127. Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:
A. Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.
B. Debit Common Dividends Payable $4,000; credit Cash $4,000.
C. Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.
D. Debit Common Dividends Payable $4,500; credit Cash $4,500.
E. Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.
128. A corporation’s distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:
A. Stock dividend.
B. Stock subscription.
C. Premium on stock.
D. Discount on stock.
E. Treasury stock.
129. Which of the following is true of a stock dividend?
A. It is a liability on the balance sheet.
B. The decision to declare a stock dividend resides with the shareholders.
C. Transfers a portion of equity from retained earnings to a cash reserve account.
D. Does not affect total equity, but transfer amounts between the components of equity.
E. Reduces a corporation’s assets and stockholders’ equity.
130. On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:
A. Debit Retained Earnings $750,000; credit Common Stock Split Distributable $750,000.
B. Debit Retained Earnings $750,000; credit Common Stock $750,000.
C. Debit Retained Earnings $250,000; credit Common Stock $250,000.
D. Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.
E. No entry is made for this transaction.
131. All of the following statements regarding stock dividends are true except:
A. Directors can use stock dividends to keep the market price of the stock affordable.
B. Stock dividends provide evidence of management’s confidence that the company is doing well.
C. Stock dividends do not reduce assets or equity.
D. Stock dividends decrease the number of shares outstanding.
E. Stock dividends transfer a portion of equity from retained earnings to contributed capital.
132. A stock dividend is recorded with a transfer from:
A. Contributed capital to retained earnings.
B. Retained earnings to contributed capital.
C. Retained earnings to assets.
D. Contributed capital to assets.
E. Assets to contributed capital.
133. A corporation declared and issued a 15% stock dividend on October 1. The following information was available immediately prior to the dividend:
Retained earnings …………………………….
$750,000
Shares issued and outstanding ……………..
60,000
Market value per share ………………………
$15
Par value per share …………………………..
$5
The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:
A. $45,000.
B. $135,000.
C. $(45,000).
D. $(135,000).
E. $0.
134. Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:
A. Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000.
B. Debit Retained Earnings $135,000; credit Cash $135,000.
C. Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.
D.Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000.
E. No entry is made until the stock is issued.
135. Eastline Corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record this dividend is:
A. Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $36,000.
B. Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $30,000; credit Paid-In Capital in Excess of Par Value, Common Stock $6,000.
C. Debit Common Stock Dividend Distributable $36,000; credit Retained Earnings $36,000.
D. Debit Retained Earnings $30,000; credit Common Stock Dividend Distributable $30,000.
E. No entry is needed.
136. Preferred stock which confers rights to prior periods’ unpaid dividends even if they were not declared is called:
A. Noncumulative preferred stock.
B. Participating preferred stock.
C. Callable preferred stock.
D. Cumulative preferred stock.
E. Convertible preferred stock.
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