3. All of the following statements regarding the accounting for the stockholders

Question

3. All of the following statements regarding the accounting for the stockholders' equity of a corporation are true except

a. A prior period adjustment should be reported as an adjustment to be the retained earnings balance at the beginning of the period in which the adjustment was made.

b. A restriction/appropriation of retained earnings established cash assets that are set aside for a specific purpose.

c. A 10% stock dividend will increase the number of shares outstanding, but the book value per share will decrease.

d. The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.

e. If the dividend amount of preferred stock, $50 par value, is quoted as 8% then the dividends per share would be $4.

Explanation / Answer

d. The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.

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