Question

18. Both IFRS and U.S, GAAP permit valuation of long-term debt and other ligbilities at A) present value discounted at the firm's cost of capital. B) current market values of the obligations, based on changes in the discount rate with unrealized gains and losses reflected in a separate account in stockholders' equity C) fair val D) histori ue with gains and losses on changes in fair value recorded in income in certain situations. c costs without reflecting changes in valuation as obligations will be retired at their maturity date. 19. On January 1,2018, Culver Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1 , when the market price of the stock was S 15, the corporation declared a 15% stock dividend to be issued to stockholders ofrecord on December 16, 2018. what was the impact of the l 5% stock dividend on the balance of the retained earnings account? A) $82,500 decrease B) $225,000 decrease C) $247,500 decrease D) No effect written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of S5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year. 20, Assuming that $95,000 will be distributed as a dividend in the current year, how much will the preferred stockholders receive? A) $32,000. B) S36,000. C) $72,000. D) $95,000. 21. Treasury stock. Agler Corporation's balance sheet reported the following: Capital stock outstanding, 5,000 shares, par S30 per share Paid-in capital in excess of par Retained earnings $150,000 80,000 100,000 The following transactions occurred this year: (a) Purchased 400 shares of capital stock to be held as treasury stock, paying $60 per share. (b) Sold 300 of the shares of treasury stock at S65 per share. (c) Sold the remaining shares of treasury stock at $50 per share. Instructions Prepare the journal entry for these transactions under the cost method of accounting for treasury stock. Page 7

Answer 1

18- c -fair value with gains and losses on changes in fair value recorded in income in certain situations

19-

19-	no of shares outstanding		110000
	less stock held as treasury stock		10000
	stock outstanding		100000
	market value of stock	100000*15	1500000
	stock dividend	1500000*15%	225000
	answer is B		retained earnings decrease by 225000
20-	value of preferred stock		600000
	amount of preferred dividend	600000*6%	36000
	cumulative preference dividend for 2 years	36000*2	72000
	current year dividend		36000
	total preferred dividend payable		108000
	amount of dividend to be paid		95000
	amount of preferred dividend		95000
	answer is D
21-	explanation	debit	credit
	treasury stock	24000
	cash		24000
	cash	19500
	treasury stock		18000
	additional paid in capital-treasury stock		1500
	cash	5000
	additional paid in capital-treasury stock	1000
	treasury stock		6000