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Exam 18: Shareholders Equity Key

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Question 1

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R Co. has outstanding 100 million shares, $1 par common stock, 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 2

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

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Question 3

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In February 2013, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts?

What is comprehensive income and how does it differ from net income? Where is it reported in the balance sheet?

ZIP Company owns 40,000 shares of the common stock of PIK Company. ZIP decided to divest itself of this investment by distributing the PIK shares in the form of a property dividend. The dividend ratio is one share of PIK for every four shares of ZIP common held by shareholders. ZIP has 160,000 common shares outstanding. On April 15, 2013, the date of declaration, PIK stock had a par value of $5 per share, a carrying value of $12 per share, and a market value of $17 per share. Required: Prepare any necessary journal entries. The shares were distributed on May 15, 2013, to stockholders of record on May 1, 2013.

Heidi Aurora Imports issued shares of the company's Class B stock. Heidi Aurora Imports should report the stock in the company's statement of financial position:

Cash dividends become a binding liability as of the record date.

During the current year JET Industries issued 5 million of its $1 par common shares to its underwriters for $25,000,000 less promotional and accounting services of $500,000 to effect the issue. Required: Prepare the journal entry to record the issuance of the shares.

Treasury shares are most often reported as:

Olsson Corporation received a check from its underwriters for $72 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $72 per share. Which is the correct entry to record the issue of the stock?

Which of the following transactions decreases retained earnings?

On October 1, 2013, Chief Corporation declared and issued a 10% stock dividend. Before 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:

In January 2013, Despot recorded a transaction with this journal entry: The transaction was for the:

The shareholders' equity of Nick Co. includes the items shown below. The board of directors of Nick declared cash dividends of $4 million, $8 million, and $50 million in each of its first 3 years of operation: 2011, 2012, 2013, respectively. Common stock, $1 par, 50,000,000 shares outstanding Preferred stock, 6%, $100 par, 1,000,000 shares outstanding Required: Determine the amount of dividends per share on preferred and common stock for each of the three years. The preferred stock is noncumulative and nonparticipating.

F Co. declares a 5% stock dividend. If the market price at declaration is $12 per share, a shareholder with 110 shares likely would receive:

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

Which of the following transactions decreases retained earnings?

Identify the three common forms of business organization and the primary difference in the way we account for them.

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

When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction: