Question 1

On September 1, a corporation had 50,000 shares of $5 par value common stock, and $1,000,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

Accepted Answer

The answer of On September 1, a corporation had 50,000...

Question 2

A liability for dividends exists:

Accepted Answer

The answer of A liability for dividends exists:
...

Question 3

A stock dividend:

Accepted Answer

A stock dividend is not a liability, does not reduce assets or total equity, transfers equity from retained earnings to contributed capital, and affects the components of equity.

Question 4

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:

Accepted Answer

The entry to record a stock dividend includes a debit to retained earnings for the fair market value of the shares issued (50,000 shares x 10% x $27 = $135,000). The credit portion of the entry includes common stock dividend distributable for the par value of the shares issued (50,000 shares x 10% x $20 = $100,000) and the excess amount is credited to paid-in capital in excess of par value, common stock ($35,000). Therefore, choice C is the correct answer.

Question 5

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital is:

Accepted Answer

The answer of A company issued 60 shares of $100...

Question 6

A corporation issued 300 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state. The entry to record this transaction will include:

Accepted Answer

The issuance of 300 shares of $5 par value common stock amounts to a total par value of $1,500 ($5 x 300). Since the accountant's fee was $1,800, the excess of $300 ($1,800 - $1,500) is credited to Paid-in Capital in Excess of Par Value, Common Stock. The entry to record the transaction would be: 
Debit Organization Expenses $1,500 
Credit Common Stock $1,500
Credit Paid-in Capital in Excess of Par Value, Common Stock $300 
Credit Cash $1,800

Question 7

A corporation declared and issued a 15% stock dividend on November 1. The following information was available immediately prior to the dividend:  The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

Accepted Answer

The answer of A corporation declared and issued a 15%...

Question 8

A stock dividend transfers:

Accepted Answer

A stock dividend transfers a portion of retained earnings to contributed capital. This means that the retained earnings, which are part of equity, are being distributed to shareholders in the form of additional shares of stock. As a result, contributed capital increases while retained earnings decrease.

Question 9

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

Accepted Answer

The answer of A company issued 60 shares of $100...

Question 10

A company's board of directors votes to declare a cash dividend of $.75 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

Accepted Answer

The total amount of the cash dividend is calculated by multiplying the dividend per share by the number of shares outstanding. Here, it's $.75 * 9,500 = $7,125.

Question 11

A corporation issued 6,000 shares of its $10 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

Accepted Answer

The answer of A corporation issued 6,000 shares of its...

Question 12

A liquidating dividend is:

Accepted Answer

A liquidating dividend is a distribution of assets to shareholders when a corporation is going out of business or selling off assets. It is intended to return a portion of the capital contributed by stockholders.

Question 13

Preferred stock which confers no right to prior periods' unpaid dividends if they were not declared is called:

Accepted Answer

Noncumulative preferred stock does not accumulate any unpaid dividends from previous periods, and the holder only receives the current period's dividend if it is declared. Cumulative preferred stock, on the other hand, allows for unpaid dividends to accumulate and be paid out at a later date. Participating preferred stock allows for the holder to receive additional dividends beyond the fixed rate if the company surpasses a certain level of profitability. Callable preferred stock allows the issuer to buy back the stock at a certain price, while convertible preferred stock can be exchanged for common stock at a certain ratio.

Question 14

A premium on common stock:

Accepted Answer

A premium on common stock is the amount paid in excess of par by purchasers of newly issued stock.

Question 15

A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:

Accepted Answer

The description provided is that of a stock dividend, which involves a corporation distributing additional shares of its own stock to its stockholders without receiving any payment in return. A stock subscription involves a commitment by an investor to purchase shares of a company's stock at a future date or when certain conditions are met. Premium on stock refers to the amount paid by investors for shares in excess of their face value, while discount on stock refers to the amount by which the face value of a stock exceeds its market value. Treasury stock refers to shares of a company's stock that have been repurchased by the company and are held in its treasury.

Question 16

A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $60,000. The entry to record this exchange is:

Accepted Answer

The corporation issued 5,000 shares of $10 par value common stock, which has a total par value of 5,000 × $10 = $50,000. However, the land received in exchange has a market value of $60,000. Therefore, the entry should reflect the $10,000 excess amount, which is recorded in the Paid-In Capital in Excess of Par Value, Common Stock account. So, the correct entry is to debit Land for $60,000, credit Common Stock for $50,000, and credit Paid-In Capital in Excess of Par Value, Common Stock for $10,000.

Question 17

A company declared a $0.50 per share cash dividend. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is:

Accepted Answer

$0.50 * 8,000 shares = $4,000

Question 18

The date the directors vote to pay a dividend is called the:

Accepted Answer

The date the directors vote to pay a dividend is called the date of declaration. This is the official announcement of the dividend and the date on which shareholders become entitled to receive it. The other options listed are different dates related to the dividend, but not the specific date on which the vote to pay the dividend occurs.

Question 19

A corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record this dividend is:

Accepted Answer

For a large stock dividend, the entry is recorded at par value. The par value is $10, so the entry is: Debit Retained Earnings $30,000 (3,000 shares x $10) and credit Common Stock Dividend Distributable $30,000.

Question 20

All of the following statements regarding stock dividends are true except:

Accepted Answer

Stock dividends do not decrease the number of shares outstanding. Instead, they increase the number of shares outstanding while reducing the per-share value of the stock.

Quiz 13: Accounting for Corporations