When a stock option plan for employees is compensatory, the measurement date for determining compensation cost is the
a.Date the option plan is adopted, provided it precedes the date on which the options may first be exercised by less than one operating cycle
b.Date on which the options may first be exercised (if the first actual exercise is within the same operating period) or the date on which a recipient first exercises any of his options
c.First date on which are known both the number of shares than an individual employee is entitled to receive and the option or purchase price, if any
d.Date each option is granted
12.As a minimum, how large in relation to total outstanding shares may a stock distribution be before it should be accounted for as a stock split instead of a stock dividend?
a.No less than 2 to 5 percent
b.No less than 10 to 15 percent
c.No less than 20 to 25 percent
d.No less than 45 to 50 percent
13.The dollar amount of total stockholders’ equity remains the same when there is a (an)
a.Issuance of preferred stock in exchange for convertible debentures
b.Issuance of nonconvertible bonds with detachable stock purchase warrants
c.Declaration of a stock dividend
d.Declaration of a cash dividend
14.A company with a substantial deficit undertakes a quasi-reorganization. Certain assets will be written down to their present fair market value. Liabilities will remain the same. How would the entries to record the quasi-reorganization affect each of the following?
Contributed Capital Retained Earnings
b.Decrease No effect
d.No effect Increase
15.What is the most likely effect of a stock split on the par value per share and the number of shares outstanding?
Par Value Number of shares
b.Decrease No effect
d.No effect No effect
16.Gilbert Corporation issued a 40percent stock split-up of its common stock that had a par value of $10 before and after the split-up. At what amount should retained earnings be capitalized for the additional shares issued?
a.There should be no capitalization of retained earnings
c.Market value on the declaration date
d.Market value on the payment date
17.How would the declaration and subsequent issuance of a 10 percent stock dividend by the issuer affect each of the following when the market value of the shares exceeds the par value of the stock?
Common StockAdditional Paid-in Capital
a.No effect No effect
b.No effect Increase
c.Increase No effect
18.A company with a $2,000,000 deficit undertakes a quasi-reorganization on November 1, 2014. Certain assets will be written down by $400, 000 to their present fair market value. Liabilities will remain the same. Capital stock was $3,000,000 and additional paid-in capital was $1,000,000 before the quasi-reorganization. How would the entries to accomplish these changes on November 1, 2014, affect each of the following?
Capital StockTotal Stockholders’ Equity
a.No effectNo effect
b.No effect Decrease
d.Decrease No effect
19.How would a stock split affect each of the following?
Total Stockholders’ Additional
a.Increase IncreaseNo effect
b.No effect No effect No effect
c.No effect No effect Increase
20.The purchase of treasury stock
a.Decreases common stock authorized
b.Decreases common stock issued
c.Decreases common stock outstanding
d.Has no effect on common stock outstanding
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