Stockholders' Equity (F7:M5-6)

Question 1

where are dividends in arrears (undeclared dividends on cum pref stock) reported?

Answer 1

in the footnotes. liability not recorded because undeclared

Question 2

when a company issues shares of CS in exchange for property, what is the property recorded at (i.e., what is the debit)?

Answer 2

the property (land) is recorded at the market value of the shares issued in exchange for it.

land (d
CS (c
APIC (c

Question 3

what is the journal entry when a stock dividend is declared (less than 20-25% “small”)?

Answer 3

RE (d = FV at date of declaration
CS (c = Par
APIC (c = Plug

*number of shares awarded x par value

Question 4

on what date are cash dividends booked as a liability?

Answer 4

date of declaration

RE (d
Dividends payable (c

Question 5

what is a liquidating dividend and what account does it decrease?

Answer 5

its a return of capital rather than a distribution of earnings like a normal dividend. decreases APIC (amount in excess of RE)

Question 6

is a stock dividend recorded as revenue by the recipient?

Answer 6

no. it increases the number of shares held and decreases the cost basis per share

Question 7

when a company issues rights to its existing shareholders without consideration, what journal entry must be made?

Answer 7

no entry is required bc there is no consideration given. Only disclosure required

Question 8

how should the difference between BV and FMV of a property dividend be recorded?

Answer 8

as a G/L on disposal of asset

Question 9

what is the journal entry when a stock dividend is declared (greater than 20-25% “large”)?

Answer 9

RE (c = Par
CS distributable (d = Par

Question 10

what is the journal entry to record a property dividend?

Answer 10

property dividend (d
asset (at CV) (c
G/L (c or d