【正文】 CHAPTER 10COVERAGE OF LEARNING OBJECTIVES LEARNING OBJECTIVESQUESTIONSEXERCISESPROBLEMSOTHERLO1: Describe the rights of shareholders.1,2,3,5,16, 22,23,2832,34,3546,47,48,67, 6976LO2: Account for mon stock, including payment of dividends./P/OBJ10,11,12,2030,31,33,36, 44,4549,50,53,54, 55,66,68,71, 7274,75LO3: Contrast bonds, preferred stock, and mon stock.6,8,93776LO4: Identify the economic characteristics of and account for stock splits.14,2938, 3951,53,54,55 76LO5: Account for both large and smallpercentage stock dividends.134052, 56LO6: Explain and report stock repurchases and other treasury stock transactions.4,15,17,18,1926,274157,58,59,60, 61,62,63LO7: Record conversions of debt for equity or of preferred stock into mon stock.7,2165LO8: Use the rate of return on mon equity and book value per share.24,2542,437073CHAPTER 10101 The preemptive privilege gives present shareholders the opportunity to purchase additional shares directly from the corporation before new shares can be sold to the general public. In this way, the shareholders are able to maintain their percentage ownership.102 Unlike individual proprietors or partners, stockholders’ personal assets cannot be claimed by creditors to satisfy the debts of an incorporated entity.103 No. Before a share of mon stock can be outstanding, it must be duly authorized and issued.104 No. Treasury stock is issued stock that has been repurchased by the issuer and is no longer outstanding.105 Dividends are never liabilities unless declared. Here liabilities is used in the strict accounting sense. Cumulative dividends are conditional obligations as the statement implies. 106 No. Liquidating value is the dollar measurement of the preference to receive assets in the event of corporate liquidation.107 Convertible securities are bonds and stocks that can be transformed into mon shares at the option of the holder.108 Preferred stock and debt both have fixed payment rates. A payment on preferred stock is called a dividend while the payment on debt is called interest. While interest is a legal obligation on the periodic payment date, dividends on preferred and mon stock are not an obligation of the pany until declared by the board of directors. Interest is an expense and reduces net ine while preferred and mon dividends do not reduce net ine. Finally interest and dividends are often taxed differently for both the issuer and the investor.109 Bonds are riskier for the corporation because interest and principal payments are legal responsibilities. Preferred stock is riskier for the investor because the corporation has no legal obligation to pay dividends and most preferred stocks have an infinite life.1010 When a pany grants a stock option to an executive, it is giving something of value for services rendered. Existing financial models allow us to measure the value of these options when they are granted. When the pany grants other items of value to employees, they record an expense. 1011 Stock options reward the employees only if the stock appreciates in value. Stock options create incentives for employees to work hard in the best interests of the shareholders. There can also be tax advantages to options.1012 Cash dividends are real in the sense that they require the disbursement of assets. Stock dividends involve disbursement of real assets only when the dividend rate per share is maintained and a stock dividend results in an increase in total dividends.1013 No. It is impossible to increase every shareholders’ fractional portion of the pany because every shareholder receives the same proportional distribution.1014 The use of highpercentage stock dividends (20% or more) is merely another way of obtaining a stock split. Sometimes such transactions are called a “stock split effected in the form of a stock dividend.” While the economic effects are the same for large stock dividends and for splits, different stockholders’ equity accounts may be involved in the accounting. 1015 Yes, if shares are repurchased and permanently retired, the purchase price is charged against mon stock, additional paidin capital, and retained earnings. If the shares are to be held only temporarily, they are listed as treasury stock and deducted from stockholders’ equity in total, and individual parts of stockholders’ equity are not reduced.1016 No. To retire shares, a pany must pay the market price per share.1017 There are many reasons a pany might buy back its own stock. It might be the most efficient way to distribute excess cash to shareholders, especially after considering tax consequences. It also allows more flexibility in timing and amount of payment than does the payment of dividends. Further, it may not create an expectation of higher dividends in the future. Finally, it can demonstrate management’s confidence in the prospects for the pany.1018 Treasury stock is not an asset because it is a reduction of stockholders’ equity. Treasury stock is acquired by distributing cash or other assets to shareholders. It arises from a return of assets previously contributed by shareholders.1019 Although the specific accounting for transactions in the pany’s own stock may vary from pany to pany, one rule is paramount. Any difference between the acquisition price and resale price of treasury stock is never reported as a loss, expense, revenue, or gain in the ine statement. Why? A corporation’s own capital stock is part of its capital structure. It is not an asset of the corporation. Nor is stock intended to be treated like merchandise for sale to customers at a profit. Therefore, changes in a corporation39。s capitalization should produce no accounting gain or loss, but should be recorded as direct adjustments to the stockholders’ equity.1020 The proper amount is the “fair value” of eith