Reference no: EM132813197

True or false

Question 1. The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.

Question 2. The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.

Question 3. The journal entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury stock.

Question 4. A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation issues a 5-for-1 stock split, the number of shares outstanding after the split will be 40,000.

Question 5. The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.

Question 6. Since a stock split changes information of a business, this transaction needs to be recorded.

Question 7. The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.

Question 8. A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.

Question 9. A stock split results in a transfer at market value from retained earnings to paid-in capital.

Question 10. If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 39,000.