Deck 3: Corporations: Retained Earnings and the Income Statement

Question 1

1_The retained earnings account is not a reservoir of cash.

Answer 1

True

Question 2

11_Stock dividends have no impact to total shareholders' equity.

Answer 2

True

Question 3

16_In a 3 for 1 stock split,the number of shares outstanding triples.

Answer 3

True

Question 4

12_The declaration of a stock dividend creates a current liability for the corporation.

Question 5

9_The statement of Retained Earnings will always show an increase for dividends declared in the year.

Question 6

20_Increasing the use of stock dividends will decrease the market value of a firm's stock.

Question 7

3_Retained earnings cannot be invested by shareholders.

Question 8

10_Stock dividends decrease total shareholders' equity.

Question 9

19_A stock dividend has no effect on assets or liabilities.

Question 10

2_The retained earnings account equals all previous periods' net earnings plus any dividends declared less prior losses.

Question 11

6_One of the main reasons for stock dividends is to continue dividends while retaining cash.

Question 12

5_Stock dividends are similar to cash dividends in that assets of the corporation are transferred to the shareholders.

Question 13

13_Common stock dividend distributable is a liability account on the balance sheet.

Question 14

4_All dividends declared by a corporation require a payment of cash.

Question 15

15_A stock split reduces the number of outstanding shares.

Question 16

17_A reverse stock split reduces the number of outstanding shares.

Question 17

7_In a stock dividend,equity moves from retained earnings to stock dividends.

Question 18

8_The dollar value assigned to a stock dividend is the market value,on the declaration date,of the shares to be distributed as a stock dividend.

Question 19

14_Common stock dividend distributable is an equity account on the balance sheet.

Question 20

18_The declaration of a stock dividend has no effect on Retained earnings.

Question 21

29_When a corporation declares a 5% stock dividend,the journal entry will include:

A) debit retained earnings and credit a liability
B) debit common shares and credit retained earnings
C) debit retained earnings and credit common stock dividend distributable
D) debit retained earnings and credit common shares

Question 22

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The entry to record the distribution of a 10% common stock dividend includes a:

A) debit to dividends payable for $46,000
B) credit to common shares for $46,000
C) debit to retained earnings for $46,000
D) credit to cash for $46,000

Question 23

22_Kelly Corporation has experienced profits greater than losses in the past four years since incorporation.Which of the following is true?

A) Retained earnings has a debit balance at the end of the fourth year.
B) Retained earnings has a credit balance at the end of the fourth year.
C) Retained earnings on the balance sheet will cause a reduction in total shareholders' equity.
D) Retained earnings will not appear on the balance sheet.

Question 24

Table 14-1
The board of directors declares a 10% stock dividend. There are 20,000 common shares authorized and 10,000 outstanding common shares. The current market price of the shares is $12 per share; the average issue price was $10 per share.
33_Refer to Table 14-1.The entry to distribute the shares will require a:

A) debit to common shares for $10,000
B) debit to common stock dividend distributable for $10,000
C) debit to common stock dividend distributable for $12,000
D) debit to retained earnings for $24,000

Question 25

31_When a corporation distributes a 10% stock dividend,common shares will be:

A) debited for the new shares times the average issue price of all of the existing shares
B) debited for the new shares times the current market value of the shares
C) credited for the new shares times the book value of the shares
D) credited for the new shares times the current market value of the shares

Question 26

23_Stock dividends:

A) decrease total shareholders' equity
B) have no effect on total shareholders' equity
C) reduce the total assets of the company
D) increase total liabilities upon declaration

Question 27

26_Stock dividends increase ________ and decrease ________.

A) assets, liabilities
B) common shares, assets
C) common shares, retained earnings
D) retained earnings, assets

Question 28

30_When a corporation distributes a 5% stock dividend that was previous declared,the journal entry will include:

A) debit a liability and credit common shares
B) debit common stock dividend distributable and credit common shares
C) debit retained earnings and credit common shares
D) debit common shares and credit common stock dividend distributable

Question 29

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The total contributed capital after the declaration of a 10% common stock dividend is:

A) $862,000
B) $856,000
C) $836,000
D) $882,000

Question 30

27_A shareholders' ownership percentage in the shares of a corporation ________ upon the distribution of a stock dividend.

A) increases
B) decreases
C) can increase or decrease depending on the type of stock dividend
D) will stay the same

Question 31

36_The common stock dividend distributable account will appear on the balance sheet:

A) in the shareholders' equity section before common shares
B) as a contra account to common shares
C) in the shareholders' equity section after common shares
D) This account is an income statement account and would not appear on the balance sheet.

Question 32

34_Which of the following will reduce retained earnings?

A) a 3-for-1 stock split
B) declaration of a 15% stock dividend
C) distribution of a 15% stock dividend
D) payment of a $0.50 per share cash dividend

Question 33

Table 14-1
The board of directors declares a 10% stock dividend. There are 20,000 common shares authorized and 10,000 outstanding common shares. The current market price of the shares is $12 per share; the average issue price was $10 per share.
32_Refer to Table 14-1.The journal entry will require a debit to retained earnings for:

A) $10,000
B) $12,000
C) $20,000
D) $24,000

Question 34

28_When a corporation declares a 15% stock dividend,retained earnings will be:

A) debited for the new shares times the average issue price of all of the existing shares
B) debited for the new shares times the current market value of the shares
C) credited for the new shares times the book value of the shares
D) credited for the new shares times the current market value of the shares

Question 35

25_When a corporation declares a stock dividend:

A) total liabilities decrease
B) shareholders' equity decreases
C) total assets decrease
D) shareholders' equity remains unchanged

Question 36

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The total shareholders' equity after the distribution of a 10% common stock dividend is:

A) $1,152,000
B) $1,146,000
C) $1,126,000
D) $1,172,000

Question 37

21_Stock dividends require the use of the company's cash when the shareholders cash them in.

Question 38

24_A proportional distribution by a corporation of its own shares to its shareholders is a:

A) liquidating dividend
B) property dividend
C) cash dividend
D) stock dividend

Question 39

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The entry to record the declaration of a 10% common stock dividend includes a:

A) debit to retained earnings for $46,000
B) credit to common shares for $51,125
C) debit to common stock dividend distributable for $46,000
D) credit to retained earnings for $46,000

Question 40

35_Common stock dividend distributable is a:

A) contra liability account
B) shareholders' equity account
C) liability account
D) contra equity account

Question 41

53_In a 2-for-1 stock split,the balance in the common shares account:

A) is cut in half
B) remains the same
C) doubles
D) triples

Question 42

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The number of common shares issued after the declaration of a 10% common stock dividend is:

A) 44,000
B) 40,000
C) 100,000
D) 104,000

Question 43

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The total shareholders' equity after the distribution of a 60% common stock dividend is:

A) $1,196,000
B) $1,246,000
C) $1,126,000
D) $836,000

Question 44

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The entry to record the declaration of a 60% common stock dividend when the shares have a current market price of $15 per share includes a:

A) debit to retained earnings for $360,000
B) credit to common shares for $360,000
C) debit to common stock dividend distributable for $360,000
D) debit to common shares for $240,000

Question 45

Table 14-6
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { |l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 6 \text {, cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 7,000 \text { shares issued } & \$ 700,000 \\\hline \text { Common shares, } 1,000,000 \text { shares authorized, } 500,000 & \\\hline \text { shares issued } & 2,500,000 \\\hline \text { Total contributed capital } & 3,200,000 \\\hline \text { Retained earnings } & \$ 90,000 \\\hline \text { Total shareholders' equity } & \$ 4,190,000 \\\hline\end{array}$$ The preferred shares are currently selling for $89.50 per share and the common shares are currently selling for $12.50 per share.

-Refer to Table 14-6.The total shareholders' equity after the distribution of a 5% common stock dividend is:

A) $4,315,000
B) $3,877,500
C) $4,190,000
D) $4,502,500

Question 46

55_The declaration of a 2-for-1 stock split appears on which financial statement?

A) income statement
B) balance sheet
C) statement of retained earnings
D) does not appear on any financial statement

Question 47

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The balance in the common shares account after the distribution of a 60% common stock dividend is:

A) $516,000
B) $680,000
C) $320,000
D) $836,000

Question 48

Table 14-6
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { |l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 6 \text {, cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 7,000 \text { shares issued } & \$ 700,000 \\\hline \text { Common shares, } 1,000,000 \text { shares authorized, } 500,000 & \\\hline \text { shares issued } & 2,500,000 \\\hline \text { Total contributed capital } & 3,200,000 \\\hline \text { Retained earnings } & \$ 90,000 \\\hline \text { Total shareholders' equity } & \$ 4,190,000 \\\hline\end{array}$$ The preferred shares are currently selling for $89.50 per share and the common shares are currently selling for $12.50 per share.

-Refer to Table 14-6.The total contributed capital after the declaration of a 5% common stock dividend is:

A) $3,075,000
B) $3,325,000
C) $3,200,000
D) $3,512,500

Question 49

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The entry to record the distribution of a 60% common stock dividend when the shares have a current market price of $15 per share includes a:

A) debit to common dividends payable for $360,000
B) credit to common stock dividend distributable for $360,000
C) debit to retained earnings for $360,000
D) credit to common shares for $360,000

Question 50

60_Which of the following is NOT a similarity between stock dividends and stock splits?

A) Both require a journal entry.
B) Both increase the number of shares owned per shareholder.
C) Both do not change the investor's total cost.
D) Both increase the number of shares issued and outstanding.

Question 51

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The number of common shares issued after the distribution of a 60% common stock dividend is:

A) 124,000
B) 64,000
C) 40,000
D) 100,000

Question 52

50_Helen Randall owns 2,500 common shares in Holister Corporation,for which she paid $8,500.Holister Corporation declared a 2-for-1 stock split.Her average cost per share after the stock split is:

A) $2.27
B) $3.40
C) $1.70
D) $0.85

Question 53

Table 14-6
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { |l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 6 \text {, cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 7,000 \text { shares issued } & \$ 700,000 \\\hline \text { Common shares, } 1,000,000 \text { shares authorized, } 500,000 & \\\hline \text { shares issued } & 2,500,000 \\\hline \text { Total contributed capital } & 3,200,000 \\\hline \text { Retained earnings } & \$ 90,000 \\\hline \text { Total shareholders' equity } & \$ 4,190,000 \\\hline\end{array}$$ The preferred shares are currently selling for $89.50 per share and the common shares are currently selling for $12.50 per share.

-Refer to Table 14-6.The entry to record the declaration of a 5% common stock dividend includes a:

A) debit to retained earnings for $312,500
B) credit to common shares for $312,500
C) debit to common stock dividend distributable for $125,000
D) debit to retained earnings for $125,000

Question 54

54_A 2-for-1 stock split:

A) results in the number of shares issued to remain the same
B) results in a reduction in retained earnings
C) results in an increase in total shareholders' equity
D) increases the number of authorized and outstanding shares

Question 55

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The balance in the common shares account after the declaration of a 10% common stock dividend is:

A) $320,000
B) $836,000
C) $290,000
D) $366,000

Question 56

49_Which of the following is needed when declaring a common stock dividend?

A) number of common shares authorized
B) number of preferred shares authorized
C) number of preferred shares issued
D) number of common shares issued

Question 57

Table 14-2
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { | l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 8 , \text { cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 5,000 \text { shares issued } & \$ 516,000 \\\hline \text { Common shares, } 100,000 \text { shares authorized, } 40,000 & \\\hline \text { shares issued } & \underline { 320,000 } \\\hline \text { Total contributed capital } & 836,000 \\\hline \text { Retained earnings } & \underline { 290,000 } \\\hline \text { Total shareholders' equity } & \$ 1,126,000 \\\hline\end{array}$$ The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share.

-Refer to Table 14-2.The total contributed capital after the distribution of a 60% common stock dividend is:

A) $290,000
B) $1,196,000
C) $1,126,000
D) $836,000

Question 58

Table 14-6
Following is the shareholders' equity section of the balance sheet of Thomson Corporation:
$$\begin{array} { |l | r | } \hline \text { Contributed capital } & \\\hline \text { Preferred shares, } \$ 6 \text {, cumulative, } 25,000 \text { shares } & \\\hline \text { authorized, } 7,000 \text { shares issued } & \$ 700,000 \\\hline \text { Common shares, } 1,000,000 \text { shares authorized, } 500,000 & \\\hline \text { shares issued } & 2,500,000 \\\hline \text { Total contributed capital } & 3,200,000 \\\hline \text { Retained earnings } & \$ 90,000 \\\hline \text { Total shareholders' equity } & \$ 4,190,000 \\\hline\end{array}$$ The preferred shares are currently selling for $89.50 per share and the common shares are currently selling for $12.50 per share.

-Refer to Table 14-6.The balance in the common shares account after the declaration of a 5% common stock dividend is:

A) $2,500,000
B) $2,625,000
C) $2,812,500
D) $3,200,000

Question 59

51_A 2-for-1 stock split has the same effect on the number of shares outstanding as a:

A) 20% stock dividend
B) 50% stock dividend
C) 100% stock dividend
D) 200% stock dividend

Question 60

52_The board of directors announces a 2-for-1 stock split on 20,000 outstanding common shares,with an average issue price of $15.Immediately after the stock split,the:

A) book value of the shares increases to $30 per share
B) issued shares decrease to 10,000
C) average issue price of the shares remains the same
D) issued and outstanding shares increase to 40,000

Question 61

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance in the common shares account after the distribution of a 10% common stock dividend is: __________.

Question 62

80_From an investor's perspective,what is the main difference between a stock split and a stock dividend.

Question 63

Following is the shareholders' equity section of the balance sheet of Downing Corporation as of November 1,2017:
$\begin{array}{lr}\text {Preferred shares, \( \$ 3 \), noncumulative, 10,000 shares}\\\text {authorized, 6,500 shares issued}&\$ 325,000 \\\text {Common shares, 300,000 shares authorized,}\\120,000 \text { shares issued } & \underline{1,620,000} \\\text { Total contributed capital } & 1,945,000 \\\text { Retained earnings } & \underline{467,200} \\\text { Total shareholders' equity } & \underline{ \$ 2,412,200}\end{array}$ Downing Corporation reported the following transactions during November,2017:
Nov. 1 $\quad$ Declared the required annual cash dividend on the preferred shares and a $\$ 0.50$ dividend on the common shares.
15 $\quad$ Paid the dividends declared on November 1.
16 $\quad$ Declared a 10\% common stock dividend. The market value of the common shares is $\$ 15.00 \mathrm { per }$ share.
26 $\quad$ Distributed the common stock dividend declared on November 16.
30 $\quad$ The board of directors announced a 2-for-1 stock split. Show the dollar amount of the effect of each transaction on both total contributed capital and total shareholders' equity.
$$\begin{array} { | r | l | l | } \hline \text { Date } & \text { Total Contributed Capital } & \text { Total Shareholders' Equity } \\\hline \text { Nov. } 1 & & \\\hline 15 & & \\\hline 16 & & \\\hline 26 & & \\\hline 30 & & \\\hline\end{array}$$

Question 64

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance in the common shares account after the declaration of a 20% common stock dividend is: __________.

Question 65

61_Stock splits are ________ stock dividends due to the way they are treated for tax purposes.

A) less popular than
B) more popular than
C) equally as popular as
D) usually less popular than

Question 66

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance of retained earnings after the declaration of a 20% common stock dividend is: __________.

Question 67

Use the words "no effect," "increase," or "decrease" to indicate the effects of stock dividends and stock splits on the following items:

Question 68

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance of total shareholders' equity after the declaration of a 10% common stock dividend is: __________.

Question 69

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The number of common shares issued after the distribution of a 3-for-1 stock split is: __________.

Question 70

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance in the common shares account after the declaration of a 10% common stock dividend is: __________.

Question 71

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance of total shareholders' equity after the declaration of a 3-for-1 stock split is: __________.

Question 72

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The number of common shares issued after the declaration of a 20% common stock dividend is: __________.

Question 73

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The total contributed capital after the declaration of a 20% common stock dividend is: __________.

Question 74

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The total contributed capital after the declaration of a 10% common stock dividend is: __________.

Question 75

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance of retained earnings after the declaration of a 3-for-1 stock split is: __________.

Question 76

EverClean Corporation reported the following shareholders' equity on January 1,2017:
Contributed capital
$\begin{array}{lr}\text {Preferred shares, \( \$ 2.50 \), cumulative, 30,000}\\\text {shares authorized, 7,500 shares issued}& \$ 393,750 \\\text {Common shares, 200,000 shares}\\\text { authorized, } 135,000 \text { shares issued } & \underline{607,500} \\\text { Total contributed capital } & 1,001,250 \\\text { Retained earnings } & \underline{218,500} \\\text { Total shareholders' equity } &\underline{ \$ 1,219,750}\end{array}$
a_On October 15,2017,the board of directors declared a 5% common stock dividend when the market price of the shares was $10.00 per share.On November 15,2017,the stock dividend was distributed to the shareholders.Prepare the necessary journal entries to record the declaration and distribution of the common stock dividend.
b_What effect did the declaration of the common stock dividend have on:
$\begin{array}{l}\text { 1) total assets } \\\text { 2) total liabilities } \\\text { 3) total contributed capital } \\\text { 4) total retained earnings } \\\text { 5) total shareholders' equity }\end{array}$ $$\begin{array}{l}\text { General Jaurnal }\\\begin{array} { c | c | c | c } \hline \text { Date } & \text { Accounts } & \text { Debit } & \text { Credit } \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & &\end{array}\end{array}$$

Question 77

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The number of common shares issued after the declaration of a 10% common stock dividend is: __________.

Question 78

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance in the common shares account after the declaration of a 3-for-1 stock split is: __________.

Question 79

Table 14-5
Following is the shareholders' equity section of the balance sheet of Bradson Ltd.:
Contributed capital
$\begin{array}{ll}\text {Preferred shares, \( \$2\), noncumulative, 75,000 shares}\\\text {authorized, 10,000 shares issued}&\$ 300,000 \\\text {Common shares, 300,000 shares authorized,50,000}\\\text { shares issued } & \underline{400,000} \\\text { Total contributed capital } & 700,000 \\\text { Retained earnings } & \underline{490,000} \\\text { Total shareholders' equity } &\underline{ \$ 1,190,000}\end{array}$
The preferred shares are currently selling for $34.00 per share and the common shares are currently selling for $12.00 per share.

-Refer to Table 14-5.The balance of retained earnings after the declaration of a 10% common stock dividend is: __________.

Question 80

Rice Corporation reported the following shareholders' equity items on December 31,2017:
Preferred shares,$5,cumulative,7,000 shares
authorizad, 1,000 shares issued $\quad\$ 153,200$ Common shares,10,000 shares authorized,
$\begin{array}{ll}\text { 5,000 shares issued } & 550,000 \\\text { Retained earnings } & 455,300\end{array}$ Consider each of the following cases independently:
1_How many common shares would be outstanding if Rice Corporation declares a 4-for-1 stock split?
2_Prepare the journal entry if Rice Corporation declared a 15% stock dividend on the common shares when the market price of common shares was $130 per share.
3_Prepare the journal entry if Rice Corporation declared a 45% stock dividend on the common shares when the market price of common shares was $130 per share.
4_Give the journal entry to record the sale of 800 common shares for $125 per share.