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Exhibit 11-2 On January 31, the board of directors declares a stock dividend of 10% to...

Exhibit 11-2

On January 31, the board of directors declares a stock dividend of 10% to be issued on February 15 to stockholders of record on February 5^th. The corporation currently has 500,000 shares of $2 par stock outstanding and a market price of $10/share.

____ 23. Refer to Exhibit 11-2. How many additional shares of stock are issued?

a.	500,000
b.	5,00,000
c.	50,000
d.	Zero

____ 24. Refer to Exhibit 11-2. What is the journal entry on the date of declaration?

a.	Retained earnings 500,000 Common stock 100,000 Paid in capital in excess of par 400,000
b.	Retained earnings 500,000 Common stock 500,000
c.	Retained earnings 500,000 Stock dividend distributable 100,000 Paid in capital in excess of par 400,000
d.	Common stock 500,000 Retained earnings 500,000

____ 25. In the statement of stockholders' equity, the presence of treasury stock is

a.	a subtraction
b.	an addition
c.	not shown in the statement but is shown in the notes
d.	not shown in the statement and is not in the notes

____ 26. If the beginning balance in stockholders’ equity is $2,000, retained earnings is $120, treasury stock was purchased for $225, what is the ending balance of stockholders’ equity?

a.	$2,400
b.	$1,895
c.	$1,840
d.	$1,600

Expert Solution

23

Additional shares of stock issued = 500000*10%=50000

Option C is correct

24

Retained earnings 500,000

Stock dividend distributable 100,000

Paid in capital in excess of par 400,000

Option C is correct

25

In the statement of stockholders' equity, the presence of treasury stock is a subtraction

Option A is correct

26

Ending balance of stockholders’ equity = 2000+120-225= $1895

Option B is correct

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