Question : 135.On June 1, 20×6, Sterling Corporation had 40,000 shares of : 1244200

135.On June 1, 20×6, Sterling Corporation had 40,000 shares of $10 par value common stock outstanding. On June 2, 20×6, Sterling declared a 40 percent stock dividend to be distributed on July 5, 20×6, to shareholders of record on June 15, 20×6. What amount of retained earnings should be transferred to contributed capital because of this dividend?

 

a.

Par value per share multiplied by the number of dividend shares

b.

Market value of the stock at the date of distribution multiplied by the number of dividend shares

c.

None

d.

Market value of the stock at the date of declaration multiplied by the number of dividend shares

 

 

 

136.On July 1, 20×7, Tobias Corporation had 20,000 shares of its $100 par value common stock outstanding. On July 2, 20×7, Tobias declared a 15 percent stock dividend to be distributed on August 6, 20×7, to shareholders of record on July 16, 20×7. What amount of retained earnings should be transferred to contributed capital because of this dividend?

 

a.

Market value of the stock at the date of declaration multiplied by the number of dividend shares

b.

Market value of the stock at the date of distribution multiplied by the number of dividend shares

c.

None

d.

Par value per share multiplied by the number of dividend shares

 

 

 

137.A corporation should account for the declaration of a 10 percent stock dividend by

 

a.

making only a memorandum entry in the journal.

b.

transferring from retained earnings to contributed capital whatever amount the board of directors deems appropriate.

c.

transferring from retained earnings to contributed capital an amount equal to the market value of the dividend shares.

d.

transferring from retained earnings to contributed capital an amount equal to the legal capital represented by the dividend shares.

 

 

 

138.Which of the following statements is not true about a 2-for-1 stock split?

 

a.

A stockholder with ten shares before the split owns twenty shares after the split.

b.

Total contributed capital increases.

c.

Par value per share is reduced to half of what it was before the split.

d.

The market price probably will decrease.

 

 

 

139.Which of the following is not true about a 35 percent stock dividend?

 

a.

Contributed capital increases.

b.

Retained earnings decreases.

c.

The market value of the stock is needed to record the stock dividend.

d.

Par value per share remains the same.

 

 

 

140.At the beginning of 20×8, Helms Corporation had 35,500 shares of $10 par value common stock issued and outstanding. During January 20×8, Helms declared and distributed a 10 percent stock dividend. The market value of Helms’s stock was $24 throughout the month of January. As a result of this stock dividend, Helms’s retained earnings will be reduced by

 

a.

$35,500.

b.

$85,200.

c.

$28,400.

d.

$71,000.

 

 

 

141.On May 1, 20×9, Bryson Corporation had 200,000 shares of $100 par value common stock outstanding with a market value of $160 per share. On May 2, 20×9, Bryson announced a 4-for-1 stock split. After the split, the par value of the stock

 

a.

was reduced by $25 per share.

b.

remained the same as before the split.

c.

was reduced to $25 per share.

d.

was reduced by $40 per share.

 

 

 

142.Use this information to answer the following question.

 

Hernandez Corporation has 60,000 shares of $10 par value common stock outstanding. The following transactions occurred during the year:

 

Mar.

17 

Declared a 10 percent stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17.

 

30 

Distributed the stock dividend.

 

The entry to record the transaction of March 17 would include a

 

a.

credit to Retained Earnings for $18,000.

b.

credit to Cash for $78,000.

c.

debit to Common Stock Distributable for $60,000.

d.

credit to Common Stock Distributable for $60,000.

 

 

 

143.Use this information to answer the following question.

 

Hernandez Corporation has 60,000 shares of $10 par value common stock outstanding. The following transactions occurred during the year:

 

Mar.

17 

Declared a 10 percent stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17.

 

30 

Distributed the stock dividend.

 

The entry to record the transaction of March 30 would include a

 

a.

debit to Common Stock Distributable for $60,000.

b.

credit to Additional Paid-in Capital for $18,000.

c.

debit to Retained Earnings for $18,000.

d.

credit to Cash for $60,000.

 

 

 

144.How will the declaration and distribution of a 10 percent stock dividend affect the issuing corporation’s balance of retained earnings and total stockholders’ equity, respectively?

 

a.

Decrease and no effect

b.

No effect and decrease

c.

No effect and no effect

d.

Decrease and decrease

 

 

 

 

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