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Any dividend that is considered to be a liquidating dividend will:
Any dividend that is considered to be a liquidating dividend will:
On June 1, 2013, Blue Co. distributed to its common stockholders 200,000 outstanding common shares of its investment in Red, Inc. What amount should Blue report as gain before income taxes on disposal of the stock?
On June 1, 2013, Blue Co. distributed to its common stockholders 200,000 outstanding common shares of its investment in Red, Inc. What amount should Blue report as gain before income taxes on disposal of the stock?
Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?
Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?
Preferred shares that are participating may:
Preferred shares that are participating may:
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When a property dividend is declared, the reduction in retained earnings is for:
When a property dividend is declared, the reduction in retained earnings is for:
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When a property dividend is declared, the property to be distributed should be revalued to fair value as of the:
When a property dividend is declared, the property to be distributed should be revalued to fair value as of the:
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What amount of dividends will a preferred shareholder owning 100 shares receive in 2013 if Emily pays $1,000,000 in dividends?
What amount of dividends will a preferred shareholder owning 100 shares receive in 2013 if Emily pays $1,000,000 in dividends?
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What are the dividends per share for preferred and common, respectively, if a $150,000 dividend is paid this year?
What are the dividends per share for preferred and common, respectively, if a $150,000 dividend is paid this year?
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What are the dividends per share payable to preferred and common, respectively, if a $300,000 dividend will be paid?
What are the dividends per share payable to preferred and common, respectively, if a $300,000 dividend will be paid?
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What is the amount of the dividend declared by Lucid Company for 20,000 shares of Polk Company common stock?
What is the amount of the dividend declared by Lucid Company for 20,000 shares of Polk Company common stock?
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The declaration and issuance of a stock dividend on shares of common stock:
The declaration and issuance of a stock dividend on shares of common stock:
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Stock splits are issued primarily to:
Stock splits are issued primarily to:
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A small stock dividend is defined as one that is:
A small stock dividend is defined as one that is:
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When a company issues a stock dividend, which of the following would be affected?
When a company issues a stock dividend, which of the following would be affected?
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After a 1 for 4 reverse stock split, how many shares will R Co. have?
After a 1 for 4 reverse stock split, how many shares will R Co. have?
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If F Co. declares a 5% stock dividend, what would a shareholder with 110 shares likely receive?
If F Co. declares a 5% stock dividend, what would a shareholder with 110 shares likely receive?
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Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?
Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?
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Heidi Aurora Imports applies International Financial Reporting Standards. How should the company report the Class B stock?
Heidi Aurora Imports applies International Financial Reporting Standards. How should the company report the Class B stock?
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The net assets of a corporation are equal to:
The net assets of a corporation are equal to:
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Two of the three primary account classifications within shareholders' equity are:
Two of the three primary account classifications within shareholders' equity are:
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Details of each class of stock must be reported:
Details of each class of stock must be reported:
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In terms of business volume, the dominant form of business organization is the:
In terms of business volume, the dominant form of business organization is the:
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The corporate charter sometimes is known as (a):
The corporate charter sometimes is known as (a):
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Corporations are formed in accordance with:
Corporations are formed in accordance with:
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Outstanding common stock is:
Outstanding common stock is:
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Issued stock refers to the number of shares:
Issued stock refers to the number of shares:
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The Model Business Corporation Act:
The Model Business Corporation Act:
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When preferred stock carries a redemption privilege, the shareholders may:
When preferred stock carries a redemption privilege, the shareholders may:
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The common stock account in a company's balance sheet is measured as:
The common stock account in a company's balance sheet is measured as:
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What is total shareholders' equity at the end of 2013 for Roberto Corporation, which issued 10,000 shares at $7 and 20,000 shares at $8 with a reported net income of $100,000 and dividends paid of $50,000?
What is total shareholders' equity at the end of 2013 for Roberto Corporation, which issued 10,000 shares at $7 and 20,000 shares at $8 with a reported net income of $100,000 and dividends paid of $50,000?
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Heidi Aurora Imports issued shares of the company's Class B stock. How should the stock be reported in the company's statement of financial position?
Heidi Aurora Imports issued shares of the company's Class B stock. How should the stock be reported in the company's statement of financial position?
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Accumulated other comprehensive income:
Accumulated other comprehensive income:
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A statement of comprehensive income does not include:
A statement of comprehensive income does not include:
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Accumulated other comprehensive income is reported:
Accumulated other comprehensive income is reported:
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A statement of comprehensive income does not include:
A statement of comprehensive income does not include:
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Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following except:
Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following except:
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The preemptive right refers to the shareholder's right to:
The preemptive right refers to the shareholder's right to:
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Common shareholders usually have all of the following rights except:
Common shareholders usually have all of the following rights except:
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The par value of shares issued is normally recorded in the:
The par value of shares issued is normally recorded in the:
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Authorized common stock refers to the total number of shares:
Authorized common stock refers to the total number of shares:
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The par value of common stock represents:
The par value of common stock represents:
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When stock traded on an active exchange is issued for a machine:
When stock traded on an active exchange is issued for a machine:
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Paid-in capital in excess of par is reported:
Paid-in capital in excess of par is reported:
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Share issue costs refer to the costs of obtaining the legal, promotional, and accounting services necessary to effect the sale of shares. These costs reduce the net cash proceeds from selling the shares and thus paid-in capital—excess of par, and are:
Share issue costs refer to the costs of obtaining the legal, promotional, and accounting services necessary to effect the sale of shares. These costs reduce the net cash proceeds from selling the shares and thus paid-in capital—excess of par, and are:
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When stock is issued in exchange for property, the best evidence of fair value might be any of the following except:
When stock is issued in exchange for property, the best evidence of fair value might be any of the following except:
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When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on:
When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on:
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The owners of a corporation are its shareholders. If a corporation has only one class of shares, they typically are labeled common shares. Each of the following are ownership rights held by common shareholders, unless specifically withheld by agreement, except:
The owners of a corporation are its shareholders. If a corporation has only one class of shares, they typically are labeled common shares. Each of the following are ownership rights held by common shareholders, unless specifically withheld by agreement, except:
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What is the amount of dividends common shareholders will receive in 2013 for Green Corporation, which declared $50,000 in dividends after paying $20,000 in 2012 and 2011?
What is the amount of dividends common shareholders will receive in 2013 for Green Corporation, which declared $50,000 in dividends after paying $20,000 in 2012 and 2011?
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What is the amount of dividends common shareholders will receive in 2013 for Red Corporation, which declared $50,000 in dividends after paying $20,000 in 2012 and $40,000 in 2011?
What is the amount of dividends common shareholders will receive in 2013 for Red Corporation, which declared $50,000 in dividends after paying $20,000 in 2012 and $40,000 in 2011?
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What would Rick Co. debit retained earnings by during the issuance of a 1% common stock dividend with 30 million shares at $60 per share?
What would Rick Co. debit retained earnings by during the issuance of a 1% common stock dividend with 30 million shares at $60 per share?
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Which of the following transactions decreases retained earnings?
Which of the following transactions decreases retained earnings?
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What is the total paid-in capital at the end of 2013 for Poodle Corporation, which issued 30,000 shares at $7 and 20,000 shares at $8 with paid dividends of $50,000?
What is the total paid-in capital at the end of 2013 for Poodle Corporation, which issued 30,000 shares at $7 and 20,000 shares at $8 with paid dividends of $50,000?
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Olsson Corporation received a check for the issue of one million of its $5 par stock expected to sell for $72 per share. What is the correct entry to record the issue of the stock?
Olsson Corporation received a check for the issue of one million of its $5 par stock expected to sell for $72 per share. What is the correct entry to record the issue of the stock?
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By how much will Fink's paid-in capital—excess of par increase when Montgomery & Co. provided legal services valued at $700 per hour for 500 hours in exchange for 1,000 shares of stock verging at $250 per share?
By how much will Fink's paid-in capital—excess of par increase when Montgomery & Co. provided legal services valued at $700 per hour for 500 hours in exchange for 1,000 shares of stock verging at $250 per share?
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In 2011, Winn, Inc. issued $1 par value common stock for $35 per share. After a stock retirement, which statement correctly states an effect of this acquisition?
In 2011, Winn, Inc. issued $1 par value common stock for $35 per share. After a stock retirement, which statement correctly states an effect of this acquisition?
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Treasury shares are most often reported as:
Treasury shares are most often reported as:
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What is the balance of Coy, Inc.'s treasury stock account dated December 31, 2013, after repurchasing and reselling shares?
What is the balance of Coy, Inc.'s treasury stock account dated December 31, 2013, after repurchasing and reselling shares?
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When treasury shares are sold at a price above cost:
When treasury shares are sold at a price above cost:
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When treasury shares are resold at a price below cost:
When treasury shares are resold at a price below cost:
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When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity?
When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity?
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When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:
When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:
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Retained earnings represent:
Retained earnings represent:
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Retained earnings represent a company's:
Retained earnings represent a company's:
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The retained earnings balance reported in the balance sheet typically is not affected by:
The retained earnings balance reported in the balance sheet typically is not affected by:
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By how much is retained earnings reduced by the property dividend declared by Boxer Company?
By how much is retained earnings reduced by the property dividend declared by Boxer Company?
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What is the effect on retained earnings for Chief Corporation after declaring a 10% stock dividend?
What is the effect on retained earnings for Chief Corporation after declaring a 10% stock dividend?
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Preferred stock is called preferred because it usually has two preferences. These preferences relate to:
Preferred stock is called preferred because it usually has two preferences. These preferences relate to:
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When dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the:
When dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the:
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Study Notes
Shareholders' Equity and Corporate Structures
- Net assets of a corporation equal shareholders' equity.
- Primary account classifications in shareholders' equity include paid-in capital and retained earnings.
- Each class of stock is reported either on the face of the balance sheet or in disclosure notes.
- The corporation is the dominant form of business organization by volume.
Formation and Structure of Corporations
- The corporate charter is known as articles of incorporation.
- Corporations are formed according to state laws, not federal statutes.
- Outstanding common stock refers to stock held by shareholders.
Stock Issuance and Types
- Issued stock consists of outstanding shares plus treasury shares.
- The Model Business Corporation Act influences state laws regarding corporate structures.
- Preferred stock may have a redemption privilege, allowing shareholders to surrender shares for cash.
Accounting for Common Stock
- Common stock is recorded based on the number of shares issued multiplied by par value.
- Authorization for common stock denotes the maximum number of shares that can be issued.
- The par value of stock is an arbitrary dollar amount assigned per share.
Shareholders' Rights and Dividends
- Shareholders have rights including maintaining ownership proportions and electing the board of directors.
- Common shareholders do not participate in daily operations of the corporation.
- Dividends declared but unpaid create a liability that must be recorded on the declaration date.
Financial Reporting and Earnings
- Accumulated other comprehensive income includes items not directly reported in the income statement.
- Retained earnings represent undistributed net income and can be affected by dividends, prior period adjustments, and net income.
- Property dividends reduce retained earnings based on the book value of the property.
Stock Transactions and Treasury Stock
- Treasury shares are a reduction of total shareholders' equity and may affect paid-in capital when resold.
- Gains from selling treasury shares above cost increase paid-in capital; losses reduce paid-in capital or retained earnings.
- Stock dividends reduce retained earnings based on market value at the declaration date.
Cumulative Preferred Stock
- Cumulative preferred stockholders accumulate unpaid dividends, reported in notes to financial statements if not declared.
- Participating preferred stock may receive additional dividends beyond their stated amount during distributions.
Special Cases in Share Transactions
- Issuing stock in exchange for property records the asset at fair value of the stock issued.
- Share issue costs reduce paid-in capital and are not recorded separately.
- Liquidating dividends reduce paid-in capital, affecting corporate equity structure.
Miscellaneous
- The market price of shares at declaration affects calculations when distributing stock dividends.
- Common practice in declarations impacts retained earnings, demonstrating how equity fluctuates with corporate actions.
- Understanding corporate structure, rights, and the treatment of equity is vital for financial reporting and analysis.### Property Dividends and Valuation
- Property dividends require revaluation to fair value at the date of declaration.
Preferred Stock Dividends
- Emily Corporation issued 10,000 shares of $100 par, 5% cumulative preferred stock at $110 per share.
- Unpaid dividends for preferred and common shareholders result in $1,500 for a shareholder owning 100 shares in 2013.
Dividend Allocation Example
- Pug Corporation has 10,000 shares of $10 par common stock and 20,000 shares of $100 par, 6% noncumulative preferred stock.
- A $150,000 dividend allocation leads to $6 per preferred share and $3 per common share.
Cumulative Preferred Stock Impacts
- Beagle Corporation with cumulative preferred stock has 20,000 shares of common stock and 10,000 preferred shares.
- A $300,000 dividend provides $18 per preferred share (after 3 years’ back dividends) and $6 per common share.
Dividend Calculation on Property
- Lucid Company declared a property dividend of 20,000 shares of Polk Company common stock with an initial purchase price of $5 per share.
- Market value at declaration of $10 per share results in a total dividend of $200,000.
Stock Dividends and Equity
- Declaring a stock dividend does not affect total assets, liabilities, or total shareholders’ equity.
Purpose of Stock Splits
- Stock splits primarily aim to decrease the market value per share by increasing outstanding shares.
Definitions of Stock Dividends
- A small stock dividend is defined as one that is less than or equal to 25%.
Earnings per Share Impact
- Issuing a stock dividend impacts earnings per share but does not alter total assets or liabilities.
Reverse Stock Split Example
- R Co., with 100 million shares at $1 par value, undergoes a 1-for-4 reverse stock split, resulting in 25 million shares at $4 par value.
Stock Dividend Calculations
- F Co. declared a 5% stock dividend at a market price of $12 per share. A shareholder with 110 shares would receive five additional shares and $6 in cash.
Financial Reporting Standards
- U.S. GAAP uses the term "accumulated other comprehensive income", differing from international standards.
Reporting of Shares under IFRS
- Under IFRS, shares identifiable as mandatorily redeemable or redeemable at the option of the shareholder are classified as liabilities.
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Test your knowledge with these flashcards on shareholders' equity and net assets. This quiz helps reinforce key concepts in accounting and financial statements. Perfect for students preparing for Acc 306.
