A Corporation with $10 Par Common Stock Issues a Small

question 67

Multiple Choice

A corporation with $10 par common stock issues a small stock dividend. The capitalization of retained earnings is equal to:

• A) The par value of the shares outstanding.
• B) The par value of the shares to be distributed.
• C) There is no capitalization of retained earnings in the case of a small stock dividend.
• D) The market value of the shares outstanding.
• E) The market value of the shares to be distributed.

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Definitions:

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.

Net Realizable Value

The estimated selling price of inventory in the ordinary course of business minus any costs for completion, disposal, and transportation.

Bad Debt Expense

A financial accounting concept representing the amount of revenue considered uncollectible from customers or clients.

Percent Of Sales Method

A financial forecasting model that estimates future financial statements based on assumed sales growth and historical financial ratios.