Ch 11 LO.1 & LO.2

When a corporation sells its stock at a price above par value, they should credit the difference to paid-in capital.

• True

• False

Dividends can only be paid in cash.

• True

• False

Dividends are reported as a percentage of the stock price for common stock.

• True

• False

Common shareholders cannot be paid dividends until all preferred shareholders are paid.

• True

• False

Which of the below are true about preferred stocks?

• They have voting rights and are paid dividends before common stockholders.

• They don't have voting rights but are paid dividends before common stockholders.

• They don't have voting rights but they are paid before common stockholders in the event of liquidation.

When a corporation buys back shares, it records the purchase at par value.

• True

• False

Answer explanation

The corporation uses the cost method, so they record the amount that they paid for the stock.

The sale of treasury stock increases shareholders' equity.

• True

• False

The sale of treasury stock increases assets.

• True

• False

Treasury Stock is a corporate asset.

• True

• False

Cash dividends decrease retained earnings.

• True

• False