Stock Split Stock Dividends Treasury Stock Vocabulary Miscellaneous

Stock Split Stock Dividends Treasury Stock Vocabulary Miscellaneous 10 10 10 20 20 20 30 30 30 40 40 40 50 50 50

Category 1 questions follow

Question Does a stock split increase, decrease, or have no effect on the Retained Earnings account? Category 1 10

Answer No Effect Category 1 10

Question Does a stock split have an increase, decrease, or no effect on the Total Stockholders’ Equity? Category 1 20

Answer No Effect Category 1 20

Question What increases and what decreases because of a stock split? (Must answer both parts) Category 1 30

Answer Increase: # of outstanding shares of stock Decrease: par value of the stock Category 1 30

Question What does the journal transaction look like when there is a stock split? Category 1 40

Answer It looks like a NOTE. New # of shares outstanding & par values are stated. No accounts debited or credited. Category 1 40

Question A corporation has 10, 000 shares of $40 par value common stock and the board of directors declares a 4 -for-1 stock split when the market value of the stock is $100. What will be the # of shares outstanding? What will be the par value? What will be the market value? Category 1 50

Answer A corporation has 10, 000 shares of $40 par value common stock and the board of directors declares a 4 -for-1 stock split when the market value of the stock is $100. What will be the # of shares outstanding? 40, 000 What will be the par value? $10 What will be the market value? $25 Category 1 50

Category 2 questions follow

Question True or False? Stock dividends have no effect on assets or liabilities Category 2 10

Answer True Category 2 10

Question Does a stock dividend increase, decrease or have no effect on stockholders’ equity? 20

Answer No effect Category 2 20

Question What happens to the following accounts when a stock dividend is declared? Common stock? Paid-in Capital in excess of Par? Retained earnings? Category 2 30

Answer What happens to the following accounts when a stock dividend is declared? Common stock? Increase Paid-in Capital in excess of Par? Increase Retained earnings? Decrease Category 2 30

Question What would the journal entry be to record the declaration of a 10% stock dividend with the following information: The corporation has 100, 000 shares of common stock. The par value is $10 and the market value is $25. Category 2 40

Answer What would the journal entry be to record the declaration of a 10% stock dividend with the following information: The corporation has 100, 000 shares of common stock. The par value is $10 and the market value is $25. 100, 000 x 10% x $25 Retained Earnings $250, 000 Common Stock Paid in capital in excess of par Category 2 $100, 000 $150, 000 100, 000 x 10% x $10 40

Question Beginning Balance Common stock, $5 par, 100, 000 shares authorized, 20, 000 shares issued. $100, 000 What would be the value of the common stock account after declaring a 10% stock dividend? Category 2 50

Answer Beginning Balance Common stock, $5 par, 100, 000 shares authorized, 20, 000 shares issued. $100, 000 What would be the value of the common stock account after declaring a 10% stock dividend? $110, 000 Category 2 20, 000 shares x 10% = 2, 000 shares x $5 = $10, 000 $100, 000 beginning balance + $10, 000 increase = $100, 000 50

Category 3 questions follow

Question True or False? One of the reasons for acquiring treasury stock is to avoid a takeover by an outside party Category 3 10

Answer True Category 3 10

Question What type of account is treasury stock? Category 3 20

Answer Contra Equity Account Category 3 20

Question What does a journal entry look like when a company purchases treasury stock? Category 3 30

Answer Treasury stock Cash Category 3 $$$ 30

Question What does purchasing treasury stock do to: Assets? Stockholders’ equity? (Each is either increase, decrease, or no effect) Category 3 40

Answer What does purchasing treasury stock do to: Assets? Decrease Stockholders’ equity? Decrease Category 3 40

Question Where is treasury stock reported on a balance sheet? Category 3 50

Answer Report after retained earnings on the balance sheet Category 3 50

Category 4 questions follow

Question A distribution by a corporation of its own stock to its stockholders Category 4 10

Answer Stock Dividend Category 4 10

Question An increase in # of shares outstanding AND a decrease in the par value of stock is a result of: Category 4 20

Answer Stock Split Category 4 20

Question The amount of a company’s net income for each share of its outstanding common stock Category 4 30

Answer Earnings Per Share Category 4 30

Question A corporation’s own stock that it has issued and later reacquired Category 4 40

Answer Treasury Stock Category 4 40

Question In order for an item to be considered extraordinary, it has to meet two criteria. What are they? Category 4 50

Answer Unusual in nature – abnormal and only incidentally related to customary activities Infrequent in occurrence – not reasonably expected to happen in the foreseeable future Category 4 50

Category 5 questions follow

Question True or False? Earnings per share is the most widely used of all business statistics Category 5 10

Answer True Category 5 10

Question What effect does a cash dividend have on: Retained earnings? Stockholders’ Equity? Category 5 20

Answer What effect does a cash dividend have on: Retained earnings? Decrease Stockholders’ Equity? Decrease Category 5 20

Question How are restrictions to retained earnings reported? Category 5 30

Answer As a note in financial statements (not on the balance sheet) Category 5 30

Question Give two examples of “special items” on a corporation’s income statement Category 5 40

Answer Discontinued operations Extraordinary gains and losses Category 5 40

Question What is the formula for calculating earnings per share? Category 5 50

Answer Net Income – Preferred Dividends # of common stock shares outstanding Reminder: subtract treasury stock shares if there any from the common stock Category 5 50