Question 1

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

Accepted Answer

When a corporation declares a cash dividend, they are distributing a portion of their earnings to their shareholders. This decreases the amount of retained earnings, which is a component of stockholders' equity. Therefore, Option C is the correct choice. Option A is incorrect because the cash is being distributed, not decreasing. Option B is also incorrect because liabilities are not affected by the declaration of a cash dividend. Option D is incorrect because an entry is necessary to record the payment of dividends.

Question 2

All of the following are reasons that a corporation may purchase treasury stock except:

Accepted Answer

The answer of All of the following are reasons that...

Question 3

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

Accepted Answer

The answer of If a corporation declares a 2-for-1 stock...

Question 4

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 as it only determines which shareholders are eligible to receive the dividend. The actual payment of the dividend will result in a decrease in cash and stockholders' equity.

Question 5

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

The answer of A growing corporation had $180,000 of its...

Question 6

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 number of outstanding shares is doubled while the value of each share is halved. This means that each shareholder will now own twice the number of shares they had before, but the overall value of their holdings will remain the same. No new class of stock needs to be authorized, and the number of issued shares remains the same.

Question 7

Lake Lanier Grill The stockholders' equity section of the December 31,2014,balance sheet is provided below:
Assume that all 2,000 shares of stock were issued as of December 31,2014 for $3.50 per share.On March 1,2015,the company reacquired 1,000 shares of its common stock for $4.50 per share.
-Refer to Lake Lanier Grill,Inc.If all of the 1,000 shares that Lake Lanier Grill repurchased on March 1 were later reissued for $4.00 per share,the journal entry to record this transaction includes a debit to what account and for what amount?

Accepted Answer

The answer of Lake Lanier Grill The stockholders' equity section...

Question 8

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

Accepted Answer

The corporation's cash and retained earnings accounts are important considerations as they determine the availability of funds for paying out dividends. The other options are not directly related to the decision of paying a cash dividend.

Question 9

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 for every share a stockholder previously held, they will receive 2 new shares. Therefore, a stockholder who previously held 100 shares will have 200 shares after the split. The amount of stockholders' equity and capital stock remain the same as the split only affects the number of shares outstanding. The price of each share will be halved as a result of the split since the total value of the company remains the same but is now divided among twice the number of shares.

Question 10

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 11

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

Accepted Answer

The cost of treasury stock is deducted from stockholders' equity as a reduction. B is incorrect because no dividends are paid on treasury stock. C is incorrect because treasury stock is not considered an investment. D is incorrect because treasury stock is still considered issued, but it no longer has voting rights or rights to dividends.

Question 12

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?

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.

Question 13

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 and retires its previously-issued common stock, the common stock and paid-in capital accounts must be decreased by the amount of the original issue price. There is no need to issue a new class of stock or obtain approval from the state, and any gain or loss from the transaction would already have been recorded when the shares were repurchased.

Question 14

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

Accepted Answer

When a corporation issues a stock dividend, it essentially splits its existing shares into smaller portions, which are distributed to shareholders as dividends. As there is no direct outflow of cash, cash does not decrease. However, the number of outstanding shares increases, decreasing the value of each share proportionally. As a result, total stockholders' equity remains the same. Retained earnings are not directly impacted by a stock dividend issue.

Question 15

Lakeshore Industries This company reported the following information on its recent balance sheet:
Common stock,$10 par,100,000 shares authorized,75,000 shares issued and outstanding
-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 additional shares at $15 per share increases assets (cash) by $15,000 and increases stockholders' equity by the same amount.

Question 16

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:

Accepted Answer

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

Question 17

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 answer of If a corporation repurchases 500 shares of...

Question 18

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, its liabilities decrease because the dividend payable (a liability) is settled.

Question 19

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

Accepted Answer

The answer of When a corporation issues a small stock...

Question 20

Lake Lanier Grill The stockholders' equity section of the December 31,2014,balance sheet is provided below:
Assume that all 2,000 shares of stock were issued as of December 31,2014 for $3.50 per share.On March 1,2015,the company reacquired 1,000 shares of its common stock for $4.50 per share.
-Refer to Lake Lanier Grill,Inc.The journal entry to record the transaction on March 1 includes a credit to what account and for what amount?

Accepted Answer

The answer of Lake Lanier Grill The stockholders' equity section...

Quiz 10: Stockholders Equity

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

All of the following are reasons that a corporation may purchase treasury stock except:

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

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

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 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?

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

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

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?

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

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

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:

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?

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?