F7 - Stockholders' Equity

Question 1

When treasury stock transactions are recorded under the “cost method,” the resale of treasury stock, if at a price that exceeds acquisition price, it will not

Answer 1

Affect retained earnings. Gains will only affect the Additional Paid-in Capital - Treasury Stock account. Losses in excess of APIC-Treasury Stock are booked to retained earnings.

Question 2

When a company declares a cash dividend, retained earnings is decreased by the amount of the dividend on the date of:

Answer 2

Declaration

Question 3

If a corporation sells some of its treasury stock at a price that exceeds its cost, this excess should be:

Answer 3

Credited to additional paid-in capital

Question 4

There is no gain or loss on the purchase and/or sale of:

Answer 4

Treasury stock. Any “difference” goes to Paid-In Capital, or if there is not enough Paid-in capital to absorb a loss, the loss would be debited (subtracted) from Retained Earnings.

Question 5

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

Answer 5

Eliminate a deficit in retained earnings OR Revalue overvalued assets to their lower fair values.

Question 6

A dividend is a liquidating dividend to the extent that:

Answer 6

The dividend exceeded retained earnings.

Question 7

A property dividend should be recorded in retained earnings at the property’s

Answer 7

Market value at date of declaration.