Question

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

Answer 1

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