Stockholders' Equity

Question 1

The date of _______ is the date the board of directors formally approves a divided.

Answer 1

declaration

Question 2

JE for declaration of dividends

Answer 2

DR: Retained earnings (reduces RE)
CR: Dividends payable

Question 3

When all treasury stock transactions are recorded under the “cost method,” and the resale of treasury stock is at a price that _______ its acquisition price, none of the treasury stock transactions affect retained earnings

Answer 3

exceeds

Question 4

If the rights are exercised and stock is issued, then common stock and additional paid-in capital ______

Answer 4

increase

Question 5

When treasury stock is sold at a price that exceeds its cost, the excess would be credited to:

Answer 5

APIC

Question 6

The dividend is a liquidating dividend to the extent that the dividend exceeds:

Answer 6

retained earnings

Question 7

A property dividend should be recorded in retained earnings at the property’s _____ _____ at date of declaration

Answer 7

market/fair value

Question 8

Additional paid-in capital is ________ upon the acquisition and retirement of shares at a cost less than initial selling price

Answer 8

decreased

Question 9

Is there a change in total stockholder’s equity as a result of a donation of stock from a shareholder?

Answer 9

No

Question 10

The ___ ____ of the warrants is credited to paid in capital/assigned to warrants outstanding

Answer 10

fair value

Question 11

In a compensatory stock option plan for which the grant and exercise dates are different, the stock options outstanding account should be reduced at the:

Answer 11

exercise date

Question 12

Net income or retained earnings will _____ be increased through treasury stock transactions

Answer 12

never

Question 13

Gains and losses on treasury stock transactions are ______ recorded on the income statement. Gains are recorded by _______ Additional Paid-in Capital―Treasury Stock

Answer 13

never; increasing

Question 14

On which of the following dates is a public entity required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award?

Answer 14

date of grant

Question 15

For a large stock dividend, retained earnings is _____ for the par value of the additional shares issued

Answer 15

debited

Question 16

intrinsic value of the call option

Answer 16

Number of share options × (Market price of the stock on the date of the grant - exercise price of the share option)

Question 17

Synonym for capital stock

Answer 17

legal stock

Question 18

Capital stock includes:

Answer 18

common stock and preferred stock

Question 19

Capital/legal stock cannot be used to:

Answer 19

pay a dividend

Question 20

APIC and RE can be used to:

Answer 20

pay a dividend

Question 21

Treasury stock reduces:

Answer 21

stockholder’s equity

Question 22

Legal capital is the amount of capital that must be retained by the corporation for the protection of:

Answer 22

creditors

Question 23

Common stockholders’ equity formula:

Answer 23

total shareholders equity - preferred stock outstanding - cumulative preferred dividends in arrears

Question 24

Book value per common share =

Answer 24

common shareholder’s equity / common shares OUTSTANDING

Question 25

Fully participating preferred stock means that preferred shareholders participate in excess dividends without

Answer 25

limit

Question 26

Mandatorily redeemable preferred stock is recorded as a:

Answer 26

liability

Question 27

Mandatorily redeemable preferred stock must be bought back by the company on the:

Answer 27

maturity date

Question 28

Accumulated earnings (or losses) during the life of the corporation that have not been paid out as dividends

Answer 28

retained earnings

Question 29

The purpose of _____ _____ ______ is to disclose to the shareholders that some of the RE are not available to pay dividends because they have been restricted for legal or contractual reasons

Answer 29

appropriating retained earnings

Question 30

An accounting adjustment that revises the capital structure of a corporation as though it had been legally reorganized & allows a corporation with a significant deficit in RE to eliminate that deficit

Answer 30

quasi-reorganization

Question 31

The purpose of a quasi-reorganization is to restate _______ assets to their lower ____ _____

Answer 31

overvalued; fair values

Question 32

Under the cost method, a gain or loss will be determined when treasury stock is:

Answer 32

reissued or retired

Question 33

Original issue of stock JE:

Answer 33

DR: cash
CR: CS
CR: APIC

Question 34

Buy back above issue price (cost method) JE

Answer 34

DR: Treasury stock (at cost)
CR: Cash

Question 35

Reissue above cost (cost method) JE

Answer 35

DR: Cash
CR: TS (at cost)
CR: APIC - TS

Question 36

Reissue below cost (cost method) JE

Answer 36

DR: Cash
DR: APIC - TS
DR: RE
CR: TS

Question 37

For the legal (par/stated value) method, a gain or loss is calculated upon:

Answer 37

buy back

Question 38

Buy back above issue price (par method) JE:

Answer 38

DR: TS (at par)
DR: APIC - CS
DR: RE (plug)
CR: Cash

Question 39

Buy back below issue price (par method) JE:

Answer 39

DR: TS (at par)
DR: APIC - CS
CR: Cash
CR: APIC - TS (plug)

Question 40

Reissue shares above par price (par method) JE

Answer 40

DR: Cash
CR: TS
CR: APIC - CS

Question 41

Retirement of treasury shares under the cost method has the same entries as ________ of treasury shares except cash is not debited, _____ _____ is

Answer 41

repurchase; common stock

Question 42

The number of shares outstanding ______ as a result of a donation

Answer 42

decreases

Question 43

Donated stock should be recorded at:

Answer 43

FMV

Question 44

Stock issued for outside services should be recorded at the ____ _____ of the stock

Answer 44

fair value

Question 45

On the date of declaration, the property to be distributed should be restated to _____ ______ and any gain or loss should be recognized in:

Answer 45

fair value; income

Question 46

Scrip dividends are a form of:

Answer 46

notes payable

Question 47

For a small stock dividend ( < 20%), reduce retained earnings by the ________ of the stock

Answer 47

FMV

Question 48

For a large stock dividend ( >20%), reduce retained earnings by the _______ of the stock

Answer 48

par value

Question 49

Stock splits reduces the _____ and increases the number of:

Answer 49

par; shares outstanding

Question 50

The compensation expense in a compensatory stock option is allocated over the:

Answer 50

vesting period

Question 51

The fair value of the options (Stock options - APIC) is the:

Answer 51

compensation expense

Question 52

JE to exercise options under compensatory stock option

Answer 52

DR: Cash
DR: APIC - stock options (reverse comp. exp.)
CR: CS (at par)
CR: APIC (plug)

Question 53

A “liquidating dividend” is a return of capital (which ______ additional paid-in capital) and not a distribution of earnings (which ________ retained earnings).

Answer 53

decreases (2)

Question 54

A (pure) “liquidating dividend” implies there is no ______________ left to decrease.

Answer 54

retained earnings

Question 55

The fair market value of a true stock dividend at declaration date _______ retained earnings and _______ capital stock and paid-in capital.

Answer 55

decreases; increases

Question 56

When collectibility is reasonably assured, the excess of the subscription price over the stated value of the no par common stock subscribed should be recorded as additional paid-in capital (APIC) when the subscription is: .

Answer 56

recorded/received

Question 57

Cost of stock rights =

Answer 57

[FMV of rights / (FMV of rights + FMV of stock ex-rights)] x cost of stock