Question 1

How is treasury stock shown on the balance sheet?

Accepted Answer

Treasury stock is shown as a decrease in stockholders' equity on the balance sheet, since it represents shares of stock that a company has repurchased and no longer outstanding. It is not considered an asset or an increase in stockholders' equity.

Question 2

A company sold 200 shares of common stock with a par value of $5 at a price of $13 per share.What is the effect on the accounts of this transaction?

Accepted Answer

The sale of 200 shares of common stock would result in an increase in cash of $2,600 ($13 per share x 200 shares). The par value of the shares sold is $5 per share, so the increase in common stock would be $1,000 ($5 par value x 200 shares). The remaining $1,600 ($2,600 cash received - $1,000 increase in common stock) would be recorded as an increase in paid-in capital. Therefore, the correct option is (C).

Question 3

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

Accepted Answer

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is known as a stock split. This increases the total number of shares outstanding without changing the overall value of the company. A stock dividend involves the issuance of additional shares of stock as a dividend to existing shareholders, which does not change the par or stated value. Stock options are a type of financial instrument that gives the holder the right to buy or sell stock at a specified price. Preferred dividends are a type of dividend paid out to holders of preferred stock, which have priority over common stockholders in receiving dividends.

Question 4

Which of the following accounts is reported in the noncurrent liabilities section of the corporate balance sheet?

Accepted Answer

Bonds Payable are long-term liabilities, and therefore are reported in the noncurrent liabilities section of the corporate balance sheet. Common Stock and Cash are reported in the equity and asset sections of the balance sheet, respectively. Dividends Payable are reported in the current liabilities section.

Question 5

The excess of issue price over par of common stock is termed a(n)

Accepted Answer

The excess of issue price over par of common stock is termed a premium. This represents the amount paid by investors over the face value of the shares.

Question 6

The major subdivisions of the Stockholders' Equity section of the balance sheet are

Accepted Answer

The answer of The major subdivisions of the Stockholders' Equity...

Question 7

A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180.If the corporation issues a 4-for-1 stock split,the market value of the stock will fall to approximately

Accepted Answer

The answer of A corporation has 50,000 shares of $100...

Question 8

The liability for a dividend is recorded on which of the following dates?

Accepted Answer

The liability for a dividend is recorded on the date of declaration. This is the date when the company's board of directors authorizes the payment of the dividend and sets the amount and record date. The other options (A, B, and C) are not relevant for recording the liability for a dividend. The date of record determines which shareholders are eligible to receive the dividend, the date of payment is when the dividend is actually paid out, and the date of announcement is when the company publicly announces its intention to pay a dividend.

Question 9

In which section of the balance sheet would treasury stock be reported?

Accepted Answer

Treasury stock is a contra-equity account, meaning it reduces the total stockholders' equity of a company. As a result, it is reported under the stockholders' equity section of the balance sheet.

Question 10

Which of the following is usually NOT a prerequisite to paying a cash dividend?

Accepted Answer

Market value in excess of par value per share is not a prerequisite to paying a cash dividend. The prerequisites to paying a cash dividend are formal action by the board of directors, sufficient cash, and sufficient retained earnings.

Question 11

What is the effect of a stock dividend on the balance sheet?

Accepted Answer

The answer of What is the effect of a stock...

Question 12

Which statement below is NOT a reason for a corporation to buy back its own stock?

Accepted Answer

Buying back its own stock would decrease the number of shares outstanding, not increase it. Therefore, D is the statement that is not a reason for a corporation to buy back its own stock.

Question 13

A corporation purchases 5,000 shares of its own $20 par common stock for $35 per share,recording it at cost.What will be the effect on total stockholders' equity?

Accepted Answer

The purchase of treasury stock reduces total stockholders' equity. The cost of the treasury stock is debited to Treasury Stock and credited to Cash. The par value of the treasury stock is debited to Paid-In Capital from Treasury Stock and credited to Common Stock. The excess of the cost over the par value is debited to Retained Earnings.

Question 14

Which one of the following is usually NOT necessary in order for a corporation to pay a cash dividend?

Accepted Answer

Declared dividends are not necessary for a corporation to pay a cash dividend, as long as the board of directors takes formal action and there are sufficient cash and retained earnings. However, it is customary for the corporation to declare the dividend before paying it to shareholders.

Question 15

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired.What is the number of shares outstanding?

Accepted Answer

The number of outstanding shares is equal to the total number of issued shares minus the number of treasury shares (shares reacquired by the company).

Outstanding shares = Issued shares - Treasury shares

In this case: 
Issued shares = 40,000 
Treasury shares = 5,000

Therefore: 
Outstanding shares = 40,000 - 5,000 = 35,000

Question 16

A corporation has 50,000 shares of $100 par value stock outstanding.If the corporation issues a 4-for-1 stock split,the number of shares outstanding after the split will be

Accepted Answer

The answer of A corporation has 50,000 shares of $100...

Question 17

What is one reason to undergo a REVERSE stock split?

Accepted Answer

A reverse stock split is typically done to increase the market value of the stock per share, often to meet stock exchange listing requirements or to make the stock more attractive to investors.

Question 18

The primary purpose of a stock split is to

Accepted Answer

A stock split increases the number of outstanding shares and decreases the market price of the stock per share. This is done to make the stock more affordable and accessible to investors and may also increase trading liquidity. It does not impact paid-in capital, retained earnings, or the market price per share.

Question 19

A company sold 200 shares of common stock with a par vale of $5 at a price of $12 per share.Which section of the statement of cash flows will contain this transaction?

Accepted Answer

Sale of stock is a financing activity, so the transaction will appear in the financing section of the statement of cash flows.

Question 20

Significant changes in stockholders' equity are reported in the

Accepted Answer

The statement of stockholders' equity is specifically designed to report significant changes in stockholders' equity, including issuance of new shares, dividend payments, and changes in retained earnings due to net income or loss. The other statements, such as the income statement, retained earnings statement, and statement of cash flows, may indirectly affect stockholders' equity, but do not focus solely on reporting changes in equity.

Quiz 8: Liabilities and Stockholders Equity

How is treasury stock shown on the balance sheet?

A company sold 200 shares of common stock with a par value of $5 at a price of $13 per share.What is the effect on the accounts of this transaction?

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

Which of the following accounts is reported in the noncurrent liabilities section of the corporate balance sheet?

The excess of issue price over par of common stock is termed a(n)

The major subdivisions of the Stockholders' Equity section of the balance sheet are

A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180.If the corporation issues a 4-for-1 stock split,the market value of the stock will fall to approximately

The liability for a dividend is recorded on which of the following dates?

In which section of the balance sheet would treasury stock be reported?

Which of the following is usually NOT a prerequisite to paying a cash dividend?

What is the effect of a stock dividend on the balance sheet?

Which statement below is NOT a reason for a corporation to buy back its own stock?

A corporation purchases 5,000 shares of its own $20 par common stock for $35 per share,recording it at cost.What will be the effect on total stockholders' equity?

Which one of the following is usually NOT necessary in order for a corporation to pay a cash dividend?

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired.What is the number of shares outstanding?

A corporation has 50,000 shares of $100 par value stock outstanding.If the corporation issues a 4-for-1 stock split,the number of shares outstanding after the split will be

What is one reason to undergo a REVERSE stock split?

The primary purpose of a stock split is to

A company sold 200 shares of common stock with a par vale of $5 at a price of $12 per share.Which section of the statement of cash flows will contain this transaction?

Significant changes in stockholders' equity are reported in the