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Christmas Corporation issued a 20% stock dividend on 40,000 outstanding shares of $10 par value common...

  1. Christmas Corporation issued a 20% stock dividend on 40,000 outstanding shares of $10 par value common stock. The distribution was made at the time the market value of the stock was $32 a share. How did this transaction affect the company's total stockholders' equity?


A. The total balances in equity accounts increased by $80,000.
B. The sum of the balances in equity accounts increased by $256,000.
C. The sum of the balances in equity accounts decreased by $256,000.
D. Total stockholders' equity was not affected by this transaction.

  1. During the year, Timberdale Company sold a truck at a loss of $20,000. On the Statement of Cash Flows,

  1. the loss from the sale of truck is added to net income in the cash flow from financing activities.
  2. the loss from the sale of truck is deducted from net income in the cash flow from operating activities.
  3. the loss from the sale of truck is deducted from net income in the cash flow from investing activities
  4. the loss from the sale of truck is added to net income in the cash flow from operating activities.
  1. Regarding the Statement of Cash Flows, which one of the following is false?

  1. If accounts receivable decreases, cash increases.
  2. If accounts payable decreases, cash increases.
  3. If inventory decreases, cash increases.
  4. If accounts payable decreases, cash decreases.

Solutions

Expert Solution

Part 1)D. Total stockholders' equity was not affected by this transaction.

Explanation:

Stock Dividends do not affect total stockholders' equity. The reason behind this is that, on declaring stock dividends retained earnings (which also form part of stockholders' equity)are essentialy converted into stock and additional paid in capital (both which forms part of stockholders' equity).

Part 2)D. the loss from the sale of truck is added to net income in the cash flow from operating activities.

Explanation:

Proceeds received from sale of an asset is recorded under Investing Activities in cash flow statement and any Gain is deducted from net income under Operating Activities and conversely Loss is added to net income under Operating Activities.

Part 3)B.If accounts payable decreases, cash increases.

Explanation:

If accounts payable decreases then cash will get reduced due to payment to creditors.

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ekkarill92 answered 2 months ago
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