Question 1

The date of record is the date that directors vote to pay a cash dividend to shareholders.

Accepted Answer

The date of record is the date on which the company determines which shareholders are eligible to receive the dividend, not the date on which directors vote to pay the dividend.

Question 2

A reverse stock split increases the market value per share and the par value per share of stock.

Accepted Answer

A reverse stock split reduces the number of outstanding shares and proportionally increases the price per share, which can increase the market value per share. The par value per share may also be increased in a reverse stock split, but this is not always the case.

Question 3

A stock split increases total stockholders' equity.

Accepted Answer

The answer of A stock split increases total stockholders' equity....

Question 4

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Accepted Answer

Preferred stock is a type of stock that typically pays a fixed dividend and has priority over common stock in the payment of dividends and in the event of liquidation. By issuing preferred stock, corporations can raise capital while still maintaining control of the company. Additionally, preferred stock can be attractive to investors who are seeking a higher return than what is offered by common stock.

Question 5

A stock dividend is a distribution of corporate assets that returns part of the original investment to shareholders.

Accepted Answer

The answer of A stock dividend is a distribution of...

Question 6

The declaration of cash dividends increases retained earnings.

Accepted Answer

The declaration of cash dividends decreases retained earnings as the company is distributing a portion of its earnings to shareholders.

Question 7

Recording of a stock dividend results in a liability being recorded.

Accepted Answer

Recording of a stock dividend results in an increase in equity and a decrease in retained earnings, not the recording of a liability.

Question 8

A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.

Accepted Answer

A stock split increases the number of shares outstanding, but shareholders still maintain the same percentage of ownership in the company. Therefore, additional shares are distributed to shareholders according to their existing percent of ownership.

Question 9

Callable preferred stock gives a corporation the option of exchanging preferred shares into common shares at a specified rate.

Accepted Answer

The answer of Callable preferred stock gives a corporation the...

Question 10

The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.

Accepted Answer

This is because the declaration of dividends reduces the Retained Earnings balance and creates a liability for the company to pay out the dividends to common stockholders, which is recorded as Common Dividend Payable in the liabilities section of the balance sheet.

Question 11

A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

Accepted Answer

A large stock dividend occurs when a distribution of more than 25% of previously outstanding shares is issued, not 50%.

Question 12

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Accepted Answer

A corporation may legally give shares of its stock to promoters in exchange for their services in organizing the corporation, as long as the shares are issued for a fair and reasonable value.

Question 13

All stock dividends are recorded at par value so there would never be a credit to the paid-in capital in excess of par value account.

Accepted Answer

This statement is false. Stock dividends can be recorded at either par value or market value. If stock dividends are recorded at market value, there can be a credit to the paid-in capital in excess of par value account.

Question 14

Participating preferred stock has a feature that allows its holders to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock.

Accepted Answer

This statement accurately describes the feature of participating preferred stock.

Question 15

A debit balance in retained earnings is referred to as an accumulated deficit.

Accepted Answer

This is because a debit balance in retained earnings means that the company has accumulated losses over time, which is also known as an accumulated deficit.

Question 16

When no-par stock is not assigned a stated value, the total amount received is recorded in the Common Stock account.

Accepted Answer

No-par stock is not assigned a stated value, so the total amount received is recorded in the Common Stock account.

Question 17

A stock dividend decreases the market price of the company's stock.

Accepted Answer

The answer of A stock dividend decreases the market price...

Question 18

Paid and declared preferred dividends are called dividends in arrears.

Accepted Answer

Paid and declared preferred dividends are not considered to be in arrears. Dividends in arrears refer to past preferred dividends that were not paid out and are owed to shareholders.

Question 19

A stock dividend does not reduce a corporation's assets or its stockholders' equity.

Accepted Answer

A stock dividend only changes the composition of the stockholders' equity, rather than reducing the overall amount of equity or assets.

Question 20

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

Accepted Answer

Cumulative preferred stock is entitled to receive unpaid dividends from prior periods before any dividend is paid to common shareholders. This means that the dividends on cumulative preferred stock accumulate over time and must be paid before any dividends are paid to holders of common stock.

Quiz 11: Corporate Reporting and Analysis