Stockholders Equity

Question 1

When a cash or property dividend is declared?

Answer 1

Retained earning is reduced

Question 2

At what cost should property dividends should be recorded?

Answer 2

Property dividends should be recorded at FMV

Question 3

Treasury stocks can be accounted for using 2 methods

Answer 3

1. Cost method
2. Legal (par/stated value)

Question 4

What will be the impact on stock holders equity for the acquisition of the Company’s own stock?

Answer 4

Stockholders equity will decrease. The Treasury account its a contra Equity account (Debit).

Question 5

For GAAP purposes when is a stock dividend considered large?

Answer 5

When the stock dividend is greater than 25%.

Question 6

For GAAP purposes when is a stock dividend considered small and what account is debited?

Answer 6

When a stock dividend is smaller than 20%. The debit is against retained earnings for the fair market value.

Dr Retained earning (FM value)
Cr. Common stock ( par value)
Cr. APIC CS ( FV - PAR