121. Preferred stockholders' claims to a corporation's assets take precedence over the claims of some creditors.
122. Van Buren Corporation issued 5,000 shares of $6 par common stock for $24 per share. For this transaction, Common Stock should be credited (increased) for $120,000.
123. Chisolm Corporation issued 10,000 shares of $5 par common stock for $22 per share. As a result of this transaction, Chisolm’s legal capital increased by $50,000.
124. Weller Corporation issued 10,000 shares of no-par common stock for $25 per share. For this transaction, Common Stock should be credited (increased) for $250,000.
125. A corporation might buy some of its own stock to help keep the market price from falling.
126. A purchase of treasury stock is an asset use transaction.
127. Treasury Stock is an equity account with a normal credit balance.
128. Treasury Stock is reported on the balance sheet between liabilities and equity.
129. A corporation must record a liability for cash dividends on the date of record.
130. When a corporation records a stock dividend, it debits Retained Earnings for the par value of the stock.
131. Powell Corporation had $10 par stock with a market price of $60, when it declared a 2-for-1 stock split. After the stock split, the number of shares outstanding will double, and the market price of the stock should drop to about $30.
132. An appropriation of retained earnings places a limit on the amount of dividends a corporation can declare.
133. The most frequently reported measure of a company's value is earnings per share.
134. A high price-earnings ratio generally means that investors are optimistic about a company's future growth.