18 Chapter Shareholders Test Bank

18 Chapter Shareholders Test Bank - 18 Chapter...

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18 Chapter Shareholders' Equity True/False Questions Paid-in capital must consist solely of amounts invested by shareholders. Answer: False Stock designated as preferred usually has preferential rights over other classes of stock relative to dividends and liquidating distributions. Answer: True Dividends in arrears on cumulative preferred stock are reported as current liabilities. Answer: False Noncash assets received as consideration for the issue of stock are always valued based on the fair market value of the stock. Answer: False Treasury stock transactions never increase retained earnings or net income. Answer: True Restrictions on retained earnings must be disclosed in the body of the balance sheet. Answer: False Cash dividends become a binding liability as of the record date. Answer: False Under GAAP, the declaration of a property dividend may require the recognition of a gain or loss if the fair value of the property is different from its carrying value on the declaration date. Answer: True Stock dividends may cause a reduction in retained earnings, but they never reduce total shareholders' equity. Answer: True Shareholders' Equity Matching Pair Questions Use the following to answer questions 11-20: 11-20.
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Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the listed transactions. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. ____ Declaration of a property dividend. ____ Net income for the year. ____ Purchase of treasury stock at a cost greater than the original issue price (cost method). ____ Purchase of treasury stock at a cost greater than the original issue price (par value method). ____ Purchase of treasury stock at a cost less than the original issue price (cost method). ____ Purchase of treasury stock at a cost less than the original issue price (par value method). ____ Issue common stock. ____ Resale of treasury stock for less than cost (cost method), assuming no previous treasury stock sales. ____ Resale of treasury stock for more than cost (cost method). ____ Resale of treasury stock for more than par and cost (par value method). Answer: 11-D; 12-I; 13-N; 14-D; 15-N; 16- N; 17-N; 18-D; 19-N; 20-N Use the following to answer questions 21-30: 21-30. Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the listed transactions. 21. ____ A net loss for the year. 22. ____ A stock split effected in the form of a stock dividend. 23. ____ A stock split in which the per share is reduced (but not effected in the form of a stock dividend). 24. ____ Declaration of a 5% stock dividend. 25. ____ Declaration of a cash dividend. 26. ____ Issue stock by a share purchase contract. 27. ____ Payment of previously declared cash dividend. 28. ____ Retirement of common stock at a cost greater than the original issue price. 29.
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18 Chapter Shareholders Test Bank - 18 Chapter...

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