F7/M6 Stockholders Equity: Part 2

Question 1

Stock subscriptions

Answer 1

Agreement to sell a number of shares at a specific price

Question 2

Subscriptions not paid for at year end are treated as a contra-equity account

Answer 2

Dr: Subscriptions receivable
Cr: Common Stock Subscribed
Cr: APIC

NO CHANGE TO STOCKHOLDERS EQUITY

Question 3

Stock rights

Answer 3

No JE until exercised

- Issuance of stock rights is a memorandum entry only

Question 4

Date of Dividend DECLARATION

Answer 4

Liabilities go up

Equity goes down

Question 5

Cash dividend

Answer 5

Financing outflow

Question 6

Property dividends are written up to fair value and gain is reported on Income Statement

Answer 6

True
Dr: Retained earnings
Dr: Accumulated depreciation
Cr:       Asset (cost)
Cr:       Gain

Question 7

Liquidating dividends

Answer 7

Dividends exceed retained earnings
First) Reduce APIC
Second) Reduce Common stock

Question 8

Stock dividend (Reduce RE by what amount)
 - No effect on Total SE

Answer 8

Small stock dividend ( < 25%)
- Use FMV

Large stock divide ( > 25%)

• Use Par Value
• Reduce RE by par value

Question 9

Public companies and those that follow IFRS require the Statement of Changes in Stockholders Equity to be a primary financial statement

Answer 9

True

Question 10

Stock warrants (Rights) are recorded when

Answer 10

Stock warrants are exercised