11 A feature common to both stock splits and stock dividends is a a transfer to

Question

11 A feature common to both stock splits and stock dividends is a a transfer to earned capital of a corporation. b. a reduction in the contributed capital of a corporation. 0. an increase in total stockholders" equity of a corporation. d. that there is no effect on total stockholders' equity 12. What effect does the losuance of a 3-for-1 stock split have on each of the following? Total Par Value No effect Increase Decrease Decrease Number of Shares b. C, d. Increase Decrease No effect Increase 13. The conversion of bonds is most commonly recorded by the a. incremental method. b. book value method c. market value method. d. proportional method. For stock appreciation rights, the measurement date for computing compensation is the date a. b. 14. the rights mature. the stock's price reaches a predetermined amount. c. of exercise. d. of grant. Norton Company issues 10,000 shares of its $5 par value common stock having a fair value of $9.90 per share and 6,000 shares of its $10 par value preferred stock having a fair value of $13.50 per share for a lump sum of $210,000. What amount of the proceeds should be allocated to the common stock? a. $99,000 b. $81,000 15. c. $82,500 d. $67,500

Explanation / Answer

Answer11: (d) That there is no effect on total stockholder's equity.

Note: A feature common to both stock splits and stock dividend is that there is no effect on total stockholder's equtiy. In the stock split, amount of stock is same, but number of stock is increase. In the stock dividend, amount of stock is same after stock dividend.

Answer12:

Total par Value Number of shares

(a) No effect Increases

Note: When stock split of a 3 for 1 stock, number of shares has incrases by 3 times from original number of shares.But, the original value of shares remains the same.

Answer 13: (b) Book value method

Note: Book value method uses carrying value of the bonds to record the transactions. It is useful when market price of bond is not available on the time of conversion.

Answer 14: (c) of exercise

Note: For stock appreciation right, the measurement date for computing compensation is the date of exercise.

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