Learning Objective 8-4
1) A corporation’s distribution of new shares of stock to the corporation’s current shareholders is called a ________.
A) cash dividend
B) liquidating dividend
C) stock dividend
D) stock split
2) A ________ is created when a corporation increases the number of shares and proportionately decreases the par value.
A) cash dividend
B) liquidating dividend
C) stock dividend
D) stock split
3) Issuing a stock dividend ________.
A) decreases total shareholders’ equity
B) does not increase any shareholder’s percentage of ownership in the company
C) increases total shareholders’ equity
D) decreases total assets
4) Team Shirts issued a 10% stock dividend. The balance in retained earnings just before the dividend was $45,000. There were 15,000 shares outstanding on the day of the dividend. The $1 par value stock had a market price of $17.25 on the day of the dividend. Total shareholders’ equity will increase (decrease) by ________.
A) $4,500
B) $1,500
C) $25,875
D) $0
5) Team Shirts issued a 2-for-1 stock split. Just before the split, Team Shirts had 100,000, $1 par value common shares outstanding. After the split, Team Shirts had ________ outstanding.
A) 50,000 common shares
B) 100,000 common shares
C) 200,000 common shares
D) 100,000 shares of preferred stock and 100,000 shares of common stock
6) Team Shirts issued a 2-for-1 stock split. Before the split, Team Shirts had 100,000, $1 par value common shares outstanding. After the split, the par value of each common share is ________.
A) $2.00
B) $1.00
C) $0.50
D) unable to be determined since it is determined by the market not the corporation
7) Team Shirts issued a 2-for-1 stock split. The balance in retained earnings just before the split was $45,000. There were 15,000 shares outstanding on the day of the split. The $1 par value stock had a market price of $17.25 on the day of the split. Retained earnings will increase (decrease) after the split by ________.
A) $4,500
B) $1,500
C) $25,875
D) $0
8) A stock split ________ total shareholders’ equity.
A) increases
B) decreases
C) has no effect on
D) increases both total assets and
9) Corporations split stock because ________.
A) a stock split increases shareholders’ equity
B) a stock split will decrease the market price per share of stock
C) a stock split will decrease the number of shares outstanding
D) a stock split will increase total assets
10) Which of these will decrease the par value of a corporation’s common stock?
A) a stock split
B) paying a stock dividend
C) paying a cash dividend
D) buying treasury stock
11) How many of these will decrease a corporation’s retained earnings?
? a stock split
? paying a stock dividend
? paying a cash dividend
? buying treasury stock
A) one
B) two
C) three
D) all four
12) Stock splits occur when a corporation increases the number of shares and proportionately decreases the par value.
13) Stock splits occur when a corporation wants to decrease the market price per share of its stock.
14) Stock splits occur when a corporation wants to increase the market price per share of its stock.
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