Question 1

The prescribed accounting treatment for stock dividends implicitly assumes that shareholders are fooled by "small" stock dividends and benefit by the market value of their additional shares. Explain this statement. Is it logical?

Accepted Answer

The answer of The prescribed accounting treatment for stock dividends...

Question 2

Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Accepted Answer

The answer of Some preferred stock is cumulative while other...

Question 3

The December 31, 2009, balance sheet of Springer Company included the following:
Springer completed the following transactions in 2009 relating to treasury stock:
March 17: Reacquired 5 million shares at $10.
May 17: Reacquired 3 million shares at $9.
August 10: Sold 6 million shares at $12.
Required:
Assuming Springer uses the cost method, prepare journal entries to record the foregoing transactions on a FIFO basis.
 $\begin{array}{lr}
\text { Common stock, } 20 \text { million shares outstanding at } \$ 1 \text { par } & \$ 20,000,000 \
\text { Paid-in capital }- \text { excess of par } & 100,000,000 \
\text { Retained earnings } & 115,000,000
\end{array}$

Accepted Answer

The answer of The December 31, 2009, balance sheet of...

Question 4

The December 31, 2009 balance sheet of MBI Company included the following:
MBI completed the following transactions in 2009 relating to treasury stock:
March 17: Reacquired 2 million shares at $10.
May 17: Reacquired 2 million shares at $9.
August 10: Issued 3 million shares at $12.
Required:
Assuming MBI uses the cost method, prepare journal entries to record the foregoing transactions on a weighted average basis.
 $\begin{array}{lr}
\text { Common stock, } 20 \text { million shares outstanding at } \$ 1 \text { par } & \$ 20,000,000 \
\text { Paid-in capital - excess of par } & 100,000,000 \
\text { Retained earnings } & 115,000,000
\end{array}$

Accepted Answer

The answer of The December 31, 2009 balance sheet of...

Question 5

On September 15, 2009, the Scottie Company board of directors declared a 10% stock dividend on common shares. The shares are to be distributed on October 10, 2009, to shareholders of record on October 1, 2009. The market price per share on the date of declaration was $24 while the market price on the date of distribution was $26. The common stock has a par value of $5 per share and there were 1,000,000 shares outstanding prior to the declaration of the stock dividend.
Required:
Prepare any necessary journal entries to record the above transactions.

Accepted Answer

The answer of On September 15, 2009, the Scottie Company...

Question 6

What is the difference between a stock split and a stock split affected in the form of a stock dividend?

Accepted Answer

The answer of What is the difference between a stock...

Question 7

Identify the three common forms of business organization and the primary difference in the way we account for them.

Accepted Answer

The answer of Identify the three common forms of business...

Question 8

When a corporation acquires its own shares, those shares assume the same status as authorized but unissued shares, as if they never had been issued. Explain how this is reflected in the accounting records if the shares are formally retired.

Accepted Answer

The answer of When a corporation acquires its own shares,...

Question 9

What is comprehensive income and how does it differ from net income? Where is it reported in the balance sheet?

Accepted Answer

The answer of What is comprehensive income and how does...

Question 10

When stock is issued for consideration other than cash, what is the measurement objective?

Accepted Answer

The answer of When stock is issued for consideration other...

Question 11

The balance sheet reports the balances of shareholders' equity accounts. What additional information is provided by the statement of shareholders' equity?

Accepted Answer

The answer of The balance sheet reports the balances of...

Question 12

The costs of legal, promotional, and accounting services necessary to effect the sale of shares are referred to as share issue costs. How are these costs recorded? Compare this approach to the way debt issue costs are recorded.

Accepted Answer

The answer of The costs of legal, promotional, and accounting...

Question 13

On October 15, 2009, a 5% stock dividend was declared and distributed. The market value of the common stock on this date was $32 per share. Fractional share rights represented 100,000 shares. Cash was paid in lieu of issuing fractional share rights. On the date of declaration and payment, the company had 10 million shares of common stock outstanding. The par value of the common shares was $5.
Required:
Prepare any necessary journal entries to record the above events.

Accepted Answer

The answer of On October 15, 2009, a 5% stock...

Quiz 18: Shareholders Equity