CH 15. - Stockholder's Equity

Question 1

When a corporation issues common or preferred stock, it records the stock at its ____________________.

Answer 1

par or stated value

Question 2

If ____________________ is cumulative, any undeclared annual dividend not paid in the previous year(s) accumulates (ie, dividends in arrears) and is paid in the future when declared.

Answer 2

Preferred Stock

Question 3

When a dividend is declared, ___________________.

Answer 3

A liability is incurred

Question 4

Quasi-reorganization

Answer 4

Eliminate deficit in retained earnings, giving the company a fresh start.

Question 5

Under the ___________ , all treasury stock transactions are recorded at the original requisition cost.

Answer 5

Cost Method

Question 6

___________ are recorded at the fair value (FV) of the property on the date of declaration

Answer 6

Property dividends (non-reciprocal transfers to owners)

Question 7

___________ is a measure of an entity’s short-term solvency

Answer 7

Working capital

Question 8

_________ is company stock that is repurchased but not retired. Because a company is not allowed to report owning its common stock (C/S) as an investment, T/S is recorded as a contra account (debit balance) to stockholders’ equity.

Answer 8

Treasury stock (T/S)

Question 9

_______________ may not reduce retained earnings below zero.

Answer 9

Declared dividends

Question 10

Order of Divdends Payments

Answer 10

1) Dividends in Arrears
- Cumulative Preferred Stock

2) Current Year Annual Dividend
- Preferred Stock

3) Current Year Declared Divided
- Common Stock