ACCT 410 Exam 3 Questions Answered Correctly Latest Update 2025-2026
common stock - Answers most prominent form of corporate ownership, owners have a
"residual" ownership interest, limited liability for the investor, high risk but higher expected
reward for the investor when compared to debt investments
preferred stock - Answers trades voting rights for preferential treatment in certain areas
contributed capital - Answers capital stock and apic, from owners
earned capital - Answers retained earnings, does not equal cash flow, from operations-
accumulated and not yet distributed
accumulated other comprehensive income - Answers from operations- accumulated and not yet
realized in net income
treasury stock - Answers previously issued stock that has been temporarily repurchased and
will eventually be reissued or retired
recording par value common stock - Answers debit cash (price x shares, credit common stock
(par value x shares), plug for credit apic
issue costs - Answers not an expense, reduce cash and apic
stock issued with other securities (lump sum) - Answers use relative FMV to allocate proceeds
from stock sale. use previous prices to get weights. multiply weight by newer price to determine
amount for c/s and p/s
stock issued in noncash transactions - Answers same as common stock, but use ppe, inventory,
etc instead of cash
stock issued in noncash transactions general rule - Answers if the stock is actively traded, the
value of the stock should be the basis for the transaction, if the stock is not actively traded, the
transaction should reflect whichever piece is viewed as having the most objective value
preferred stock debt like characteristics - Answers preference to dividends, preference as to
assets in the event of liquidation, convertible into common stock, callable at the option of the
corporation, nonvoting
dividend date of declaration - Answers establishes legal obligation to distribute; based on
number of shares outstanding
dividend date of record - Answers determines who is entitled to the dividend, no accounting
entry
dividend date of payment - Answers date the dividend is distributed
, ordinary cash dividends - Answers debit re, credit dividends payable, then debit dividends
payable credit cash
property dividends - Answers 1. restate the property at fmv (adj htm inv and g/l on inv)
2. distribute property to shareholders
liquidating dividends reminder - Answers return OF investment, not ON investment
liquidating dividends declaration - Answers debit apic cs, credit dividends payable
stock dividends - Answers no assets are distributed and each stockholder retains the same
proportionate interest in the corporation
small (ordinary) stock dividends (<20% to 25% of outstanding shares) - Answers 1. multiply
amount of shares by stock dividend percentage to get amount of new shares
2. multiply amount of new shares x price and debit re by this amount
3. credit c/s dividends distributable by amount of new shares x par price
4. use apic to balance
5. debit c/s dd and credit c/s at distribution
large stock dividends (>20% to 25% of outstanding shares) - Answers 1. multiply amount of
shares by stock dividend percentage to get amount of new shares
2. multiply amount of new shares x par price and debit re by this amount, credit c/s dividends
distributable
3. debit c/s dd and credit c/s at distribution
stock splits - Answers main purpose is to change market price of stock. no accounting entry,
simply adjust the par value per share
2 for 1 stock split - Answers double amount of shares, half the par value. c/s and r/e amounts
stay same
100% stock dividend - Answers double amount of shares, keep par same. reclassified. c/s
doubled and r/e halved
immediate retirement of shares - Answers debit c/s and apic to remove amounts. credit cash
amount. plug r/e to balance
treasury stock reacquired - Answers debit t/s, credit cash
selling shares of t stock for more than original cost - Answers equity gain. debit cash, credit t/s
common stock - Answers most prominent form of corporate ownership, owners have a
"residual" ownership interest, limited liability for the investor, high risk but higher expected
reward for the investor when compared to debt investments
preferred stock - Answers trades voting rights for preferential treatment in certain areas
contributed capital - Answers capital stock and apic, from owners
earned capital - Answers retained earnings, does not equal cash flow, from operations-
accumulated and not yet distributed
accumulated other comprehensive income - Answers from operations- accumulated and not yet
realized in net income
treasury stock - Answers previously issued stock that has been temporarily repurchased and
will eventually be reissued or retired
recording par value common stock - Answers debit cash (price x shares, credit common stock
(par value x shares), plug for credit apic
issue costs - Answers not an expense, reduce cash and apic
stock issued with other securities (lump sum) - Answers use relative FMV to allocate proceeds
from stock sale. use previous prices to get weights. multiply weight by newer price to determine
amount for c/s and p/s
stock issued in noncash transactions - Answers same as common stock, but use ppe, inventory,
etc instead of cash
stock issued in noncash transactions general rule - Answers if the stock is actively traded, the
value of the stock should be the basis for the transaction, if the stock is not actively traded, the
transaction should reflect whichever piece is viewed as having the most objective value
preferred stock debt like characteristics - Answers preference to dividends, preference as to
assets in the event of liquidation, convertible into common stock, callable at the option of the
corporation, nonvoting
dividend date of declaration - Answers establishes legal obligation to distribute; based on
number of shares outstanding
dividend date of record - Answers determines who is entitled to the dividend, no accounting
entry
dividend date of payment - Answers date the dividend is distributed
, ordinary cash dividends - Answers debit re, credit dividends payable, then debit dividends
payable credit cash
property dividends - Answers 1. restate the property at fmv (adj htm inv and g/l on inv)
2. distribute property to shareholders
liquidating dividends reminder - Answers return OF investment, not ON investment
liquidating dividends declaration - Answers debit apic cs, credit dividends payable
stock dividends - Answers no assets are distributed and each stockholder retains the same
proportionate interest in the corporation
small (ordinary) stock dividends (<20% to 25% of outstanding shares) - Answers 1. multiply
amount of shares by stock dividend percentage to get amount of new shares
2. multiply amount of new shares x price and debit re by this amount
3. credit c/s dividends distributable by amount of new shares x par price
4. use apic to balance
5. debit c/s dd and credit c/s at distribution
large stock dividends (>20% to 25% of outstanding shares) - Answers 1. multiply amount of
shares by stock dividend percentage to get amount of new shares
2. multiply amount of new shares x par price and debit re by this amount, credit c/s dividends
distributable
3. debit c/s dd and credit c/s at distribution
stock splits - Answers main purpose is to change market price of stock. no accounting entry,
simply adjust the par value per share
2 for 1 stock split - Answers double amount of shares, half the par value. c/s and r/e amounts
stay same
100% stock dividend - Answers double amount of shares, keep par same. reclassified. c/s
doubled and r/e halved
immediate retirement of shares - Answers debit c/s and apic to remove amounts. credit cash
amount. plug r/e to balance
treasury stock reacquired - Answers debit t/s, credit cash
selling shares of t stock for more than original cost - Answers equity gain. debit cash, credit t/s
