Question 1

-Refer to Landmark Company. The company's total capital stock is

Accepted Answer

The answer of 
-Refer to Landmark Company. The company's total...

Question 2

When a corporation pays a previously declared cash dividend, which of the following is true?

Accepted Answer

When a corporation pays a previously declared cash dividend, liabilities decrease because the dividend payable (a liability) is settled.

Question 3

When a corporation issues a small stock dividend, which of the following is false?

Accepted Answer

A small stock dividend does not involve cash transactions, so cash does not decrease. Instead, retained earnings are decreased and transferred to capital stock accounts, keeping total stockholders' equity the same.

Question 4

The stockholders' equity section of the balance sheet immediately before a recent stock dividend is provided below:  A 10% stock dividend was declared and paid when the market price per share was $12. Immediately after the stock dividend, the components of stockholders' equity section were:
Common Stock Paid-in Capital Retained Earnings

Accepted Answer

The answer of The stockholders' equity section of the balance...

Question 5

If a corporation declares a 2-for-1 stock split, which of the following is true?

Accepted Answer

A 2-for-1 stock split means that each shareholder will receive two shares for every one share held before the split. So, a stockholder who previously held 100 shares will have 200 shares after the split. The amount of stockholders' equity and capital stock will not change, as the total value of the company remains the same. The price of each share will also be halved as a result of the split to reflect the increased number of shares, so it is not doubled.

Question 6

When a corporation issues a stock dividend, which of the following is true?

Accepted Answer

When a corporation issues a stock dividend, there is no cash outflow, so cash does not decrease. Instead, the corporation transfers a portion of retained earnings to the common stock or additional paid-in capital account, which increases the total number of outstanding shares. However, since the proportional ownership of each shareholder remains the same, the total stockholders' equity remains the same. Therefore, the correct answer is B.

Question 7

When a corporation declares a cash dividend, which of the following is true?

Accepted Answer

When a corporation declares a cash dividend, it reduces retained earnings, which is a component of stockholders' equity, thus decreasing stockholders' equity.

Question 8

After a corporation declares a cash dividend, what takes place on the date of record?

Accepted Answer

On the date of record, no entry is necessary in the company's accounting records. The date of record is simply the date on which the company determines which shareholders are eligible to receive the dividend payment. It is important for shareholders to own the stock by the date of record in order to receive the dividend. However, the actual distribution of cash to shareholders will take place on the payment date, not the date of record.

Question 9

If a corporation declares a 2-for-1 stock split, which of the following is true?

Accepted Answer

In a 2-for-1 stock split, the par value of the stock is reduced to half of its pre-split value, while the number of shares doubles. This does not change the total value of stockholders' equity, so no journal entry is required, and the proportionate ownership remains the same. The market price typically adjusts to reflect the increased number of shares, often decreasing rather than increasing.

Question 10

-Refer to Lakeshore Industries. What is the effect on the company's accounting equation of issuing 1,000 additional shares of common stock at $15 per share?

Accepted Answer

Issuing 1,000 shares at $15 each increases cash (an asset) by $15,000 and increases stockholders' equity by $15,000.

Question 11

If a corporation repurchases 500 shares of its previously-issued common stock for $5,000 and then reissues it for $4,000, which of the following statements is true regarding the difference in the amounts of the repurchase and reissuance?

Accepted Answer

The difference between the repurchase and reissuance of treasury stock is recorded as a decrease in stockholders' equity, not as a gain or loss.

Question 12

If a corporation repurchases 500 shares of its previously-issued common stock then retires these shares, which of the following is true?

Accepted Answer

When a corporation repurchases its previously issued common stock and retires them, it reduces the number of outstanding shares. As a result, the common stock and paid-in capital accounts must be decreased by the amount of the original issue price. No new type of stock needs to be issued as the retired shares are not being replaced. Approval from the state is not required for this type of transaction. Additionally, the gain or loss from the repurchase would only need to be recorded if the cost to repurchase the shares is different from their original issue price.

Question 13

-Refer to Lakeshore Industries. What is the effect of a 2-for-1 stock split if the market value of the common stock is $20 per share at the time the stock split is declared?

Accepted Answer

A 2-for-1 stock split doubles the number of shares while halving the price per share, but it does not affect the total stockholders' equity or any account balances.

Question 14

A growing corporation had $180,000 of its $30 par common stock issued before its recent 3-for-1 stock split. The market price of the stock was $120 per share before the split. Which of the following is true as a result of the split?

Accepted Answer

In a 3-for-1 stock split, the par value of the stock is divided by 3, reducing it from $30 to $10 per share.

Question 15

If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders?

Accepted Answer

Cumulative, participating preferred stock will receive a fixed dividend regardless of the amount of dividends declared. However, if the company does well and declares dividends that exceed a specified amount, participating preferred stockholders will share in the excess dividends in proportion to their ownership. Therefore, option B is the correct choice. Option A is incorrect because cumulative preferred stockholders are entitled to any skipped dividends, which will accumulate until the company declares dividends. Option C is incorrect because it only refers to fixed dividends, which is not the case for participating preferred stock. Option D is incorrect because it is referring to convertible preferred stock, which is not the same as cumulative, participating preferred stock.

Question 16

-Refer to Lakeshore Industries. What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the stock dividend is declared?

Accepted Answer

A 10% stock dividend means that 10% of the existing shares are distributed to shareholders. If the market price is $30 per share, the value of the stock dividend is transferred from retained earnings to capital stock accounts. If the total value of the dividend is $225,000, this amount is moved from retained earnings to capital stock accounts, reflecting the distribution of additional shares.

Question 17

If a corporation declares a 2-for-1 stock split, which of the following is true?

Accepted Answer

When a 2-for-1 stock split is declared, the number of outstanding shares is doubled, while the number of issued shares remains the same. This means that each shareholder now owns twice the number of shares they previously held, but the value of each individual share will be halved. There is no need to authorize a new class of stock for a stock split.

Question 18

When a corporation decides whether to pay a cash dividend, which of the following is an important consideration?

Accepted Answer

When a corporation decides whether to pay a cash dividend, one of the most important considerations is the balances in the corporation's cash and retained earnings accounts. If the corporation has sufficient funds in these accounts, it may choose to pay a dividend to its shareholders. However, if the corporation does not have enough cash or if it needs to retain earnings for future growth or investment opportunities, it may decide to postpone or skip paying a dividend. The number of authorized shares of stock, the book value of the stock, and the balance of paid-in capital are not as critical in determining whether to pay a cash dividend.

Question 19

Which of the following statements is true regarding a corporation's purchase of treasury stock?

Accepted Answer

When a corporation purchases its own stock (treasury stock), the cost of treasury stock is a reduction in stockholders' equity. This is because the amount of equity originally recorded for the shares being repurchased is reduced. Therefore, option A is the correct statement. Options B, C and D are incorrect because dividends are not paid on treasury stock, treasury stock is not considered an asset because it represents a reduction in equity, and treasury stock is still considered issued even when it is bought back by the corporation.

Question 20

A company plans to distribute $134,000 in dividends. It has outstanding 200,000 shares of 7% $10 par preferred stock (non-cumulative and non-participating)and 60,000 shares of $2 par common stock. How much will be distributed per share on preferred and common stock? Preferred stock Common stock

Accepted Answer

Since the preferred stock is non-cumulative, the company is not required to pay any dividends for the years in which it does not declare dividends. Therefore, the entire $134,000 will be distributed to the preferred stockholders and the common stockholders will not receive any dividends.

The preferred stockholders will receive a dividend of 7%*$10 par value = $0.70 per share.

$0.70 per share * 200,000 preferred shares = $140,000.

Since the total amount available for distribution is only $134,000, the company will distribute the entire amount to the preferred stockholders.

Therefore, the distribution per share on preferred stock is $134,000 / 200,000 preferred shares = $0.67 per share.

The distribution per share on common stock is $0.00.

The correct answer is B.

Quiz 10: Stockholders Equity

-Refer to Landmark Company. The company's total capital stock is

When a corporation pays a previously declared cash dividend, which of the following is true?

When a corporation issues a small stock dividend, which of the following is false?

If a corporation declares a 2-for-1 stock split, which of the following is true?

When a corporation issues a stock dividend, which of the following is true?

When a corporation declares a cash dividend, which of the following is true?

After a corporation declares a cash dividend, what takes place on the date of record?

If a corporation declares a 2-for-1 stock split, which of the following is true?

-Refer to Lakeshore Industries. What is the effect on the company's accounting equation of issuing 1,000 additional shares of common stock at $15 per share?

If a corporation repurchases 500 shares of its previously-issued common stock for $5,000 and then reissues it for $4,000, which of the following statements is true regarding the difference in the amounts of the repurchase and reissuance?

If a corporation repurchases 500 shares of its previously-issued common stock then retires these shares, which of the following is true?

-Refer to Lakeshore Industries. What is the effect of a 2-for-1 stock split if the market value of the common stock is $20 per share at the time the stock split is declared?

A growing corporation had $180,000 of its $30 par common stock issued before its recent 3-for-1 stock split. The market price of the stock was $120 per share before the split. Which of the following is true as a result of the split?

If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders?

-Refer to Lakeshore Industries. What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the stock dividend is declared?

If a corporation declares a 2-for-1 stock split, which of the following is true?

When a corporation decides whether to pay a cash dividend, which of the following is an important consideration?

Which of the following statements is true regarding a corporation's purchase of treasury stock?

A company plans to distribute $134,000 in dividends. It has outstanding 200,000 shares of 7% $10 par preferred stock (non-cumulative and non-participating) and 60,000 shares of $2 par common stock. How much will be distributed per share on preferred and common stock? Preferred stock Common stock