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Exam 18: Shareholders Equity

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Question 61

Multiple Choice

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When treasury shares are resold at a price below cost:

A) Paid-in capital and/or retained earnings is reduced.
B) Paid-in capital and/or retained earnings is increased.
C) Retained earnings is always reduced.
D) A loss is taken on the income statement.

E) A) and D)
F) None of the above

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Question 62

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Use I = Increase,D = Decrease,or N = No effect,to indicate the effect on retained earnings for each of the listed transactions. ____ A net loss for the year. ____ A stock split effected in the form of a stock dividend. ____ A stock split in which the par per share is reduced (but not effected in the form of a stock dividend). ____ Declaration of a 5% stock dividend. ____ Declaration of a cash dividend. ____ Issue stock for noncash assets. ____ Payment of previously declared cash dividend. ____ Retirement of common stock at a cost greater than the original issue price. ____ Retirement of common stock at a cost less than the original issue price. ____ Resale of treasury stock for less than book value assuming no previous treasury stock sales.

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Question 63

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When a company issues a stock dividend,which of the following would be affected?

The December 31,2016,balance sheet of Springer Company included the following: Springer completed the following transactions in 2016 relating to treasury stock: March 17: Reacquired 5 million shares at $10. May 17: Reacquired 3 million shares at $9. August 10: Sold 6 million shares at $12. Required: Assuming Springer uses the cost method,prepare journal entries to record the foregoing transactions on a FIFO basis.

The balance sheet of FIFA Cup Company included the following shareholders' equity section at December 31,2016: On January 5,2017,FIFA purchased and retired 2 million shares for $9 million.Immediately after retirement of the shares,the balances in the paid-in capital - excess of par and retained earnings accounts are:

The common stock account in a company's balance sheet is measured as:

When treasury shares are sold at a price above cost:

The preemptive right refers to the shareholder's right to:

Issued stock refers to the number of shares:

Mike Bradley & Company,a family-owned corporation,declared and distributed a property dividend from its overstocked inventory instead of declaring its usual cash dividend.The inventory's book value exceeded its fair value.The excess is:

What is the effect of the declaration and subsequent issuance of a 10% stock dividend on each of the following?

Lucid Company declared a property dividend of 20,000 shares of $1 par Polk Company common stock.The Polk stock was purchased for $5 per share.Market value was $10 per share on the declaration date and $11 per share on the distribution date.What is the amount of the dividend?

Mandatorily redeemable preferred stock (preference shares) is reported as debt,with the dividends reported in the income statement as interest expense,using:

When dividends are declared in one fiscal year and paid in the next fiscal year,the liability for the dividend should be recorded as of the:

Restrictions on retained earnings must be disclosed in the body of the balance sheet.

Use the following to answer questions The following information comes from the 2016 Annual Report to stockholders of Composition Inc.(in thousands): From the Statement of Changes in Stockholders' Equity: From the Statement of Cash Flows: Cash flows from financing activities: -Assuming that Composition had Dividends Payable of $17,450 thousand at December 31,2014,compute the balance in that account at December 31,2016.

On December 31,2015,Rebel Corporation's balance sheet reported the following. During 2016,Rebel decided to discontinue accounting for share buybacks as treasury shares.Instead,the shares will be treated as having been retired. Required: Prepare the appropriate journal entry to effect this change.

Stock splits are issued primarily to:

Noncash assets received as consideration for the issue of stock are always valued based on the fair value of the stock.

When treasury stock is purchased for an amount greater than its par value,what is the effect on total shareholders' equity?