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A company originally issued 50,000 shares of $5 common stock at $9. The board of directors declares a 40% stock dividend when the market price of the stock is $10 a share. Which of the following is included in the entry to record the stock dividend? 

a)            Retained earnings is decreased, common stock is decreased and paid-in capital is increased.  

b)            Retained earnings is decreased, common stock is increased and paid-in capital is increased.  

c)            Retained earnings is increased, common stock is increased and paid-in capital is increased.  

d)            None of the above happens.  

 

 

35)          Which of the following occurs with a stock split?  

a)            A stock split increases the number of authorized issued and outstanding shares of stock. (See page 601) dap  

b)            A stock split decreases the par value per share of stock  

c)            Both A and B occur.  

d)            Neither A nor B occur.  

 

 

36)          Which of the following statements is TRUE?  

a)            Both a stock dividend and a stock split increase the balance in the common stock account.  

b)            Both a stock dividend and a stock split reduce retained earnings.  

c)            Neither a stock dividend nor a stock split will create taxable income for the investor.  

d)            A stock split increases the par value of the stock.  

 

 

37)          Which of the following would be included in the entry to record a 2-for-1 stock split?  

a)            There is no journal entry to record a stock split.  

b)            Common stock would be credited.  

c)            Retained earnings would be credited.  

d)            Retained earnings would be debited.  

 

 

38)          Which of the following would have the same effect on the number of shares as a 2-for-1 stock split?  

a)            A 20% stock dividend would have the same effect as a 2-for-1 stock split.  

b)            A 200% stock dividend would have the same effect as a 2-for-1 stock split.  

c)            A 100% stock dividend would have the same effect as a 2-for-1 stock split.  

d)            A 120% stock dividend would have the same effect as a 2-for-1 stock split.  

 

 

39)          Which of the following occurs when the board of directors declares a 2-for-1 stock split on 20,000 outstanding shares of $15 par common stock?  

a)            The par value of the stock remains the same.  

b)            The par value of the stock increases to $30 per share.  

c)            Outstanding shares decrease to 10,000.  

d)            Outstanding shares increase to 40,000.  

 

 

40)          Which of the following is a true statement?  

a)            A stock split will increase total stockholders equity but a stock dividend will not.  

b)            Neither a stock split nor a stock dividend will increase total stockholders equity.  

c)            A stock dividend will increase total stockholders equity but a stock split will not.  

d)            Both a stock split and a stock dividend will increase total stockholders equity.  

 

 

41)          Which of the following occurs when a 2-for-1 stock split is declared?  

a)            The balance in common stock remains the same.  

b)            The balance in common stock is reduced to half the original amount.  

c)            The balance in common stock doubles.  

d)            The balance in common stock cannot be determined from the information given.  

 

 

42)          Which of the following occurs due to a 4-for-1 stock split?  

a)            The par value of each share of common stock is 25% of the par value before the split.  

b)            The par value of each share of common stock is 200% of the par value before the split.  

c)            The par value of each share of common stock remains the same as before the split.  

d)            The par value of each share of common stock is 400% of the par value before the split.  

 

 

43)          Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.

                Common stock, $5 par, 100,000 shares authorized,

                40,000 shares issued                                                       $200,000

                Paid in capital in excess of par -common                120,000

                Retained earnings                                                           290,000

                Total stockholders equity                                            $610,000

Which of the following would be included in the entry to record a 10% stock dividend?  

a)            Paid-in capital in excess of par- common is credited for $46,000.  

b)            Retained earnings would be debited for $46,000.  

c)            Common stock would be debited for $20,000.  

d)            Common stock would be credited for $46,000.  

 

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