LESSON 3 TEST
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LESSON 3 TEST 1 GAAP require that the ________ of the stock dividend determine how the total amount of the dividend
is recorded. size
2 Which of the following statements is true concerning a company's stock?
The cash dividend rate on common stock is expressed as a dollar amount.
3 Retained earnings ________.
are less permanent than paid-in capital
4 Which of the following statements is incorrect with regard to stock dividends?
An asset is recorded on the date stock dividends are declared.
5 Corporation A issued 10,000 shares of common stock on January 1, 20XX. The stock has par value of
$0.01 per share and was sold for cash at $1.00 per share. The journal entry to record this transaction
would ________.
debit cash $10,000, credit common stock $100, and credit additional paid in capital $9,900
6 When bonds are issued at a discount, which of the following statements is correct?
The interest expense will be greater than the interest payment
7 In regards to an extraordinary gain or loss, which of the following statements is correct?
An extraordinary gain or loss must be unusual and infrequent.
8 Company A is considering a new project and needs to raise $800,000 of capital. The company's after-tax
net income would be $75,000 if they do not implement the new project. If the new project is
implemented, it will add an additional $50,000 of profits before tax and interest. If the company uses
debt financing, the interest will be at 5%. Company A has 25,000 shares of common stock outstanding
and no preferred stock. They would have to issue an additional 10,000 shares of common stock to
finance the project with equity capital. Assuming an income tax rate of 40%, if the company decides to
use equity financing for the project, what would its earnings per share be? 3.00
$3.24
$3.50
$3.57
$2.14
9 On January 1, 2013, Company A issued $140,000 of 4-year bonds with a stated rate of 9%. The market
rate at time of issue was 8%, so the bonds were issued with a premium and sold for $144,758. The
company uses the effective-interest method to amortize bond premium. Semiannual interest payments
are made on June 30 and December 31 of each year. How much interest expense will be recorded when
the first interest payment is made?
$5,790
11
Which of the following is a true statement?.
Neither a stock split nor a stock dividend will affect total
assets or total liabilities.
12 Company A has 2,000 shares of common stock outstanding. A stockholder has 500 shares. If Company A
distributes a 20% stock dividend, how many shares of Company A will the stockholder have?
600
13 Which of the following best defines the term outstanding stock?
the shares held by the shareholders
14 Large stock dividends are those that represent ________ or more of the issued and outstanding stock.
20-25%
16 Which of the following describes the term maturity date as it relates to bonds payable?.
The maturity date is the date on which final payment is due.
17 On October 15, 2013, Company A had bonds payable equal to $80,000 reported on its balance sheet.
The unamortized premium attributable to the bonds equaled $4,600 on this date. If Company A retires
the bonds for $82,000, which of the following would NOT appear in the journal entry to record the retirement?
debit to gain on retirement of bonds for $2,600
18 Which of the following is NOT an issue faced by a company when bonds payable are issued?
determining the appropriate market interest rate
19 Which of the following is true of a discount on bonds payable?.
A discount on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet.
20 A corporation had 30,000 shares of $10 par value common stock outstanding on January 1. The board of
directors declared a 10% stock dividend when the market value of each share was $15. The entry to
record this dividend would include:
debit retained earnings $45,000, credit common stock
dividend distributable $30,000, credit additional paid-in capital $15,000
21 Which of the following would be included in the entry to record a 2-for-1 stock split?
There is no journal entry to record a stock split.
22 On January 1, 2014, Company A issued $50,000 of 6-year bonds with a stated rate of 3%. The market rate
at time of issue was 4%, so the bonds were discounted and sold for $47,331. The company uses the
effective-interest rate of amortization for bond discounts. Semiannual interest payments are made on
June 30 and December 31 of each year. Which of the following is the correct journal entry to record the
first interest payment? (Round all amounts to the nearest whole dollar.) debit interest expense $947, credit discount on bonds payable $197, and credit cash $750
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Related Questions
8. How would total stockholders' equity be effected by the declaration of each of the
following?
Stock dividend
a. No effect
b. Decrease
c. Decrease
d.
No effect
Stock Split
Increase
Decrease
No effect
No effect
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Problem #1
Effects of Transactions
Indicate the effects of each of the following transactions on Assets, Liabilities, Share
Capital and Retained Earnings. Use + for increase, - for decrease, and 0 for no effect.
Share
Retained
Assets
Liabilities
Сapital
Earnings
1.
Declaration of cash dividends
2.
Payment of cash dividends
3.
Declaration of share dividends
4.
Issuance of share dividends
5.
A share split
6.
Cash purchase of treasury stock
7.
Sale of tre
stock below cost
Problem #2
Effect of Cash Dividend
Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect
Bernal Inc.'s total assets, liabilities and shareholders' equity:
Shareholders'
Assets
Liabilities
Equity
1.
Declaring a cash dividend
Paying the cash dividend
declared in no. 1
2.
3.
Declaring a share dividend
4,
Issuing share certificates for the
share dividend declared in no. 3
5.
Authorizing and issuing share
certificates in a share split
arrow_forward
Hi there, could you please check if my answers were correct?
Testbank Exercise 136
Indicate the effect of each of the following transactions on total stockholders' equity by placing an "X" in the appropriate column.
Increase
Decrease
No Effect
1.
Treasury stock is resold at more than cost.
X
2.
Operating loss for the period.
X
3.
Retirement of bonds payable at more than book value.
X
4.
Declaration of a stock dividend.
x
5.
Acquisition of machinery for common stock.
X
6.
Conversion of bonds payable into common stock.
X
7.
Not declaring a dividend on cumulative preferred stock.
x
8.
Declaration of cash dividend.
X
9.
Payment of cash dividend.
X
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QUESTION 3
Which of the following sources decrease stockholders' equity?
O retained earnings
O common stock
O preferred stock
O treasury stock
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LO 1
7.4 Dividend Growth Model Under what two assumptions can we use the
dividend growth model presented in the chapter to determine the value of a
share of stock? Comment on the reasonableness of these assumptions.
LO 1
7.5
Common versus Preferred Stock Suppose a company has a preferred
stock issue ond
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What is the effect of purchasing treasury stock on a company’s earnings per share and return on equity, respectively? (Enter 1, 2, 3, or 4 that represents the correct answer.)
No effect and no effect
Decrease and decrease
Increase and increase
Increase and decrease
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X Your answer is incorrect.
The effect of a stock dividend is to
O change the composition of stockholders' equity.
O decrease total assets and stockholders' equity.
O increase the book value per share of common stock.
O decrease total assets and total liabilities.
eTextbook and Media
Assistance Us
Save for Later
Attempts: 1 of 2 used
Submit Answ
@
%23
%24
8
4.
u
e
d
n
m
C
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which one is correct answer please confirm?
QUESTION 20
The record date in the normal dividend payment procedure is ____.
a.
the same day as the ex-dividend date
b.
the same day as the declaration date
c.
one day prior to the payment date
d.
the date when the firm makes a list from its stock transfer books of shareholders eligible to receive the dividend
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OKS
What is the result of stock dividends?
O a. Retained earnings decrease while total paid-in capital increases.
O b Retained earnings inccrease while total paid-in capital decrease.
O c. Both retained earnings and total paid-in capital decrease.
d. Both retained earnings and total paid-in capital increase.
POCOPHONE
SHOT ON POCOPHONE F1
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Determining the effects of cash dividends, stock dividends, and stock splits
Complete the following chart by inserting a check mark (√) for each statement that is true.
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QUESTION 1
Which best describes par value for stock?
A.
An arbitrary amount set by the company for each share of stock
B.
The current market value of the stock
C.
The amount expected to be paid out as a dividend on a share of stock
D.
The value at which stock shares were issued
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please answer all or skip do not waste question or time by giving incomplete or incorrect answer please provide answer with explanation computation formula please answer with steps thanks remember answer all
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1. What is the equity account that exists only until the common stock shares are distributed?
O Retained Earnings
O Common Stock Dividend Distributable
O Common Stock
O Common Stock Dividend Payable
79°F Rain
CH
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- 8. How would total stockholders' equity be effected by the declaration of each of the following? Stock dividend a. No effect b. Decrease c. Decrease d. No effect Stock Split Increase Decrease No effect No effectarrow_forwardProblem #1 Effects of Transactions Indicate the effects of each of the following transactions on Assets, Liabilities, Share Capital and Retained Earnings. Use + for increase, - for decrease, and 0 for no effect. Share Retained Assets Liabilities Сapital Earnings 1. Declaration of cash dividends 2. Payment of cash dividends 3. Declaration of share dividends 4. Issuance of share dividends 5. A share split 6. Cash purchase of treasury stock 7. Sale of tre stock below cost Problem #2 Effect of Cash Dividend Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect Bernal Inc.'s total assets, liabilities and shareholders' equity: Shareholders' Assets Liabilities Equity 1. Declaring a cash dividend Paying the cash dividend declared in no. 1 2. 3. Declaring a share dividend 4, Issuing share certificates for the share dividend declared in no. 3 5. Authorizing and issuing share certificates in a share splitarrow_forwardHi there, could you please check if my answers were correct? Testbank Exercise 136 Indicate the effect of each of the following transactions on total stockholders' equity by placing an "X" in the appropriate column. Increase Decrease No Effect 1. Treasury stock is resold at more than cost. X 2. Operating loss for the period. X 3. Retirement of bonds payable at more than book value. X 4. Declaration of a stock dividend. x 5. Acquisition of machinery for common stock. X 6. Conversion of bonds payable into common stock. X 7. Not declaring a dividend on cumulative preferred stock. x 8. Declaration of cash dividend. X 9. Payment of cash dividend. Xarrow_forward
- QUESTION 3 Which of the following sources decrease stockholders' equity? O retained earnings O common stock O preferred stock O treasury stockarrow_forwardLO 1 7.4 Dividend Growth Model Under what two assumptions can we use the dividend growth model presented in the chapter to determine the value of a share of stock? Comment on the reasonableness of these assumptions. LO 1 7.5 Common versus Preferred Stock Suppose a company has a preferred stock issue ondarrow_forwardWhat is the effect of purchasing treasury stock on a company’s earnings per share and return on equity, respectively? (Enter 1, 2, 3, or 4 that represents the correct answer.) No effect and no effect Decrease and decrease Increase and increase Increase and decreasearrow_forward
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