-for-1 stock split,which of the following statements is FALSE?

Accepted Answer

A 2-for-1 stock split doubles the number of shares issued and outstanding, so the number of shares issued becomes 1,000,000, not 250,000.

Question 12

During the first year of operations,New York Corporation had the following transactions:
• Jan.1 - Issued 50,000 shares of $1 par value common stock at $20 per share.
• May 24 - Reacquired 5,000 shares of common stock sold on Jan.1 for $23 per share.
• Aug.31 - Sold 500 shares of its treasury stock purchased on May 24 for $25 per share.
• Oct.18 - The board of directors declared and distributed a 10% common stock dividend.The selling price of the common stock was $26 per share at the time of the declaration.
• Nov.24 - The board of directors declared a cash dividend of $0.50 per share payable to stockholders on December 8.
• Dec.8 - Paid the cash dividends declared on November 24.
• Dec.10 - Sold 1,000 shares of treasury stock for $10 per share.
Required:
Prepare the journal entries for the above transactions.Omit explanations.

Accepted Answer

The answer of During the first year of operations,New York...

Question 13

Xanadu Manufacturing Company has total stockholders' equity of $18 billion.Retained Earnings is $20 billion.How can total stockholders' equity be less than Retained Earnings?

Accepted Answer

Total stockholders' equity can be less than retained earnings if the company has a large amount of treasury stock, which reduces stockholders' equity.

Question 14

Pillsbury Company declares and distributes a 30% common stock dividend when it has 20,000 shares of $10 par common stock outstanding.The market price per share is $50 at the date of declaration.What journal entry is prepared?

Accepted Answer

The answer of Pillsbury Company declares and distributes a 30%...

Question 15

Dolanski Company declares and distributes a 50% common stock dividend when it has 20,000 shares of $10 par common stock outstanding.The market price per share is $50 at the date of declaration.What journal entry is prepared?

Accepted Answer

The answer of Dolanski Company declares and distributes a 50%...

Question 16

Arnold,Inc.declares and distributes a 10% common stock dividend when it has 20,000 shares of $10 par value common stock outstanding.If the market value of the common stock is $25,the journal entry to record the stock dividend would include a:

Accepted Answer

The stock dividend is 10% of 20,000 shares, which is 2,000 shares. The market value is $25 per share, so the total value is 2,000 x $25 = $50,000. The entry includes a debit to Retained Earnings for the total market value of the dividend.

Question 17

Williamson Company declared and distributed a 10% stock dividend when it had 150,000 shares of $1 par value common stock outstanding.The market price per share of common stock was $10 per share when the dividend was declared.The journal entry to record the stock dividend would include a credit to:

Accepted Answer

A stock dividend transfers a portion of retained earnings to paid-in capital accounts. The dividend represents a distribution of the company’s profits. When a 10% stock dividend is declared and distributed, the company issues an additional 15,000 shares (150,000 x 10%). The market value of each share is $10, meaning the total value of the dividend is $150,000 (15,000 x $10). The journal entry to record the stock dividend would include a credit to Retained Earnings for $15,000 (10% x $150,000), and a credit to Paid-in Capital in Excess of Par-Common for the remaining $135,000 ($150,000 - $15,000). The credit to Common Stock is not necessary in this case because the stock dividend does not increase the par value of the stock.

Question 18

The Home Store reported the following figures: Retained Earnings,February 1,2013...........$20,000,000
Retained Earnings,February 1,2012...........$17,000,000
The company's fiscal year ends on February 1 each year.Net income for the fiscal year ending February 1,2013 is $5 million.What are the dividends declared for the fiscal year ending February 1,2013?

Accepted Answer

The dividends declared for the fiscal year ending February 1,2013 can be calculated as follows:
Retained Earnings, February 1, 2013 = $20,000,000
Add: Net Income for year ending February 1, 2013 = $5,000,000
Total = $25,000,000
Less: Retained Earnings, February 1, 2012 = $17,000,000
Amount available for dividends = $8,000,000
Dividends Declared = Amount available for dividends - Retained Earnings, February 1, 2013
Dividends Declared = $8,000,000 - $20,000,000
Dividends Declared = $2,000,000
Therefore, the correct choice is B. The Home Store declared $2 million in dividends for the fiscal year ending February 1, 2013.

Question 19

The Good Word Store reported the following figures: Retained Earnings,January 31,2014.........................$20,000,000
Retained Earnings,January 31,2015.........................$15,000,000
Total Stockholders' Equity,January 31,2014...........$29,000,000
Total Stockholders' Equity,January 31,2015...........$25,000,000
The company's fiscal year ends on January 31 each year.Dividends declared for the fiscal year ending January 31,2015 are $1 million.What is the net income or net loss for the fiscal year ending January 31,2015?

Accepted Answer

The answer of The Good Word Store reported the following...

Question 20

How does the declaration and payment of cash dividends affect the accounting equation?

Accepted Answer

The declaration and payment of cash dividends decrease assets (cash) and stockholders' equity (retained earnings) in the accounting equation.

Quiz 10: Stockholders Equity