How would the declaration and subsequent issuance of a small stock dividend affect share capital and share premium when the fair value of the shares is equal to the par value? No effect on share capital and increase share premium Increase share capital and no effect on share premium Increase both share capital and share premium No effect on both share capital and share premium

How would the declaration and subsequent issuance of a small stock dividend affect share capital and share premium when the fair value of the shares is equal to the par value? No effect on share capital and increase share premium Increase share capital and no effect on share premium Increase both share capital and share premium No effect on both share capital and share premium

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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4. The weighted-average number of shares outstanding during the period for all periods (other than conversion of potential ordinary shares) shall be adjusted for a. Any convertible instrument settled in cash b. Any prior period adjustment c. Any change in the number of ordinary shares without a change in resources d. Any new issue of shares for cash 5. Understating purchase discounts, returns and allowances has the effect of: a. Overstating goods available for sale b. No effect c. Overstating net income d. Understating cost of sales 6. What is the inherent justification underlying the concept of potential ordinary shares or diluters in computing diluted earnings per share? a. Timeliness b. Materiality c. Completeness d. Substance over form
When a share split occurs, the aggregate par value of issued shares will change. True False
Please answer with reason why the option is correct and why the other options are not correct
The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond. Group of answer choices True False
Which of the following transactions would most likely affect shareholders’ equity? Group of answer choices Retirement of treasury shares Retirement of ordinary shares None of the choices Declaration of a large bonus issue Expiration of stock rights
Which of the following statements is false? Multiple Choice Both stock splits and stock dividends increase the number of common shares issued. Both stock splits and stock dividends increase the number of common shares outstanding. Stock splits reallocate amounts between retained earnings and contributed capital accounts. Both stock splits and stock dividends have the impact of reducing the market price of the stock.
What is reflected in the additional paid-in capital account? a. none of the above b. Whichever is higher of (1) the difference between the market price and the par value when the stock was issued and (2) the difference between the market price and the par value when the stock was reacquired c. he difference between the market price and the par value when the stock was issued. d. The difference between the market price and the par value when the stock was reacquired e. Whichever is lower of (1) the difference between the market price and the par value when the stock was issued and (2) the difference between the market price and the par value when the stock was reacquired
Which statement is incorrect? a. Dilution is an increase in earnings per share when convertible instruments are converted to ordinary shares. b. Diluted EPS is required when there are potential shares outstanding. c. Dilutive potential shares shall be deemed to have been converted into shares at the start of the period or, if later, the date of the issue of the potential shares d. Options and warrants are dilutive, when they would result in the issue of shares for less than the average market price of shares during the period. e. none of the above
2. Which of the following is a characteristic of preferred stock?A. Give voting rights to its owner.B. It is like annuity.C. Investors cannot force the payment of the dividend.D. Dividends are tax-deductible for the firm as opposed to interest payment.
Why is this statement false. Small stock dividends are accounted for at the stock's par value.
The declaration and issuance of a share dividend a. increases ordinary shares outstanding and increases total equity. b. increases retained earnings and increases total equity. c. decreases retained earnings but does not change total equity. d. may increase share premium but does not change total equity.
In a stock split, zero basis is allocated to the new shares. True or False