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Stock Dividends T/F Chapter 12

A 5% stock dividend would increase the number of outstanding shares by 5% and would reduce the par value of the stock by 5%

True / False

False. Par value does not change.

Effect on Financial Statements: Cash Dividend Chapter 12

For the following event, choose the answer statement which properly demonstrates the effect on the financial statements.

Econo Corp. declares a $.50 per share cash dividend to be paid next year.

Assets Liability Retained Earnings Shareholder's Equity
A Increase Increase
B Decrease Increase
C Increase Decrease Decrease
D Decrease Decrease Decrease Decrease
E No effect on financials

Effect on Financial Statements: Stock Dividend Chapter 12

For the following event, choose the answer statement which properly demonstrates the effect on the financial statements.

A Company declares and distributes a 45% stock dividend.

Assets Liability Retained Earnings Shareholder's Equity
A Increase Increase
B Decrease
C Increase Decrease Decrease
D Decrease Decrease Decrease
E No effect on financials

Effect on Financial Statements: Stock Split Chapter 12

For the following event, write the journal entry and then choose the answer statement which properly demonstrates the effect on the financial statements.

XYZ Corp.’s board of directors declares a stock split.

Assets Liability Retained Earnings Shareholder's Equity
A Increase Increase
B Decrease Increase
C Increase Decrease Decrease
D Decrease Decrease Decrease
E No effect on financials

Stock and Dividends T/F Chapter 12

Which of the following statements are false?

  1. Treasury shares are included in the company’s issued shares.
  2. A liability for dividends is created on the date of declaration of a cash dividend
  3. Treasury stock is reported as reduction in stockholders’ equity
  4. Cash dividends do not reduce net income
  5. Dividends are paid all on issued shares of stock, including preferred, common, and treasury stock.

Comprehensive Stockholder's Equity Chapter 12

The stockholder’s equity accounts of a company on January 1 were as follows:

Preferred Stock (6%, $100 par, cumulative, 5,000 shares authorized) $217,700
Common Stock ($10 par, 100,000 shares authorized) 650,000
APIC Preferred 134,974
APIC Common 390,000
Retained Earnings 405,000
Treasury Stock (4,000 common shares) 68,000

During the year, the corporation had the following transactions and events pertaining to its stockholder’s equity:

  • Mar. 1: Issued 15,000 share of common stock for $277,500
  • April 15: Purchased additional shares of common treasury stock at $17 per share
  • July 20: Sold 3,000 shares of treasury stock for $63,000
  • Dec. 31: Net income for the year was $234,000. Declared an $80,000 cash dividend on December 27th. Dividends are one year in arrears.


  1. What is the average per-share sales price of the preferred stock when issued?
  2. Prepare the journal entry for the March 1 transaction.
  3. Of the dividends declared, what amount will be allocated to common stockholders?
  1. $162
  2. Journal Entry 1
    Cash 277,500
    C.S. 150,000
    APIC - C.S. 127,500
  3. $53,876