Accounting for Share Dividends

When multiple types of stocks (e.g., common stock and preferred stock) are issued together at a basket price, how should the individual stock price for each type of stock be measured?

• The individual stock price is allocated based on the par value of each stock

• The individual stock price is allocated based on the relative fair value of each stock

• The individual stock price is allocated equally among the different stocks issued

• The individual stock price is determined by the cost of issuance for each stock type

When a corporation declares a large share dividend (typically exceeding 20-25% of the previously outstanding shares), how should the dividend be measured in accordance with accounting standards?

• At the fair market value of the shares on the date of declaration

• At the par or stated value of the additional shares issued

• At the book value of the shares as of the end of the reporting period

• At the average market value of the shares over the past year

What is the effect of declaring a share dividend on a corporation's retained earnings and total shareholders' equity?

• Both retained earnings and total shareholders' equity decrease

• Retained earnings decreases, but total shareholders' equity remains unchanged

• Retained earnings remains unchanged, but total shareholders' equity increases

• Both retained earnings and total shareholders' equity increase

From the shareholder's perspective, how is a share dividend measured upon receipt?

• At the fair market value of the additional shares received

• At the par or stated value of the additional shares

• At zero, since share dividends do not change the total investment

• As income in the period received

How is the liability for a property dividend measured on the declaration date under generally accepted accounting principles?

• At the historical cost of the property to be distributed

• At the fair market value of the property on the date of declaration

• At the book value of the property on the date of payment

• At the fair market value of the property on the date of payment

After the declaration of a property dividend, how is the property dividend liability measured subsequently before distribution?

• At historical cost of the property

• At fair value of the property on the date of distribution

• At book value of the property less accumulated depreciation

• At fair value less cost to distribute as of the end of each reporting period until settlement

What is the effect of a share split on a corporation's retained earnings and total shareholders' equity?

• Retained earnings decreases, and total shareholders' equity increases

• Retained earnings remains unchanged, and total shareholders' equity decreases

• Both retained earnings and total shareholders' equity remain unchanged

• Retained earnings increases, and total shareholders' equity decreases

How is treasury stock initially measured when it is purchased by a corporation?

• At par or stated value of the shares

• At the fair market value of the shares on the date of purchase

• At the cost of acquiring the treasury shares

• At the book value of the shares before the repurchase

When treasury stock is reissued above its cost, what is the effect on retained earnings?

• Retained earnings decreases by the difference between the reissue price and the cost

• Retained earnings increases by the difference between the reissue price and the cost

• Retained earnings remains unchanged, and the difference is credited to additional paid-in capital

• Retained earnings increases by the total reissue price

When treasury stock is reissued below its acquisition cost and additional paid-in capital from previous treasury stock transactions is insufficient to cover the discrepancy between the acquisition cost and the reissue price, where should the discrepancy be charged?

• The discrepancy should be charged to retained earnings

• The discrepancy should be charged to income statement as a loss

• The discrepancy should be absorbed by the common stock account

• The discrepancy should be charged to APIC from the original issuance of the retired stock if sufficient to cover the loss