Question 1

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

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Question 2

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

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Question 3

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

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Question 4

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.

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Question 5

On January 1, 2013, Gerlach Inc. had the following account balances in its shareholders' equity accounts.  During 2013, Gerlach Inc. had several transactions relating to common stock.  Required:
Record the above transactions and events in journal entry format.

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Question 6

On October 15, 2013, 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.

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Question 7

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.

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Question 8

A new CEO was hired to revive the floundering Heirloom Watch Corporation. The company had endured operating losses for several years, but confidence was emerging that better times were ahead. The board of directors and shareholders approved a quasi-reorganization for the corporation. The reorganization included devaluing inventory for obsolescence by $210 million and increasing land by $10 million. Immediately before the restatement, at December 31, 2013, Heirloom Watch Corporation's balance sheet appeared as follows (in condensed form):  Required:
1. Prepare the journal entries appropriate to record the quasi-reorganization on January 1, 2014.
2. Prepare a balance sheet as it would appear immediately after the restatement.

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Question 9

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?

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Question 10

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

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Question 11

On September 15, 2013, the Scottie Company board of directors declared a 10% stock dividend on common shares. The shares are to be distributed on October 10, 2013, to shareholders of record on October 1, 2013. 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.

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Question 12

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

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Question 13

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

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Quiz 18: Shareholders Equity Key