Assignment Submission Chapter 13 Discussion 1 What is the di

Assignment Submission: Chapter 13 Discussion 1. What is the difference between a stock dividend and a stock split? 2. What are organization expenses? Provide a couple of examples. 3. How are EPS results computed for a corporation with no preferred stock? What is the main limitation of using book vale per share to value a corporation? 4. List the general rights of common stockholders. 5. A corporation reacquires 10,000 shares of its own $25 par common stock for $420,000 recording it at cost. (a) what effect does this transaction have on revenue or expense for the period? (b) What effect does it have on stockholder\'s equity? 6. Why do laws place limits on treasury stock purchases?

Solution

1) Companies may have accumulated earnings however not have the sufficient available funds for the distribution of these earnings as cash dividends to stockholders. In such scenario, the company may choose to distribute few of its own shares of stock as dividends to current stockholders. Distributions of such type are termed stock dividends. Thus a stock dividend happens when the company utilizes the amount of money that would be paid as a cash dividend for purchasing additional common shares for the shareholder

A procedure somewhat similar to stock dividends, however with a different purpose, is known as stock split. A stock split occurs when a company issues two or more new shares for every existing share a share-holder holds.

2) Organization expenses are incurred in formative and launch stages of a corporation. In other words, organizational expenses are the costs of incorporating or organizing a company. Examples include start up costs, incorporation or registration charges, attorney\'s fees etc