CHAPTER 15
STOCKHOLDERS’ EQUITY
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
Answer No. Description
T 1. State a corporation incorporates in.
F 2. Definition of preemptive right.
T 3. Common stock as residual interest.
F 4. Earned capital definition.
T 5. Reporting true no-par stock.
F 6. Allocating proceeds in lump sum sales.
T 7. Accounting for stock issued for noncash consideration.
F 8. Definition of treasury stock.
F 9. Reporting treasury stock under cost method.
T 10. Selling treasury stock below cost.
F 11. Participating preferred stock.
T 12. Callable preferred stock.
T 13. Restricting legal capital.
F 14. Disclosing dividend policy.
F 15. Affect of dividends on total stockholders’ equity.
T 16. Property dividends definition.
T 17. Accounting for small stock dividend.
F 18. Stock splits and large stock dividends.
F 19. Computing rate of return on common stock equity.
T 20. Computing payout ratio.
MULTIPLE CHOICE—Conceptual
Answer No. Description
c 21. Nature of stockholders' interest.
b 22. Pre-emptive right.
a 23. Pre-emptive right.
S
b 24. Definition of legal capital.
S
c 25. Definition of residual owner.
c 26. Nature of stockholders' equity.
d 27. Sources of stockholders' equity.
d 28. Classification of stockholders' equity.
d 29. Allocation methods for a lump sum issuance.
b 30. Capital stock issued in payment of services.
a 31. Costs of issuing capital stock.
b 32. Creation of "secret reserves."
P
a 33. Authorized shares.
S
d 34. Par value stock.
S
b 35. Legal restrictions for profit distributions.
S
a 36. Acquisition of treasury shares.
P
d 37. Treasury shares definition.
c 38. Purchase of treasury stock at greater than par value.
,15 - 2 Test Bank for Intermediate Accounting, Fourteenth Edition
MULTIPLE CHOICE—Conceptual (cont.)
Answer No. Description
a 39. Sale of treasury stock.
a 40. Reissued treasury stock at less than acquisition cost.
b 41. Reissued treasury stock at greater than acquisition cost.
c 42. Effect of treasury stock transactions.
c 43. Preferred stock—debt features.
b 44. Cumulative feature of preferred stock.
P
b 45. Reporting redeemable stock.
S
c 46. Reporting dividends in arrears.
c 47. Issued vs. outstanding common stock.
b 48. Timing of entry to record dividends.
c 49. Shares entitled to receive a cash dividend.
c 50. Accounting for a property dividend.
a 51. Distribution of a property dividend.
a 52. Liquidating dividend.
b 53. Entry to record a liquidating dividend.
b 54. Effects of a stock dividend.
b 55. Effects of a stock dividend.
b 56. Effect of a large stock dividend.
b 57. Large stock dividend.
a 58. Small stock dividend.
a 59. Small stock dividend.
b 60. Classification of stock dividends distributable.
b 61. Effect of stock splits and stock dividends.
c 62. Effect of a stock split.
b 63. Disclosures in the balance sheet.
a 64. Return on common stock equity calculation.
b 65. Payout ratio calculation.
c 66. Book value per share.
P
a 67. Computing book value per share.
c *68. Dividends and treasury stock.
a *69. Noncumulative preferred stock and dividends in arrears.
a *70. Disclosure of preferred dividends in arrears.
P
These questions also appear in the Problem-Solving Survival Guide.
S
These questions also appear in the Study Guide.
*This topic is dealt with in an Appendix to the chapter.
MULTIPLE CHOICE—Computational
Answer No. Description
a 71. Composition of stockholders' equity.
b 72. Calculation of total paid-in capital.
b 73. Allocating proceeds in lump sum sales.
c 74. Allocating proceeds in lump sum sales.
d 75. Computing total paid-in capital.
b 76. Allocating proceeds in lump sum sales.
c 77. Allocating proceeds in lump sum sales.
, Stockholders’ Equity 15 - 3
MULTIPLE CHOICE—Computational (cont.)
Answer No. Description
d 78. Computing paid-in capital from treasury stock transactions.
d 79. Recording purchase of treasury stock.
b 80. Reissue treasury stock—above acquisition cost.
c 81. Reissue treasury stock—cost method.
c 82. Additional paid-in capital with treasury stock transactions.
d 83. Calculation of additional paid-in capital.
c 84. Calculation of additional paid-in capital.
a 85. Total stockholders' equity with treasury stock transactions.
c 86. Total stockholders' equity with treasury stock exchange.
c 87. Calculate dividends for cumulative preferred shares.
a 88. Calculate dividends for common shares.
a 89. Calculate dividends for common shares.
c 90. Reduction in retained earnings from property dividends.
d 91. Reduction in retained earnings from property dividends.
b 92. Reduction in retained earnings caused by a property dividend.
d 93. Reduction in retained earnings from property dividends.
d 94. Reduction in retained earnings from property dividends.
a 95. Decrease in retained earnings from cash and stock dividends.
c 96. Calculation of a large stock dividend.
a 97. Calculation of a small stock dividend.
b 98. Calculation of a small stock dividend.
b 99. Small stock dividend's effect on retained earnings.
b 100. Balance of retained earnings after a small stock dividend.
a 101. Calculate retained earnings available for dividends.
a 102. Calculate decrease in retained earnings.
c 103. Calculate the payout ratio.
a 104. Calculate book value per share.
d 105. Use same descrip. as 101.
d 106. Use same descrip. as 102.
c 107. Calculate rate of return on common stock equity.
c 108. Calculate price-earnings ratio.
a 109. Calculate dividends paid to common stockholders.
b 110. Rate of return on common stock equity.
c 111. Determine the rate of return on common stock equity.
a 112. Determine book value per share.
b 113. Computation of payout ratio.
b 114. Computation of book value per share.
b *115. Allocation of cash dividend to common and preferred shares.
d *116. Cash dividends for cumulative preferred shares.
b *117. Cash dividends for cumulative participating preferred shares.
c *118. Cash dividend allocation with participating preferred shares.
b *119. Cash dividend for cumulative preferred shares.
, 15 - 4 Test Bank for Intermediate Accounting, Fourteenth Edition
MULTIPLE CHOICE—CPA Adapted
Answer No. Description
d 120. Capital stock issued in payment of services.
b 121. Proceeds from preferred stock in lump sum issue.
c 122. Determine paid-in capital from treasury stock.
b 123. Reissue treasury stock—cost method.
c 124. Effect of the reissuance of treasury stock.
d 125. Entry to record property dividends declared.
b 126. Effect of a liquidating dividend.
d 127. Effect of a stock dividend.
d 128. Stock dividend when market price exceeds par value.
a 129. Balance of retained earnings following stock dividend.
c *130. Allocation of cash dividend to common and preferred shares.
EXERCISES
Item Description
E15-131 Lump sum issuance of stock.
E15-132 Treasury stock.
E15-133 Treasury stock.
E15-134 Treasury stock.
E15-135 Treasury stock.
E15-136 Stockholders’ equity.
E15-137 Stock dividends.
E15-138 Stock dividends and stock splits.
E15-139 Computation of selected ratios.
*E15-140 Dividends on preferred stock.
*E15-141 Dividends on preferred stock.
PROBLEMS
Item Description
P15-142 Equity transactions.
P15-143 Treasury stock transactions.
P15-144 Stock dividends.
P15-145 Equity transactions.
*P15-146 Dividends on preferred and common stock.
STOCKHOLDERS’ EQUITY
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
Answer No. Description
T 1. State a corporation incorporates in.
F 2. Definition of preemptive right.
T 3. Common stock as residual interest.
F 4. Earned capital definition.
T 5. Reporting true no-par stock.
F 6. Allocating proceeds in lump sum sales.
T 7. Accounting for stock issued for noncash consideration.
F 8. Definition of treasury stock.
F 9. Reporting treasury stock under cost method.
T 10. Selling treasury stock below cost.
F 11. Participating preferred stock.
T 12. Callable preferred stock.
T 13. Restricting legal capital.
F 14. Disclosing dividend policy.
F 15. Affect of dividends on total stockholders’ equity.
T 16. Property dividends definition.
T 17. Accounting for small stock dividend.
F 18. Stock splits and large stock dividends.
F 19. Computing rate of return on common stock equity.
T 20. Computing payout ratio.
MULTIPLE CHOICE—Conceptual
Answer No. Description
c 21. Nature of stockholders' interest.
b 22. Pre-emptive right.
a 23. Pre-emptive right.
S
b 24. Definition of legal capital.
S
c 25. Definition of residual owner.
c 26. Nature of stockholders' equity.
d 27. Sources of stockholders' equity.
d 28. Classification of stockholders' equity.
d 29. Allocation methods for a lump sum issuance.
b 30. Capital stock issued in payment of services.
a 31. Costs of issuing capital stock.
b 32. Creation of "secret reserves."
P
a 33. Authorized shares.
S
d 34. Par value stock.
S
b 35. Legal restrictions for profit distributions.
S
a 36. Acquisition of treasury shares.
P
d 37. Treasury shares definition.
c 38. Purchase of treasury stock at greater than par value.
,15 - 2 Test Bank for Intermediate Accounting, Fourteenth Edition
MULTIPLE CHOICE—Conceptual (cont.)
Answer No. Description
a 39. Sale of treasury stock.
a 40. Reissued treasury stock at less than acquisition cost.
b 41. Reissued treasury stock at greater than acquisition cost.
c 42. Effect of treasury stock transactions.
c 43. Preferred stock—debt features.
b 44. Cumulative feature of preferred stock.
P
b 45. Reporting redeemable stock.
S
c 46. Reporting dividends in arrears.
c 47. Issued vs. outstanding common stock.
b 48. Timing of entry to record dividends.
c 49. Shares entitled to receive a cash dividend.
c 50. Accounting for a property dividend.
a 51. Distribution of a property dividend.
a 52. Liquidating dividend.
b 53. Entry to record a liquidating dividend.
b 54. Effects of a stock dividend.
b 55. Effects of a stock dividend.
b 56. Effect of a large stock dividend.
b 57. Large stock dividend.
a 58. Small stock dividend.
a 59. Small stock dividend.
b 60. Classification of stock dividends distributable.
b 61. Effect of stock splits and stock dividends.
c 62. Effect of a stock split.
b 63. Disclosures in the balance sheet.
a 64. Return on common stock equity calculation.
b 65. Payout ratio calculation.
c 66. Book value per share.
P
a 67. Computing book value per share.
c *68. Dividends and treasury stock.
a *69. Noncumulative preferred stock and dividends in arrears.
a *70. Disclosure of preferred dividends in arrears.
P
These questions also appear in the Problem-Solving Survival Guide.
S
These questions also appear in the Study Guide.
*This topic is dealt with in an Appendix to the chapter.
MULTIPLE CHOICE—Computational
Answer No. Description
a 71. Composition of stockholders' equity.
b 72. Calculation of total paid-in capital.
b 73. Allocating proceeds in lump sum sales.
c 74. Allocating proceeds in lump sum sales.
d 75. Computing total paid-in capital.
b 76. Allocating proceeds in lump sum sales.
c 77. Allocating proceeds in lump sum sales.
, Stockholders’ Equity 15 - 3
MULTIPLE CHOICE—Computational (cont.)
Answer No. Description
d 78. Computing paid-in capital from treasury stock transactions.
d 79. Recording purchase of treasury stock.
b 80. Reissue treasury stock—above acquisition cost.
c 81. Reissue treasury stock—cost method.
c 82. Additional paid-in capital with treasury stock transactions.
d 83. Calculation of additional paid-in capital.
c 84. Calculation of additional paid-in capital.
a 85. Total stockholders' equity with treasury stock transactions.
c 86. Total stockholders' equity with treasury stock exchange.
c 87. Calculate dividends for cumulative preferred shares.
a 88. Calculate dividends for common shares.
a 89. Calculate dividends for common shares.
c 90. Reduction in retained earnings from property dividends.
d 91. Reduction in retained earnings from property dividends.
b 92. Reduction in retained earnings caused by a property dividend.
d 93. Reduction in retained earnings from property dividends.
d 94. Reduction in retained earnings from property dividends.
a 95. Decrease in retained earnings from cash and stock dividends.
c 96. Calculation of a large stock dividend.
a 97. Calculation of a small stock dividend.
b 98. Calculation of a small stock dividend.
b 99. Small stock dividend's effect on retained earnings.
b 100. Balance of retained earnings after a small stock dividend.
a 101. Calculate retained earnings available for dividends.
a 102. Calculate decrease in retained earnings.
c 103. Calculate the payout ratio.
a 104. Calculate book value per share.
d 105. Use same descrip. as 101.
d 106. Use same descrip. as 102.
c 107. Calculate rate of return on common stock equity.
c 108. Calculate price-earnings ratio.
a 109. Calculate dividends paid to common stockholders.
b 110. Rate of return on common stock equity.
c 111. Determine the rate of return on common stock equity.
a 112. Determine book value per share.
b 113. Computation of payout ratio.
b 114. Computation of book value per share.
b *115. Allocation of cash dividend to common and preferred shares.
d *116. Cash dividends for cumulative preferred shares.
b *117. Cash dividends for cumulative participating preferred shares.
c *118. Cash dividend allocation with participating preferred shares.
b *119. Cash dividend for cumulative preferred shares.
, 15 - 4 Test Bank for Intermediate Accounting, Fourteenth Edition
MULTIPLE CHOICE—CPA Adapted
Answer No. Description
d 120. Capital stock issued in payment of services.
b 121. Proceeds from preferred stock in lump sum issue.
c 122. Determine paid-in capital from treasury stock.
b 123. Reissue treasury stock—cost method.
c 124. Effect of the reissuance of treasury stock.
d 125. Entry to record property dividends declared.
b 126. Effect of a liquidating dividend.
d 127. Effect of a stock dividend.
d 128. Stock dividend when market price exceeds par value.
a 129. Balance of retained earnings following stock dividend.
c *130. Allocation of cash dividend to common and preferred shares.
EXERCISES
Item Description
E15-131 Lump sum issuance of stock.
E15-132 Treasury stock.
E15-133 Treasury stock.
E15-134 Treasury stock.
E15-135 Treasury stock.
E15-136 Stockholders’ equity.
E15-137 Stock dividends.
E15-138 Stock dividends and stock splits.
E15-139 Computation of selected ratios.
*E15-140 Dividends on preferred stock.
*E15-141 Dividends on preferred stock.
PROBLEMS
Item Description
P15-142 Equity transactions.
P15-143 Treasury stock transactions.
P15-144 Stock dividends.
P15-145 Equity transactions.
*P15-146 Dividends on preferred and common stock.
