F7 - Stockholders' Equity

Question 1

When should retained earnings be reduced by the amount of the dividend?

Answer 1

On the date declared

Question 2

If shares are issued for goods or services to non-employees, what value is assigned to the shares issued?

Answer 2

The FMV on the date of issuance

Question 3

The primary purpose of a quasi-reorganization is to give a corporation the opportunity to:

Answer 3

Eliminated a deficit in retained earnings

Question 4

T/F: Donated shares reduce the overall stockholders’ equity account

Answer 4

False; there is no cost to the corporation and thus no reduction in stockholders’ equity

Question 5

T/F: There are no gains or losses recognized in treasury stock transactions under the cost method

Answer 5

True

Question 6

What effect does a stock dividend have on retained earnings?

Answer 6

Retained earnings is debited for the par value of the stock issued as a dividend

Question 7

How is the value of stock compensation determined?

Answer 7

The number of shares multiplied by the FV on date of grant

Question 8

T/F: Treasury stock is considered a contra-equity account

Answer 8

True; the J/E to record a treasury stock purchase is a debit to treasury stock and a credit to cash (or another asset)

Question 9

T/F: With a dividend (whether cash or property or stock) the retained earnings account is always debited

Answer 9

True

Question 10

When is the FMV of a stock used in a stock dividend? The par value?

Answer 10

Under 20-25%, debit retained earnings for the FMV; over 25%, debit retained earnings for par value