978-0134125053 Chapter 10 Part 3

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28) Evergreen Building, Inc. has declared a $43,000 cash dividend to shareholders. The company

has 4,500 shares of $20-par, 5% preferred stock and 20,000 shares of $20–par common stock.

The preferred stock is cumulative. How much will be distributed to the preferred and common

stockholders on the date of payment if the preferred stock is $12,000 in arrears?

A) $43,000 preferred, $0 common

B) $4,500 preferred, $38,500 common

C) $16,500 preferred, $26,500 common

D) $21,500 preferred, $21,500 common

Question Type: Concept

29) Stars, Inc. has declared a $22,000 cash dividend to shareholders. The company has 3,000

shares of $14-par, 9% preferred stock and 12,000 shares of $20-par common stock. The

preferred stock is cumulative. How much will be distributed to the preferred and common

stockholders on the date of payment if the preferred stock is $8,000 in arrears?

A) $11,780 preferred, $10,220 common

B) $8,000 preferred, $14,000 common

C) $3,780 preferred, $18,220 common

D) $22,000 preferred, $0 common

Question Type: Application

30) Caesar’s Coffee Co. declared its annual cash dividend on its 3% preferred stock (total par

value $90,000) and a $0.25 per share cash dividend on its common stock (50,000 shares

outstanding). The journal entry for the declaration date is:

A) no entry required on the declaration date.

B) debit Retained Earnings $12,500, credit Dividends Payable $12,500

C) debit Retained Earnings $6,450, credit Dividends Payable – Preferred $2,700, credit

Dividends Payable – Common $3,750

D) debit Retained Earnings $15,200, credit Dividends Payable – Preferred $2,700, credit

Dividends Payable – Common $12,500

Question Type: Application

10.5 Account for stock dividends and stock splits

1) A stock dividend affects total Stockholders’ Equity.

Question Type: Concept

2) A stock dividend increases the stockholder‘s percent of stock held.

Question Type: Concept

3) A stock dividend may be given to reduce the market price of the stock.

Question Type: Concept

4) A corporation may declare stock dividends when there is not enough cash to pay a cash

dividend.

Question Type: Concept

5) A stock dividend will increase total assets.

Question Type: Concept

6) If a company has 15,000 shares outstanding before a 3-for-1 stock split, then after the split

they will have 5,000 shares outstanding.

Question Type: Application

7) If a company has 33,000 shares outstanding before a 5-for-3 stock split, then after the split

they will have 55,000 shares outstanding.

Question Type: Application

8) When a company issues stock dividends:

A) liabilities are increased.

B) common stock is decreased.

C) retained earnings are decreased.

D) dividends are decreased.

Question Type: Concept

9) The journal entry to record the distribution of a stock dividend includes a:

A) credit to Common Stock.

B) credit to Dividends Payable.

C) credit to Cash.

D) credit to Retained Earnings.

Question Type: Concept

10) Which of the following would cause the decrease of the par value of a company’s stock?

A) Cash dividend

B) Stock split

C) Stock dividend

D) Sale of additional stock

Question Type: Concept

11) A 2-for-1 stock split will:

A) double the number of shares of stock and double the par value per share.

B) double the number of shares of stock and halve the par value per share.

C) halve the number of shares of stock and halve the par value per share.

D) halve the number of shares of stock and double the par value per share.

Question Type: Concept

12) A stock split is recorded as a(n):

A) regular journal entry.

B) memorandum entry.

C) adjusting entry.

D) closing entry.

Question Type: Concept

13) Elite Electrical has 360,000 shares of $3-par common stock outstanding. They have declared

a 6% stock dividend. The current market price of the common stock is $8.50/share. The amount

that will be debited to Retained Earnings on the date of declaration is:

A) $64,800.

B) $183,600.

C) $21,600.

D) $248,400.

Question Type: Application

14) Elite Electrical has 380,000 shares of $4-par common stock outstanding. They have declared

a 5% stock dividend. The current market price of the common stock is $7.50/share. The amount

that will be credited to common stock on the date of declaration is:

A) $76,000.

B) $142,500.

C) $19,000.

D) $218,500.

Question Type: Application

15) Mike’s Motors has 240,000 shares of $5-par common stock outstanding. They have declared

a 10% stock dividend. The current market price of the common stock is $11/share. The amount

that will be debited to Retained Earnings on the date of declaration is:

A) $120,000.

B) $384,000.

C) $264,000.

D) $132,000.

Question Type: Application

16) Mike’s Motors has 220,000 shares of $6-par common stock outstanding. They have declared

a 10% stock dividend. The current market price of the common stock is $14/share. The amount

that will be credited to Common Stock on the date of declaration is:

A) $132,000.

B) $440,000.

C) $308,000.

D) $184,800.

Question Type: Application

17) Caesar Corporation has 280,000 shares of $9–par common stock outstanding. They have

declared a 8% stock dividend. The current market price of the common stock is $14/share. The

amount that will be credited to Paid-in Capital in Excess of Par Common Stock on the date of

declaration is:

A) $201,600.

B) $313,600.

C) $112,000.

D) $515,200.

Question Type: Application

18) S&C, Inc. has 420,000 shares of $12–par common stock outstanding. They have declared a

7% stock dividend. The current market price of the common stock is $19/share. The amount that

will be credited to Paid-in Capital in Excess of Par Common Stock on the date of declaration is:

A) $911,400.

B) $205,800.

C) $352,800.

D) $558,600.

Question Type: Application

19) Salty’s Seafood has 2,000 shares of $12 par common stock outstanding. During the current

year, the company distributed a 10% stock dividend. The market value of the stock at that time

was $19/share. After the distribution, Salty’s total Stockholders‘ Equity should increase or

decrease by:

A) ($3,800).

B) $2,400.

C) $1,400.

D) $0.

20) Before a 3-for-1 stock split, the shares outstanding were 5,000 shares at $48 par. After the

split, what was the par value and number of shares?

A) 15,000 shares and $48/share

B) 20,000 shares and $48/share

C) 15,000 shares and $16/share

D) 5,000 shares and $768/share

Question Type: Application

21) Before a 4-for-1 stock split, the shares outstanding were 60,000 shares at $80.00 par. After

the split, what was the par value and number of shares?

A) 240,000 shares and $80.00/share

B) 15,000 shares and $20.00/share

C) 15,000 shares and $80.00/share

D) 240,000 shares and $20.00/share

Question Type: Application

22) Before a 5-for-3 stock split, the shares outstanding were 45,000 shares at $15 par. After the

split, what was the par value and number of shares? (Round any intermediary calculations to two

decimal places, and your final answer to the nearest whole number.)

A) 75,150 shares and $25/share

B) 75,150 shares and $9/share

C) 26,946 shares and $25/share

D) 26,946 shares and $9/share

10.6 Account for treasury stock

1) A company’s stock that it reacquires is termed treasury stock.

Question Type: Concept

2) Treasury stock transactions are uncommon among larger corporations.

Question Type: Concept

3) Treasury stock is a contra–equity account and carries a debit balance.

Question Type: Concept

4) Treasury stock decreases the number of outstanding shares of stock.

Question Type: Concept

5) Treasury stock is recorded at par value.

Question Type: Concept

6) A company may purchase treasury stock if they are trying to avoid a takeover.

Question Type: Concept

7) When treasury stock is sold at or below cost, the Paid–in–Capital – Common Stock account

will be debited or credited for the difference.

Question Type: Concept

8) Which of the following is NOT a reason for a company to purchase treasury stock?

A) To reward valued employees

B) To avoid a takeover by an outside company

C) To buy the stock at a high price to increase total Stockholders’ Equity

D) To support the company’s stock price

Question Type: Concept

9) Which of the following is TRUE regarding treasury stock?

A) Treasury Stock has a debit balance.

B) Treasury Stock is a contra-asset account.

C) Treasury Stock is recorded at cost.

D) Both A and C are true of Treasury Stock.

Question Type: Concept

10) When a company purchases treasury stock, outstanding stock is computed as:

A) Issued stock + Treasury stock

B) Issued stock – Treasury stock

C) Authorized stock — Treasury stock

D) Authorized stock + Treasury stock

Question Type: Concept

11) Anderson Industries purchased 600 shares of the company’s issued common stock, paying

$14 per share. To record the purchase, the journal entry will be:

A) Debit to Common Stock $8,400, credit to Cash $8,400

B) Debit to Treasury Stock $8,400, credit to Common Stock $8,400

C) Debit to Treasury Stock $8,400, credit to Cash $8,400

D) No journal entry is needed.

Question Type: Application

12) Charmed, Inc. reacquired 7,000 shares of its $16–par common stock for $11/share. The debit

to Treasury Stock will be:

A) $35,000.

B) $77,000.

C) $112,000.

D) based on the last treasury stock transaction.

Question Type: Application

13) Charmed, Inc. has 10,000 shares of treasury stock which it purchased for $10/share. It later

resold 3,000 of those shares for $18/share. The amount to be credited to Paid–in Capital–

Treasury Stock is:

A) $80,000.

B) $100,000.

C) $54,000.

D) $24,000.

Question Type: Application

14) Charmed, Inc. has a $30,000 credit balance in Paid–In Capital–Treasury Stock. It sells 600

shares of treasury stock, which the company reacquired at $22/share, for $18/share. After the

transaction, what will the balance be in the Paid–In Capital in Excess of Par–Treasury account?

A) $32,400 credit

B) $2,400 debit

C) $27,600 credit

D) $27,600 debit

Question Type: Application

15) HiTech Industries reacquired 10,000 shares of its $26-par common stock for $70/share. The

debit to Treasury Stock will be:

A) based on the last treasury stock transaction.

B) $440,000.

C) $260,000.

D) $700,000.

Question Type: Application