Exam 15: Shareholders Equity: Capital Contributions and Distributions

U.S.GAAP and IFRS do not require the firm to measure the fair value of the stock warrants separately from the value of the associated bond or preferred stock and allocate the issue price between the two securities.

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are true?

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following is/are not true?

When a firm reacquires common shares under the Cost Method:

Which of the following is/are true regarding firms use of net assets (assets minus liabilities)?

Firms with convertible preferred stock or other potentially dilutive securities outstanding

Distinguishing a stock dividend from a stock split can sometimes cause difficulties.Usually firms treat small-percentage distributions, say less than a _____ increase in the number of shares, as stock dividends and larger ones as stock splits.

A firm owns 1,000 treasury shares which it acquired for $15 per share (par value $1).The firm sells 500 of the treasury shares for $20 per share.Using the cost method, what is the entry to record the sale of the treasury stock using the cost method?

In most cases U.S.GAAP requires firms to allocate the full issue price of Convertible Bonds or Convertible Preferred Stock to the bonds or preferred stock and none of the price to the conversion feature.

On September 1, 2013, Marker Corporation declared and issued a 20 percent common stock dividend.Prior to this date, Marker had 20,000 shares of $2 par value common stock that were both issued and outstanding.The market value of Marker's stock was $20 per share at the time the dividend was issued.As a result of this stock dividend, Marker's total stockholders' equity

Holders of a bond or preferred stock with common stock warrants attached cannot detach and redeem the warrants separately from the bond or preferred stock.

Financial statement notes must disclose significant limitations on dividend declarations.

Which of the following is not true?

Common and preferred stock usually do not have a par or stated value.

Prepare journal entries to record each of the following Year 1 transactions for Satar Co. a.Issue 12,000 shares of common stock with a par value of $2 for $5 a share. b.Issue 30 shares of 8% cumulative preferred stock with a par value of $1,000 for $1,100 a share. c.Pay dividends of $10,000 with cash. d.Repurchase 1,000 shares of common stock for $6 a share. e.Resell 400 shares of the treasury stock for $7 a share.

Treasury stock or treasury shares are shares a firm has previously issued and later reacquired. Which of the following is/are true?

Discuss how stock warrants are used.

Firms may periodically distribute net assets generated by earnings to shareholders as a dividend.Firms reduce net assets and retained earnings for the distribution.

Prepare journal entries to record each of the following transactions for Freight Co. a. Freight Co. issues stock warrants for $20,000 cash. The warrants allow holders to purchase 5,000 common shares (par value $5) for $50 each. b. One-half of the warrants are exercised. c. The remaining warrants expire.

Firms sometimes issue bonds or preferred stock with stock warrants. Which of the following is/are not true?