Chapter 11



Chapter 11

December 3, 2008

1. ___________ is the date on which the cash is disbursed to pay the dividend liability.

2. ____________ is the date on which the corporation finalizes its list of current stockholders.

3. ____________ is the date on which the board of directors officially approves the dividend.

4. _________ is a distribution of additional shares of a corporation’s own stock.

5. _________ is an increase in the total number of authorized shares by specified ratio.

6. Which reduces retained earnings, a stock split or a stock dividend?

7. What changes the number of shares, a stock split or a stock dividend?

8. What are two types of capital stock?

9. Which feature is not applicable to common stock ownership?

a. Right to receive dividends before preferred stock shareholders

b. Right to vote on appointment of external auditor

c. Right to receive residual assets of the company should it cease operations

d. All of the above are applicable to common stock ownership

10. Which of the following statements about stock dividends is true?

a. Stock dividends are reported on the income statement

b. Stock dividends increase total stockholder’s equity

c. Stock dividends decrease total stockholder’s equity

d. None of the above

11. To reduce its stock price, Shriver Food Systems, Inc, declared and issued a 50% stock dividend. The company has 800,000 share authorized and 200,000 shares outstanding. The par value of the stock is $1 per share and the market value is $100 per share. Prepare the journal entry to record this large stock dividend.

12. The annual repot of Malibu Beachwear reported the following transactions affecting stockholder’s equity: Prepare journal entries for each of the transactions.

a. Purchased $3.5 million in treasury stock

b. Declared and paid cash dividends in the amount of $254.2 million (HINT: Two separate entries)

c. Issued 100 percent common stock dividend involving 222.5 million additional shares with a total par value of $556.3 million.

13. American Laser, Inc, reported the following stockholder’s equity account balances on January 1, 2008.

Common Stock, 10,000 shares of $1 par: $10,000

Additional Paid in Capital-Common: $90,000

Retained earnings: $120,000

Treasury Stock $0

The company entered into the following transactions during 2008. Prepare journal entries for each transaction.

Jan. 15 Issued 5,000 shares of $1 par common stock for $50,000 cash

Feb. 15 Purchased 3,000 shares of $1 par common stock into treasury for $33,000 cash

Mar. 15 Reissued 2,000 share of treasury stock for $24,000 cash

Aug. 15 Reissued 600 shares of treasury stock for $4,600 cash

Sept. 15 Declared (but did not pay) a $1 cash dividend on each outstanding share of common stock.

14.

|Contributed Capital | | | | | |

| |Preferred Stock (par $20; authorized 10,000 shares, ? Issued, | |

| |of which 500 shares are held as treasury stock) | |$104,000 |

| |Additional Paid-In Capital, preferred | | |$14,300 |

| |Common stock (no-par, authorized 20,000 shares, issued and | |

| |outstanding 8,000 shares) | | | |$600,000 |

|Retained earnings | | | | | |$30,000 |

|Cost of 500 shares of Treasury Stock | | | |$9,500 |

|Assume that no shares of treasury stock have been sold in the past | |

A. The number of shares of preferred stock issued was ______________.

B. The number of shares of preferred stock outstanding was _________.

C. The average sale price of the preferred stock when issued was $__ per share.

D. The average issue price of the common stock was $_____.

E. The treasury stock transaction increased (decreased) stockholder’s equity by ____.

F. How much did the treasury stock cost per share? $_____

G. Total stockholder’s equity is $________.

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