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Exam 18: Shareholders Equity

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Question 1

Multiple Choice

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In terms of business volume, the dominant form of business organization is the:

A) Partnership.
B) Corporation.
C) Limited liability company.
D) Proprietorship.

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Question 2

Multiple Choice

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R Co. has outstanding 100 million shares, $1 par common shares, selling for $8 per share. After a 1 for 4 reverse stock split:

A) R would have 25 million shares, $4 par per share.
B) The market price per share would be about $2.
C) Fractional shares would be issued.
D) Retained earnings would be reduced.

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Question 3

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The costs of legal, promotional, and accounting services necessary to effect the sale of shares are referred to as share issue costs. How are these costs recorded? Compare this approach to the way debt issue costs are recorded.

A small stock dividend is defined as one that is:

Accumulated other comprehensive income:

On October 1, 2009, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief had 80,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief's retained earnings will:

When a property dividend is declared, the property to be distributed should be revalued to fair value as of the:

Treasury stock transactions never increase retained earnings or net income.

Mandatorily redeemable preferred stock is reported as a liability.

When treasury shares are resold at a price below cost:

Stock splits are issued primarily to:

How many of Levi's common shares were outstanding on 12/31/08?

The net assets of a corporation are equal to:

When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on:

What would shareholders' equity be as of December 31, 2010?

Boxer Company owned 20,000 shares of King Company that were purchased in 2007 for $500,000. On May 1, 2009, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was $30 per share on the date of declaration and $32 per share on the date of distribution. By how much is retained earnings reduced by the property dividend?

The changes in account balances for Elder Company for 2009 are as follows: Assuming the only changes in retained earnings in 2009 were for net income and a $50,000 dividend, what was net income for 2009?

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

Share issue costs refer to the costs of obtaining the legal, promotional, and accounting services necessary to effect the sale of shares. The costs reduce the net cash proceeds from selling the shares and thus paid-in capital - excess of par, and are:

What was shareholders' equity as of December 31, 2009?