nformation 7 A corporation with S10 par common stock issues a small stock divide

Question

nformation 7 A corporation with S10 par common stock issues a small stock dividend. The reduction of retained earnings is equal to: A) The par value of the shares outstanding. B) The par value of the shares to be distributed. C) There is no capitalization of retained earnings in the case of a small stock dividend. D) The market value of the shares outstanding. E) The market value of the shares to be distributed. 8) Landess Corporation currently has 132,000 shares outstanding of $5 par value common stock. The stock was originally issued for $20 per share. On March 15, the board of directors declares a 10% stock dividend when the stock is selling for $26 per share. Which of the following is the correct journal entry to record this transaction? (Do not round intermediate calculations.) A) debit Paid-In Capital in Excess of Par-Common $343,200 and credit Retained Earnings $343,200 B) debit Stock Dividends $343,200, credit Common Stock Dividend Distributable $66,000 and credit Paid-In Capital in Excess of Par-Common $277,200 C) debit Stock Dividends $343,200 and credit Common Stock Dividend Distributable $343,200 D) debit Common Stock Dividend Distributable $66,000, debit Paid-In Capital in Excess of Par-Common for $277,200 and credit Retained Earnings $343,200 9) Which of the following occurs when a corporation's board of directors declares a 10% stock dividend? A) Stock Dividends will be credited for the new shares times the current market value of the stock. B) Stock Dividends will be credited for the new shares times the par value of the stock. C) Stock Dividends will be debited for the new shares times the current market value of the stock. D) Stock Dividends will be debited for the new shares times the par value of the stock. 10) The par value of stock is . A) the current selling price of stock B) the amount assigned by a company to a share of its stock C) the price paid if the corporation purchases its own stock back D) the highest price for which a share can sell 11) Stockholders' equity consists of which of the following? A) Long-term assets. B) Paid-in capital and retained earnings. C) Premiums and discounts. D) Retained earnings and cash. E) Paid-in capital and par value 12) In the event of a corporate liquidation, preferred stockholders A) are guaranteed to receive the par value of the preferred stock B) are guaranteed to receive a full refund of the stock purchase price C) may retain their proportionate share of voting rights D) have first claim on remaining corporate assets after debts are paid

Explanation / Answer

7) D- The reduction in retained earning is equal to the market value of share outstanding
because small stock dividend has little effect on the market value(quoted market price) of shares.

8) B- Stock Dividend A/C Dr. $343200
           (132000×10%×$26)
         To Common stock dividend distributable A/C -$66000
           (132000×10%×$5)
       To paid in capital in excess of par,commonA/-$277200
            (Market value- stated value)
             ($26-$5)×13200

9) C- Stock dividend will be debited for the new shares times the current market value of the stock.

10) B- the amount assigned by the company to a share of its stock.
Par value means the face value os shares.it is that value that is assigned by corporation for its stock.

11) B- paid- in capital and retained earning.
stockholder equity represent the equity held in the books by a firm equity investors.

12)D- have first claim on remaining corporate assets after debts are paid
Preferred stockholder have preference that in event of liquidation they will be paid over equity stockholder.

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