ACCT 302 Read & Interact Spiceland, Nelson, & Thomas Chapter 18 solutions complete answers

ACCT 302 Read & Interact Spiceland, Nelson, & Thomas Chapter 18 solutions complete answers 

 

A liquidating dividend means that

 

__ include(s) all changes in equity during a period except those resulting from investments by owners and distributions to owners.

 

The ownership interests of the investors in a corporation are referred to as

 

Which of the following accounts are classified as shareholders' equity?

 

When investors purchase shares of stock, it is classified as

 

Amounts earned by the corporation on behalf of its shareholders are referred to as

 

Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from what type of sources?

 

True or false: Treasury stock represents investments in treasury securities of the U.S. government.

 

Which of the following accurately describes shareholders' equity?

 

The statement of shareholders' equity reports

 

A business that has equity accounts labeled "common stock" and "retained earnings" is a

 

Which of the following may be a source of paid-in capital? (Select all that apply.)

 

In a corporation, shareholders' liability is

 

Retained earnings is typically reported on the balance sheet

 

Corporations raise equity capital by

 

Shares of stock previously sold by the corporation that are repurchased are called

 

Disadvantages of the corporate form of business are (Select all that apply.)

 

The purpose of the statement of shareholders' equity is to

 

What type of corporations include churches, hospitals, universities, and charities?

 

Which of the following accounts might a corporation use to record changes in its ownership interests during a reporting period? (Select all that apply)

 

Owners of        corporations have the limited liability of a corporation, but income and expenses are passed through the owners as in a partnership, avoiding double taxation.

 

The most important advantage to the corporate form of business is

 

Who regulates the nature of shares that can be authorized, the issuance and repurchase of those shares, and the distributions to shareholders?

 

Corporations raise capital by

 

A corporation is owned by its      . (Enter one word per blank)

 

Which of the following is subject to double taxation?

 

When a company issues different classes of shares, it must

 

The two types of corporations are

 

Preferred stockholders usually have preference over common stockholders with respect to which items? (Select all that apply.)

 

Which of the following has limited liability for its owners, but passes income through to its investors and avoids double taxation?

 

Mandatorily redeemable preferred stock is reported as

 

State laws regulate which of the following corporate activities? (Select all that apply.)

 

Historically, par value indicated (select all that apply)

 

True or false: A corporation is owned by debt and equity holders.

 

When common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded?

 

If more than one class of shares is authorized, what type of information must be specified? (Select all that apply)

 

When a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction? (Select all that apply.)

 

Which type of stock usually has a high par value and a percentage of par value dividend rate?

 

When a corporation issues two securities for a single price, how is the issue price usually allocated?

 

If preferred shares must be redeemed by a certain date, they should be classified as

 

The costs for legal, promotional, and accounting services to issue stock should be

 

Historically, par value was considered to be

 

Carnival issues 10,000 shares of $1 par value common stock for $10 per share. Stock issue costs are $3,000. The journal entry to record the issuance of stock will include a credit to

 

When a corporation issues shares of common stock for an amount above par, which of the following entries occur? (Select all that apply.)

 

If a corporation issues its shares of stock for a noncash asset, at what amount should the transaction be recorded?

 

A company that repurchases its own securities accounts for the shares of stock as

 

When a corporation issues two securities for a single price and the market value of only one security is known, how is the cash received allocated?

 

The term treasury stock refers to

 

The effect of share issue costs is to

 

A company originally issues par value common stock at an amount above par. Subsequently, the company reacquires the shares for more than the issue price and immediately retires the shares. The company has no previous transactions for stock repurchases. Which of the following accounts would be reduced for the repurchase and retirement of the shares? (Select all that apply.)

 

Brandon issues 1,000 shares of $5 par value common stock for $20 per share. Stock issue costs are $500. The journal entry to record the issuance of stock will include which of the following entries? (Select all that apply.)

 

When a corporation repurchases its stock as treasury stock, the number of shares outstanding

 

When a company repurchases its own shares of stock, what are the two acceptable accounting choices for the transaction?

 

In year 1, Goal Corp. purchases 1,000 shares of treasury stock for $10 per share. In year 2, Goal reissues 500 shares of the treasury stock for $13 per share. In year 3, Goal reissues 200 shares of its treasury stock for $8 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?

 

Which of the following are characteristics of treasury stock? (Select all that apply.)

 

A corporation's accumulated, undistributed net income or loss is referred as

 

When a company repurchases its stock and immediately retires the stock, which of the following occurs?

 

A distribution of assets to shareholders is referred to as a      .

 

A company that is distributing liquidating dividends tends to be in the process of:

 

When a corporation repurchases its stock as treasury stock, the number of shares issued

 

A restriction of retained earnings (select all that apply)

 

In year 1, Rim Corporation purchases 1,000 shares of treasury stock for $10 per share. In year 2, Rim reissues 100 shares of the treasury stock for $12 per share. In year 3, Rim reissues 500 shares of its treasury stock for $9 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?

 

The date on which a cash dividend becomes a liability to a corporation is the

 

A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as       earnings.

 

A property dividend (Select all that apply.)

 

When a corporation distributes assets of the company to its investors, it is referred to as a(n)

 

When the dividend exceeds the balance in retained earnings, the excess is referred to as a       dividend.

 

Distributions of stock to current shareholders of a corporation are called what type of distribution?

 

A restriction of retained earnings signifies that

 

A 2-for-1 stock split increases the marketability of the stock because

 

When does a dividend become a liability to a corporation?

 

A reverse stock split requires

 

Fantastic Gold Inc. declares and distributes to its shareholders 1 gram of gold in lieu of a cash dividend. Fantastic Gold is distributing a(n)

 

If a company has preferred stock outstanding, a variation of calculating return on shareholders' equity can be made by making which adjustments to the ratio? (Select all that apply.)

 

Which of the following transactions are classified as a stock dividend?

 

Indicate the effect of each type of dividend on the financial statements.

 

A frequent reason for a stock split is to

 

A quasi-reorganization allows a firm that is undergoing financial difficulties to

 

Mueller Company issues one share in exchange for two outstanding shares of common shares. Mueller must have had a:

 

A nonreciprocal transfer to owners is referred to as a

 

The return to common shareholders' equity is calculated by subtracting ______ from net income and dividing that amount by average ____________.

 

Cash and property dividends ______ total equity, and stock dividends _______ total equity.

 

The purposes of a quasi reorganization are to (Select all that apply.)

 

 

 
The change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources is called
 
 
 

 
Preferred stock is similar to a bond when it has which of the following features?
 
 
 

Treasury shares are the same as shares that have never been issued; therefore, treasury shares
 
 
True or false: When investors purchase shares of stock from a corporation, it is recorded by the corporation as investments in securities.
 
 
When a company decreases its outstanding shares of stock by exchanging 1 share of stock for 10 shares, this is referred to as a(n)
 
 
When a company repurchases its own securities without formally retiring them, the stock is recorded in which account?
 
 
When a company repurchases shares held as treasury stock, the number of shares outstanding _____.
 
 
 

 
When a corporation repurchases its stock as treasury stock, the number of shares authorized
 
 
 

 

Accountants must be familiar with issues of legal capital and par value, even though such concepts have been eliminated from the Model Business Corporation Act, because
 
 
An accumulated deficit in retained earnings indicates that the company has
 
 
Although the Model Business Corporation Act has eliminated the concept of legal capital, par value is still disclosed because
 
 
appears on financial statement: accumulated OCI
 
 
appears on financial statement: OCI
 
 
Brian Corp. issues 5,000 shares of $10 par value preferred stock and 20,000 shares of $1 par value common stock for $150,000. The fair value of the preferred stock is $20 per share, and the fair value of the common shares is unknown. What is the amount allocated to the paid in capital—excess of par, common stock?
 
 
The _________ Business Corporation Act is designed to serve as a guide for states in developing their corporate laws.
 
 
A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document?
 
 
The characteristics of a limited liability company include which of the following features?
 
 
Clam Corp. issues 1,000 shares of $10 par value preferred stock and 3,000 shares of $1 par value common stock for $48,000. The fair value of the preferred stock is $20 per share, and the fair value of the common shares is $10 per share. What is the amount allocated to the paid in capital—excess of par, common stock?
 
 
common financial statement classification of non-mandatory redeemable preferred stock with the accounting standards: IFRS
 
 
common financial statement classification of non-mandatory redeemable preferred stock with the accounting standards: US GAAP
 
 
Companies may engage in stock repurchases for the following reasons (select all that apply):
 
 
A company has available-for-sale debt securities in its portfolio that have increased in value at year-end. How should the unrealized gain on the available-for-sale securities be reported on the statement of shareholders' equity? (Assume the fair value option is not elected.)
 
 
Consistent with U.S. GAAP, companies that repurchase shares held as treasury stock may utilize
 
 
Consistent with U.S. GAAP, comprehensive income may be reported as
 
 
A corporation may repurchase its shares of stock because management
 
 
A corporation's investors may not bind the corporation to a contract. Therefore, investors of a corporation lack
 
 
 
 
 
 
 
 
 
 

A corporation with shares held by only a few individuals is referred to as:
 
 
A credit balance in retained earnings indicates that
 
 
The feature that shares of preferred stock may be exchanged for cash at the option of the corporation or the shareholders is referred to as what?
 
 
financial statement with respect to the reporting of stockholders' equity: balance sheet
 
 
financial statement with respect to the reporting of stockholders' equity: statement of stockholders' equity
 
 
For IFRS reporting, the critical feature that distinguishes a liability from equity is if
 
 
Formally retiring shares has what effect on total shareholders' equity?
 
 
Formally retiring shares reduces these accounts to their pre-issuance condition:
 
 
For U.S. GAAP reporting purposes, mandatorily redeemable preferred stock is classified as
 
 
The four classifications within shareholders' equity are
 
 
How should cash dividends be reported on the statement of shareholders' equity?
 
 
If a company repurchases its shares of stock and does not retire the shares, the shares are reported as
 
 
If treasury stock on hand was purchased at different times and is subsequently reissued, what cost flow assumptions are acceptable in determining the cost of shares sold? (Select all that apply.)
 
 
In a limited liability partnership,
 
 
Investors are allowed to treat share buybacks as a distribution of company profits, and distributions to investors may be eligible for
 
 
 
 
 
 
 
 

Investors are allowed to treat share repurchases as a distribution of company profits, which are taxed at ________, which are ________ than the rates for dividends.
 
 
In year 1, Boise purchased 10,000 shares of treasury stock for $5 per share. In year 3, Boise reissued 1,000 shares of treasury stock for $8 per share. The journal entry to record the transaction in year 3 will include (Select all that apply.)
 
 
In year 1, Clark purchased 1,000 shares of treasury stock for $10 per share. In year 2, Clark reissued 200 shares of treasury stock for $14 per share. The journal entry to record the transaction in year 2 will include a credit to
 
 
In year 1, Frill Corp. issued 1,000 shares of $1 par value common stock for $10 per share. In year 3, Frill repurchased and immediately retired 100 shares of the stock at $12 per share. Which of the following entries would be included in the journal entry to retire the shares? (Select all that apply.)
 
 
In year 1, Pride Corp. issued 10,000 shares of $1 par value common stock for $8 per share. In year 3, Pride repurchased and immediately retired 1,000 shares of the stock at $6 per share. Which of the following entries would be required to retire the shares?
 
 
In year 1, Sofia Corp. issued 1,000 shares of $1 par value common stock for $10 per share. In year 4, Sofia repurchased and immediately retired 100 shares of the stock at $6 per share. Which of the following entries would be included in the journal entry to retire the shares? (Select all that apply.)
 
 
In year 1, Tallon Corp. issued 10,000 shares of $1 par value common stock for $10 per share. In year 2, Tallon repurchased and immediately retired 1,000 shares of the stock at $15 per share. Which of the following entries would be included in the journal entry to retire the shares?
 
 
Items that under U.S. GAAP are reported under the heading of "accumulated other comprehensive income" would be reported by a IFRS-based entity under the heading of ____.
 
 
Justin Corp. issues 10,000 shares of $1 par value common stock for $5 per share. The journal entry to record this transaction will include which of the following? (Select all that apply.)
 
 
Knorr issues 1,000 shares of $2 par value common stock for $10 per share. The journal entry to record this transaction will include which of the following? (Select all that apply.)
 
 
 
 
 
 
 
 

A limited liability partnership (LLP) is similar to a limited liability company (LLC), except it
 
 
Mandatorily redeemable preferred stock is classified as _____ under U.S. GAAP and related dividends are reported as ______.
 
 
Mars Inc. issues 5,000 shares of no par stock for $100,000. Which of the following entries are required? (Select all that apply.)
 
 
Newly issued stock may be exchanged for (Select all that apply.)
 
 
Niles Corp. issues 1,000 shares of $10 par value preferred stock and 5,000 shares of $5 par value common stock for $150,000. The fair value of the preferred stock is $50 per share, and the fair value of the common stock is $20 per share. The journal entry to record the transaction will include which of the following entries? (Select all that apply.)
 
 
The number of shares a specific corporation is authorized to issue is set forth in
 
 
One advantage of investing in a corporation is the lack of mutual agency, which means that:
 
 
Other common terms for shareholders' equity include (select all that apply):
 
 
Placid Corp. issues 1,000 shares of its $1 par value common stock in exchange for equipment. The book value of the equipment on the investor's books was $20,000, and its catalog list price was $23,000. The quoted market price of the stock in The Wall Street Journal was $22 per share. Which of the following entries will be included in the journal entry to record the issuance of the stock?
 
 
A preemptive right is the right to
 
 
 
 
 
 
 
 

Preferred stockholders usually have preference over common stockholders with respect to which items?
 
 
Preferred stock that has contractual rights in which the company is obligated to repurchase the stock at a specified future date is called
 
 
Ragle Corp. issues 1,000 shares of its $5 par value common stock in exchange for equipment. The book value of the equipment on the investor's books was $40,000, and its catalog list price was $45,000. The equipment could be purchased in the market for $42,000. The stock was not publicly traded. Which of the following entries will be included in the journal entry to record the issuance of the stock?
 
 
The rationale for reducing retained earnings if stock is retired for an amount greater than the original issue price is that
 
 
______ represents the creditors' interest in the company, whereas ______ represents the investors' interest in the company.
 
 
The right of a shareholder to exchange his preferred stock for another class of stock is referred to as a right of _______, whereas the right of the preferred shareholder to have her stock repurchased by the corporation for cash is referred to as a _______ privilege.
 
 
The rights of common stockholders typically include which of the following? (Select all that apply.)
 
 
The right to purchase additional shares of stock to maintain one's percentage of ownership when new shares are issued is called a ______ right.
 
 
Salisbury Company retires shares for the first time. It repurchases the shares at an amount more than the original issue price. Salisbury Company should debit _________ because the additional payment represents a ___________ to shareholders.
 
 
Shareholders' equity consists of which of the following items? (Select all that apply.)
 
 
Shareholders' equity is classified under IFRS into two categories: share capital and _____
 
 
Shareholders influence a company by
 
 
Ship Corp. issues 1,000 shares of $10 par value preferred stock and 4,000 shares of $1 par value common stock for $100,000. The fair value of the preferred stock is unknown, but the fair value of the common stock is $8 per share. The journal entry to record the transaction will include which of the following entries? (Select all that apply.)
 
 
 
 
 
 
 
 

Stock repurchases are often used to offset the effects of
 
 
Treasury stock is reported in the financial statements as
 
 
True or false: Comprehensive income may be presented as part of a combined income/comprehensive income statement, or separately immediately following the income statement.
 
 
True or false: Newly issued stock may be exchanged only for cash.
 
 
True or false: The balance sheet should disclose the sources of changes in the stockholders' equity accounts.
 
 
Under IFRS, shareholders' equity typically is classified under two categories referred to as:
 
 
Under IFRS, the critical feature that distinguishes a liability is if the issuer can be required to deliver ________ or another financial instrument to the holder.
 
 
The _______value method of accounting for treasury stock is essentially identical to formally retiring shares and is rarely used in practice.
 
 
What are some common terms that companies use to differentiate between share types? (Select all that apply.)
 
 
What is a benefit of a limited liability corporation?
 
 
What is a benefit of a limited liability corporation? (Select all that apply)
 
 
When a business incorporates, it must file its ______ with the state in which it incorporates.
 
 
When a company believes the market price of its stock is _______, it may attempt to support the price by ______ the supply of stock through stock repurchases.
 
 
 
 
 
 
 
 

When a share repurchase is viewed as treasury stock, the cost of the treasury stock _______ shareholders' equity.
 
 
When investors purchase shares of stock, it is classified as
 
 
When treasury shares are reissued for an amount greater than cost, the amount over the cost increases
 
 
When treasury shares are reissued for an amount less than cost and no paid-in capital from treasury shares account exists, the amount that is less than the cost decreases
 
 
When treasury stock is acquired at different times for different amounts and is subsequently sold, what cost flow assumptions are acceptable?
 
 
When treasury stock is purchased, the cost of treasury stock is reported as
 
 
Which account is a stockholders' equity account?
 
 
Which feature of preferred stock requires that, when a dividend is declared, all previous undeclared dividends must be paid on preferred stock?
 
 
Which item is included in shareholders' equity?
 
 
Which of the following are designations for different classes of stock? (Select all that apply.)
 
 
Which of the following are included in the rights of common stockholders?
 
 
Which of the following are sources of shareholders' equity? (Select all that apply.)
 
 
Which of the following is (are) distinguishing feature(s) of a privately held corporation? (Select all that apply.)
 
 
Which of the following is reported on the balance sheet?
 
 
 
 
 
 
 
 

Which of the following items are included in other comprehensive income?
 
 
Which of the following items are included in other comprehensive income? (Select all that apply.)
 
 
Which of the following terms refer to the ownership interests of a corporation? (Select all that apply.)
 
 
Which preferred stock feature allows preferred shareholders to receive additional dividend distributions above the amount stated on the preferred stock certificate?
 
 
Which type of corporation is regulated by the Securities and Exchange Commission?
 
 
Who owns and controls a corporation?