test 1 answers _ Fall 2010 - Accounting 3312 Test 1...

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Accounting 3312 Name:______________________ Test 1 (Chapters 14-16) Fall 2010 1. Encore Industries owned investment securities with a carrying amount of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows: Declaration – August 12 $58 million Record date – September 1 62 million Distribution date – September 20 60 million What amount of gain should Encore recognize in earnings in connection with this property dividend? A) $0 B ) $13 million C) $15 million D) $17 million 2. What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following? A) Retained earnings: no effect; Paid-in capital: no effect B) Retained earnings: no effect; Paid-in capital: increase C) Retained earnings: increase; Paid-in capital: decrease D) Retained earnings: decrease; Paid-in capital: increase 3. What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following? A) Retained earnings: no effect; Paid-in capital: no effect B) Retained earnings: no effect; Paid-in capital: increase C) Retained earnings: increase; Paid-in capital: decrease D) Retained earnings: decrease; Paid-in capital: increase 4. What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following? A) Retained earnings: no effect; Paid-in capital: no effect B) Retained earnings: no effect; Paid-in capital: increase C) Retained earnings: decrease; Paid-in capital: decrease D) Retained earnings: decrease; Paid-in capital: increase 5. Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following? A) Retained earnings: increase; Paid-in capital: increase B) Retained earnings: increase; Paid-in capital: no effect C) Retained earnings: no effect; Paid-in capital: no effect D) Retained earnings: no effect; Paid-in capital: increase
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6. Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following? A) Retained earnings: decrease; Paid-in capital: decrease B) Retained earnings: decrease; Paid-in capital: no effect C) Retained earnings: no effect; Paid-in capital: no effect D) Retained earnings: no effect; Paid-in capital: decrease 7. The balance sheet of Epsom Services included the following shareholders' equity section at December 31, 2011: On January 5, 2012, Epsom purchased and retired 1 million shares for $9 million. Immediately after retirement of the shares, the balances in the paid-in capital– excess of
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This note was uploaded on 03/27/2012 for the course ACCT 3312 taught by Professor Staff during the Spring '08 term at Texas A&M University, Corpus Christi.

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test 1 answers _ Fall 2010 - Accounting 3312 Test 1...

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