ACC 557 Week 8 Quiz – Strayer NEW

ACC 557 Week 8 Quiz Strayer NEW

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Quiz Chapter 11

All possible questions with answers

TRUE-FALSE STATEMENTS

A corporation is not an entity which is separate and distinct from its owners.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.


A corporation acts under its own name rather than in the name of its stockholders.


If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

A corporation must be incorporated in each state in which it does business.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

A stockholder has the right to vote in the election of the board of directors.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Interaction, IMA: FSA

A proxy is a legal document that instructs a stockholders agent how to vote shares of stock for the stockholder.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Interaction, IMA: FSA

As soon as a corporation is authorized to issue stock, an accounting journal entry should be made recording the total value of the shares authorized.

Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Corporate Finance

The par value of common stock must always be equal to its market value on the date the stock is issued.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

When no-par value stock does not have a stated value, the entire proceeds from the issuance of the stock becomes legal capital.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting

A corporation can issue more shares than it is authorized in its charter, if the board of directors approves of an increase in the number of authorized shares.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The market value of a corporation's stock is determined by the number of shares that the corporation has been authorized to issue.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Stock can be issued only in exchange for cash.

Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The par value of stock issued for noncash assets is never a factor in determining the cost of the assets received.

Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity.

Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Treasury stock should not be classified as a current asset.

Ans:LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of Treasury Stock being recognized on the income statement.

Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Treasury stock is a contra stockholders' equity account.


The number of common shares outstanding can never be greater than the number of shares issued.

Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Preferred stock has contractual preference over common stock in certain areas.


Preferred stockholders generally do not have the right to vote for the board of directors.

Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: None, AICPA PC: None, IMA: Investment Decisions

Dividends in arrears on cumulative preferred stock are considered a liability.

Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Dividends may be declared and paid in cash or stock.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Business Economics

Cash dividends are not a liability of the corporation until they are declared by the board of directors.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Business Economics

The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

Retained earnings represents the amount of cash available for dividends.

Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Business Economics

Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

A debit balance in the Retained Earnings account is identified as a deficit.


A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.


Prior period adjustments to income are reported in the current year's income statement.


Retained earnings that are restricted are unavailable for dividends.


Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.


A retained earnings statement shows the same information as a corporation income statement.

Ans:LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

A detailed stockholders' equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record.

Ans:LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision of the stockholders' equity section of the balance sheet.

Ans:LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

Return on common stockholders equity is computed by dividing net income by ending stockholders equity.

Ans:LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

Many companies prepare a stockholders equity statement instead of presenting a detailed stockholders equity section in the balance sheet.


a40. The stockholders equity statement shows the changes in each stockholders equity account and in total stockholders equity during the year.


a41. Book value per share of common stock is the same amount as the market value per share.


A successful corporation can have a continuous and perpetual life.


Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.


The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value.

Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The cost of a noncash asset acquired in exchange for common stock should be either the fair value of the consideration given up or the consideration received, whichever is more clearly determinable.

Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Under the cost method, Treasury Stock is debited at the price paid to reacquire the shares, and the same amount is credited to Treasury Stock when the shares are sold.

Ans:LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

A dividend based on paid-in capital is termed a liquidating dividend.


Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders' equity section.


A prior period adjustment is reported as an adjustment of the beginning balance of Retained Earnings.


In the stockholders equity section, paid-in capital and retained earnings are reported and the specific sources of paid-in capital are identified.

Ans:LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

MULTIPLE CHOICE QUESTIONS

Which one of the following is a privately held corporation?IntelGeneral ElectricCaterpillar Inc.Cargill Inc.


The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees isthe sole proprietorship.the partnership.the corporation.not known.


Under the corporate form of business organizationa stockholder is personally liable for the debts of the corporation.stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.the corporation's life is stipulated in its charter.stockholders wishing to sell their corporation shares must get the approval of other stockholders.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Stockholders of a corporation directly electthe president of the corporation.the board of directors.the treasurer of the corporation.all of the employees of the corporation.


The chief accounting officer in a company is known as thecontroller.treasurer.vice-president.president.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: Leadership, IMA: None

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that acorporation is organized for the purpose of making a profit.corporation is subject to more federal and state government regulations.corporation is an accounting economic entity.corporations temporary accounts are closed at the end of the accounting period.

Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: FSA

Which one of the following would not be considered an advantage of the corporate form of organization?Limited liability of ownersSeparate legal existenceContinuous lifeGovernment regulation

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

The concept of an "artificial being" refers to which form of business organization?PartnershipSole proprietorshipCorporationLimited partnership


The two ways that a corporation can be classified by purpose aregeneral and limited.profit and not-for-profit.state and federal.publicly held and privately held.


The two ways that a corporation can be classified by ownership arepublicly held and privately held.stock and non-stock.inside and outside.majority and minority.


Which of the following would not be true of a privately held corporation?It is sometimes called a closely held corporation.Its shares are regularly traded on the New York Stock Exchange.It does not offer its shares for sale to the general public.It is usually smaller than a publicly held company.


Which of the following is not true of a corporation?It may buy, own, and sell property.It may sue and be sued.The acts of its owners bind the corporation.It may enter into binding legal contracts in its own name.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: Professional Demeanor, IMA: Business Economics

Jason Thomas has invested $200,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does TThomas stand to lose?Up to his total investment of $200,000.Zero.The $200,000 plus any personal assets the creditors demand.$100,000.

Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions

Which of the following statements reflects the transferability of ownership rights in a corporation?If a stockholder decides to transfer ownership, he must transfer all of his shares.A stockholder may dispose of part or all of his shares.A stockholder must obtain permission from the board of directors before selling shares.A stockholder must obtain permission from at least three other stockholders before selling shares.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Decision Modeling, AICPA PC: None, IMA: Corporate Finance

A corporate board of directors does not generallyselect officers.formulate operating policies.declare dividends.execute policy.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Leadership, IMA: Internal Controls

A typical organization chart showing delegation of authority would showstockholders delegating to the board of directors.the board of directors delegating to stockholders.the chief executive officer delegating to the board of directors.the controller delegating to the chief executive officer.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Decision Modeling, AICPA PC: Leadership, IMA: Internal Controls

The officer who is generally responsible for maintaining the cash position of the corporation is thecontroller.treasurer.cashier.internal auditor.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Decision Modeling, AICPA PC: Professional Demeanor, IMA: Corporate Finance

The chief accounting officer in a corporation is thetreasurer.president.controller.vice-president of finance.


The ability of a corporation to obtain capital isenhanced because of limited liability and ease of share transferability.less than a partnership.restricted because of the limited life of the corporation.about the same as a partnership.


Which of the following statements concerning taxation is accurate?Partnerships pay state income taxes but not federal income taxes.Corporations pay federal income taxes but not state income taxes.Corporations pay federal and state income taxes.Only the owners must pay taxes on corporate income.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which of the following statements is not considered a disadvantage of the corporate form of organization?Additional taxesGovernment regulationsLimited liability of stockholdersSeparation of ownership and management

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Decision Modeling, AICPA PC: None, IMA: None

What is ordinarily the first step in the formation of a corporation?Development of by-laws for the corporationIssuance of the corporate charterApplication for incorporation to the appropriate Secretary of StateRegistration with the SEC

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics

Which one of the following is not an ownership right of a stockholder in a corporation?To vote in the election of directorsTo declare dividends on the common stockTo share in assets upon liquidationTo share in corporate earnings

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

If no-par stock is issued without a stated value, thenthe par value is automatically $1 per share.the entire proceeds are considered to be legal capital.there is no legal capital.the corporation is automatically in violation of its state charter.


If a stockholder cannot attend a stockholder's meeting, he may delegate his voting rights by means ofan absentee ballot.a proxy.a certified letter.a telegram.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Internal Controls

If a corporation has only one class of stock, it is referred to asclassless stock.preferred stock.solitary stock.common stock.


The term residual claim refers to a stockholders right toreceive dividends.share in assets upon liquidation.acquire additional shares when offered.exercise a proxy vote.

Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting

Which of the following factors does not affect the initial market price of a stock?The company's anticipated future earningsThe par value of the stockThe current state of the economyThe expected dividend rate per share

Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

If an investment firm underwrites a stock issue, therisk of being unable to sell the shares stays with the issuing corporation.corporation obtains cash immediately from the investment firm.investment firm has guaranteed profits on the sale of the stock.issuance of stock is likely to be directly to creditors.

Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

The par value of a stockis legally significant.reflects the most recent market price.is selected by the SEC.is indicative of the worth of the stock.


A corporation has the following account balances: Common stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, thelegal capital is $1,360,000.number of shares issued are 60,000.number of shares outstanding are 1,360,000.average price per share issued is $22.50.

Ans:LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The authorized stock of a corporationonly reflects the initial capital needs of the company.is indicated in its by-laws.is indicated in its charter.must be recorded in a formal accounting entry.


When stock is issued for legal services, the transaction is recorded by debiting Organization Expense for thestated value of the stock.par value of the stock.market value of the stock.book value of the stock.

Ans:LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If Vickers Company issues 4,000 shares of $5 par value common stock for $140,000,Common Stock will be credited for $140,000.Paid-In Capital in Excess of Par will be credited for $20,000.Paid-In Capital in Excess of Par will be credited for $120,000.Cash will be debited for $120,000.

Ans:LO: 2, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If common stock is issued for an amount greater than par value, the excess should be credited toCash.Retained Earnings.Paid-in Capital in Excess of Par.Legal Capital.

Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: FSA

If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation atfair value.cost.zero.a nominal amount.


If stock is issued for less than par value, the accountPaid-In Capital in Excess of Par is credited.Paid-In Capital in Excess of Par is debited if a debit balance exists in the account.Paid-In Capital in Excess of Par is debited if a credit balance exists in the account.Retained Earnings is credited.


The sale of common stock below paris a common occurrence in most states.is not permitted in most states.is a practice that most stockholders encourage.requires that a liability be recorded for the difference between the sales price and the par value of the shares.


Paid-In Capital in Excess of Stated Valueis credited when no-par stock does not have a stated value.is reported as part of paid-in capital on the balance sheet.represents the amount of legal capital.normally has a debit balance.


A separate paid-in capital account is used to record each of the following except the issuance ofno-par stock.par value stock.stated value stock.treasury stock above cost.


Barton Company is a publicly held corporation whose $1 par value stock is actively traded at $32 per share. The company issued 3,000 shares of stock to acquire land recently advertised at $100,000. When recording this transaction, Barton Company willdebit Land for $100,000.credit Common Stock for $96,000.debit Land for $96,000.credit Paid-In Capital in Excess of Par for $98,000.


Crain Company issued 2,000 shares of its $5 par value common stock in payment of its attorney's bill of $40,000. The bill was for services performed in helping the company incorporate. Crain should record this transaction by debitingLegal Expense for $10,000.Legal Expense for $40,000.Organization Expense for $10,000.Organization Expense for $40,000.

Ans:LO: 2, Bloom: C, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

In the financial statements, organization costs appearsimmediately below Retained Earnings in the stockholders' equity section.in the income statement.as part of paid-in capital in the stockholders' equity section.as an intangible asset.


Which of the following represents the largest number of common shares?Treasury sharesIssued sharesOutstanding sharesAuthorized shares

Ans:LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

New Corp. issues 2,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made toCommon Stock $20,000 and Paid-in Capital in Excess of Stated Value $8,000.Common Stock $28,000.Common Stock $20,000 and Paid-in Capital in Excess of Par $8,000.Common Stock $20,000 and Retained Earnings $8,000.

Ans:LO: 2, Bloom: K, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If Keene Company issues 4,500 shares of $5 par value common stock for $80,000, the accountCommon Stock will be credited for $22,500.Paid-in Capital in Excess of Par will be credited for $22,500.Paid-in Capital in Excess of Par will be credited for $80,000.Cash will be debited for $57,500.


Carson Packaging Corporation began business in 2013 by issuing 25,000 shares of $3 par common stock for $8 per share and 10,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $12. On its December 31, 2013 balance sheet, Carson Packaging would reportCommon Stock of $300,000.Common Stock of $75,000.Common Stock of $200,000.Paid-In Capital of $75,000.

Ans:LO: 2, Bloom: K, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Hsu, Inc. issued 7,500 shares of stock at a stated value of $8/share. The total issue of stock sold for $15 per share. The journal entry to record this transaction would include adebit to Cash for $60,000.credit to Common Stock for $60,000.credit to Paid-in Capital in Excess of Par for $112,500.credit to Common Stock for $112,500.


S. Lamar performed legal services for E. Garr. Due to a cash shortage, an agreement was reached whereby E. Garr. would pay S. Lamar a legal fee of approximately $8,000 by issuing 2,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.50 per share. Given this information, the journal entry for E. Garr. to record this transaction is:

Legal Expense 9,000Common Stock 9,000



Paid-in Capital in Excess of Par Common 6,000


Paid-in Capital in Excess of Par Common 7,000


Jarrett Company issued 600 shares of no-par common stock for $8,800. Which of the following journal entries would be made if the stock has no stated value?

Cash 8,800Common Stock 8,800

Cash 8,800Common Stock 600

Paid-in Capital in Excess of Par 8,200

Cash 8,800Common Stock 600

Paid-in Capital in Excess of Stated Value 8,200

Common Stock 8,800Cash 8,800


Darman Company issued 500 shares of no-par common stock for $5,500. Which of the following journal entries would be made if the stock has a stated value of $2 per share?Cash 5,500Common Stock 5,500


Paid-in Capital in Excess of Par 4,500


Paid-in Capital in Excess of Stated Value 4,500

Common Stock 5,500Cash 5,500


Ralston Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ralston issues 6,000 shares of common stock to pay its recent attorneys bill of $25,000 for legal services on a land access dispute, which of the following would be the journal entry for Ralston to record?Legal Expense 6,000Common Stock 6,000



Paid-in Capital in Excess of Stated Value Common 19,000


Paid-in Capital in Excess of Par Preferred 19,000


The following data is available for Blaine Corporation at December 31, 2013:Common stock, par $10 (authorized 25,000 shares) $200,000

Treasury Stock (at cost $15 per share) 900

Based on the data, how many shares of common stock are outstanding?

25,00020,00024,94019,940

Ans:LO: 3, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following data is available for Blaine Corporation at December 31, 2013:Common stock, par $10 (authorized 25,000 shares) $200,000

Treasury Stock (at cost $15 per share) $ 900

Based on the data, how many shares of common stock have been issued?

25,00020,00024,94019,940

Ans:LO: 3, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Aaron, Inc. paid $90,000 to buy back 10,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes adebit to Retained Earnings for $30,000.credit to Retained Earnings for $10,000.debit to Paid-in Capital from Treasury Stock for $90,000.credit to Paid-in Capital from Treasury Stock for $10,000.


Karl Corporation was organized on January 2, 2010. During 2013, Karl issued 20,000 shares at $24 per share, purchased 3,000 shares of treasury stock at $26 per share, and had net income of $300,000. What is the total amount of stockholders equity at December 31, 2013?$640,000$702,000$708,000$720,000

Ans:LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Evergreen Manufacturing Corporation purchased 4,000 shares of its own previously issued $10 par common stock for $92,000. As a result of this event,Evergreens Common Stock account decreased $40,000.Evergreens total stockholders equity decreased $92,000.Evergreens Paid-in Capital in Excess of Par account decreased $52,000.All of the above.

Ans:LO: 3, Bloom: K, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A corporation purchases 30,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders equity?Increase by $1,350,000Decrease by $900,000Decrease by $1,350,000Increase by $900,000


A corporation purchases 20,000 shares of its own $15 par common stock for $30 per share, recording it at cost. What will be the effect on total stockholders equity?Increase by $300,000Decrease by $600,000Increase by $600,000Decrease by $300,000


Ramos Corporation sold 200 shares of treasury stock for $45 per share. The cost for the shares was $35. The entry to record the sale will include acredit to Gain on Sale of Treasury Stock for $7,000.credit to Paid-in Capital from Treasury Stock for $2,000.debit to Paid-in Capital in Excess of Par for $2,000.credit to Treasury Stock for $9,000.


Each of the following is correct regarding treasury stock except that it has beenissued.fully paid for.reacquired.retired.


Treasury stock isstock issued by the U.S. Treasury Department.stock purchased by a corporation and held as an investment in its treasury.corporate stock issued by the treasurer of a company.a corporation's own stock which has been reacquired but not retired.


The acquisition of treasury stock by a corporationincreases its total assets and total stockholders' equity.decreases its total assets and total stockholders' equity.has no effect on total assets and total stockholders' equity.requires that a gain or loss be recognized on the income statement.


Treasury stock should be reported in the financial statements of a corporation as a(n)investment.liability.deduction from total paid-in capital.deduction from total paid-in capital and retained earnings.


A company would not acquire treasury stockin order to reissue shares to officers.as an asset investment.in order to increase trading of the company's stock.to have additional shares available to use in acquisitions of other companies.


Accounting for treasury stock is done by theFIFO method.LIFO method.cost method.lower of cost or market method.


Treasury stock is generally accounted for by thecost method.market value method.par value method.stated value method.


Treasury Stock is a(n)contra asset account.retained earnings account.asset account.contra stockholders equity account.


Five thousand shares of treasury stock of Marker, Inc., previously acquired at $14 per share, are sold at $20 per share. The entry to record this transaction will include acredit to Treasury Stock for $100,000.debit to Paid-In Capital from Treasury Stock for $30,000.debit to Treasury Stock for $70,000.credit to Paid-In Capital from Treasury Stock for $30,000.


Salon Company originally issued 3,000 shares of $10 par value common stock for $90,000 ($30 per share). Salon subsequently purchases 300 shares of treasury stock for $27 per share and resells the 300 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock, there will be acredit to Common Stock for $8,100.credit to Treasury Stock for $3,000.debit to Paid-In Capital in Excess of Par of $9,000.credit to Paid-In Capital from Treasury Stock for $600.


Brown Company has 1,000 shares of 6%, $100 par cumulative preferred stock outstanding at December 31, 2013. No dividends have been paid on this stock for 2012 or 2013. Dividends in arrears at December 31, 2013 total$0.$600.$6,000.$12,000.

Ans:LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

Era Company has 3,000 shares of 5%, $100 par non-cumulative preferred stock outstanding at December 31, 2013. No dividends have been paid on this stock for 2012 or 2013. Dividends in arrears at December 31, 2013 total$0.$1,500.$15,000.$30,000.

Ans:LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ranier issues 5,000 shares of preferred stock for land with an asking price of $600,000 and a market value of $540,000, which of the following would be the journal entry for Ranier to record?Land 500,000Preferred Stock 500,000

Land 540,000Preferred Stock 540,000


Paid-in Capital in Excess of Par-Preferred 100,000


Paid-in Capital Excess of Par-Preferred 40,000


Lakeland, Inc. has 25,000 shares of 8%, $100 par value, noncumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012. There were no dividends declared in 2011. The board of directors declares and pays a $250,000 dividend in 2012. What is the amount of dividends received by the common stockholders in 2012?$0$200,000$250,000$50,000


When preferred stock is cumulative, preferred dividends not declared in a period areconsidered a liability.called dividends in arrears.distributions of earnings.never paid.


Which of the following is not a right or preference associated with preferred stock?The right to voteFirst claim to dividendsPreference to corporate assets in case of liquidationTo receive dividends in arrears before common stockholders receive dividends

Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: None, AICPA PC: None, IMA: Business Economics

Cooke Corporation issues 10,000 shares of $50 par value preferred stock for cash at $90 per share. The entry to record the transaction will consist of a debit to Cash for $900,000 and a credit or credits toPreferred Stock for $900,000.Preferred Stock for $500,000 and Paid-in Capital in Excess of ParPreferred Stock for $400,000.Preferred Stock for $400,000 and Paid-in Capital from Preferred Stock for $500,000.Paid-in Capital from Preferred Stock for $900,000.


Cooke Corporation issues 10,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reportedentirely within the capital stock section.entirely within the additional paid-in capital section.under both the capital stock and additional paid-in capital sections.entirely under the retained earnings section.


Dividends in arrears on cumulative preferred stockare shown in stockholders equity of the balance sheet.must be paid before common stockholders can receive a dividend.should be recorded as a current liability until they are paid.enable the preferred stockholders to share equally in corporate earnings with the common stockholders.


Dividends in arrears on cumulative preferred stockare considered to be a non-current liability.are considered to be a current liability.only occur when preferred dividends have been declared.should be disclosed in the notes to the financial statements.


If preferred stock is cumulative, thepreferred dividends not declared in a given year are called dividends in arrears.preferred stockholders and the common stockholders receive equal dividends.preferred stockholders and the common stockholders receive the same total dollar amount of dividends.common stockholders will share in the preferred dividends.


The Northern Corporation issues 8,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $960,000 and a credit or credits toPreferred Stock for $960,000.Paid-in Capital from Preferred Stock for $960,000.Preferred Stock for $800,000 and Retained Earnings for $160,000.Preferred Stock for $800,000 and Paid-in Capital in Excess of ParPreferred Stock for $160,000.

Ans:LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Vega Corporations December 31, 2013 balance sheet showed the following:8% preferred stock, $20 par value, cumulative, 10,000 shares

authorized; 7,500 shares issued $ 150,000

Common stock, $10 par value, 1,000,000 shares authorized;

975,000 shares issued, 960,000 shares outstanding 9,750,000

Paid-in capital in excess of parpreferred stock 30,000

Paid-in capital in excess of parcommon stock 13,500,000

Retained earnings 3,750,000

Treasury stock (15,000 shares) 315,000

Vega declared and paid a $48,000 cash dividend on December 15, 2013. If the companys dividends in arrears prior to that date were $10,000, Vegas common stockholders received

$38,000.$22,000.$26,000.no dividend.


Each of the following decreases retained earnings except acash dividend.liquidating dividend.stock dividend.All of these decrease retained earnings.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

Each of the following decreases total stockholders' equity except acash dividend.liquidating dividend.stock dividend.All of these decrease total stockholders' equity.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

Which one of the following is not necessary in order for a corporation to pay a cash dividend?Adequate cashApproval of stockholdersDeclaration of dividends by the board of directorsRetained earnings

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

If a corporation declares a dividend based upon paid-in capital, it is known as ascrip dividend.property dividend.paid dividend.liquidating dividend.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

The date on which a cash dividend becomes a binding legal obligation is on thedeclaration date.date of record.payment date.last day of the fiscal year-end.


The effect of the declaration of a cash dividend by the board of directors is toIncrease Decrease

Stockholders' equity AssetsAssets LiabilitiesLiabilities Stockholders' equityLiabilities Assets

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is todecrease total liabilities and stockholders' equity.increase total expenses and total liabilities.increase total assets and stockholders' equity.decrease total assets and stockholders' equity.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

Common Stock Dividends Distributable is classified as a(n)asset account.stockholders' equity account.expense account.liability account.


The effect of a stock dividend is todecrease total assets and stockholders' equity.change the composition of stockholders' equity.decrease total assets and total liabilities.increase the book value per share of common stock.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration isCommon Stock Dividends Distributable.Common Stock.Paid-in Capital in Excess of Par.Retained Earnings.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

Which one of the following events would not require a formal journal entry on a corporation's books?2 for 1 stock split100% stock dividend2% stock dividend$1 per share cash dividend


Stock dividends and stock splits have the following effects on retained earnings:Stock Splits Stock Dividends

Increase No changeNo change DecreaseDecrease DecreaseNo change No change

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

Dividends are predominantly paid inearnings.property.cash.stock.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received alarge stock dividend.cash dividend.contingent dividend.small stock dividend.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

Of the various dividends types, the two most common types in practice arecash and large stock.cash and property.cash and small stock.property and small stock.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

Regular dividends are declared out ofPaid-in Capital in Excess of Par.Treasury Stock.Common Stock.Retained Earnings.


A corporation is not committed to a legal obligation when it declaresa cash dividend.either a cash dividend or a stock dividend.a stock dividend.a distribution date.


Which of the following is not a significant date with respect to dividends?The declaration dateThe incorporation dateThe record dateThe payment date

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

On the dividend record date,a dividend becomes a current obligation.no entry is required.an entry may be required if it is a stock dividend.Dividends Payable is debited.


Which of the following statements regarding the date of a cash dividend declaration is not accurate?The dividend can be rescinded once it has been declared.The corporation is committed to a legal, binding obligation.The board of directors formally authorizes the cash dividend.A liability account must be increased.


Dividends Payable is classified as along-term liability.contra stockholders' equity account to Retained Earnings.current liability.stockholders' equity account.


Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:Total Assets Total Liabilities Total Stockholders' Equity

Increase Decrease No changeNo change Increase DecreaseDecrease Increase DecreaseDecrease No change Increase

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

Which of the following statements about dividends is not accurate?Many companies declare and pay cash quarterly dividends.Low dividends may mean high stock returns.The board of directors is obligated to declare dividends.A legal dividend may not be a feasible one.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is todecrease current liabilities and stockholders' equity.increase total assets and stockholders' equity.increase current liabilities and stockholders' equity.decrease stockholders' equity and total assets.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

The declaration and distribution of a stock dividend willincrease total stockholders' equity.increase total assets.decrease total assets.have no effect on total assets.


Xeris, Inc. has 1,000 shares of 5%, $10 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2013. What is the annual dividend on the preferred stock?$5 per share$500 in total$5,000 in total$.05 per share

Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2013. If the board of directors declares a $60,000 dividend, thepreferred shareholders will receive 1/10th of what the common shareholders will receive.preferred shareholders will receive the entire $60,000.$60,000 will be held as restricted retained earnings and paid out at some future date.preferred shareholders will receive $30,000 and the common shareholders will receive $30,000.


Marion, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2013. There were no dividends declared in 2012. The board of directors declares and pays a $55,000 dividend in 2013. What is the amount of dividends received by the common stockholders in 2013?$0$25,000$55,000$30,000


Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012, and December 31, 2013. The board of directors declared and paid a $4,000 dividend in 2012. In 2013, $15,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2013?Preferred Common

$9,000 $6,000$7,500 $7,500$6,000 $9,000$5,000 $10,000


Township, Inc. has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2012, and December 31, 2013. The board of directors declared and paid a $50,000 dividend in 2012. In 2013, $110,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2013?Preferred Common

$0 $110,000$50,000 $60,000$55,000 $55,000$70,000 $40,000


The board of directors must assign a per share value to a stock dividend declared that isgreater than the par or stated value.less than the par or stated value.equal to the par or stated value.at least equal to the par or stated value.


Corporations generally issue stock dividends in order toincrease the market price per share.exceed stockholders' dividend expectations.increase the marketability of the stock.decrease the amount of capital in the corporation.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

A stockholder who receives a stock dividend wouldexpect the market price per share to increase.own more shares of stock.expect retained earnings to increase.expect the par value of the stock to change.

Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: Business Economics

When stock dividends are distributed,Common Stock Dividends Distributable is decreased.Retained Earnings is decreased.Paid-in Capital in Excess of Par is debited if it is a small stock dividend.no entry is necessary if it is a large stock dividend.


A small stock dividend is defined asless than 30% but greater than 25% of the corporation's issued stock.between 50% and 100% of the corporation's issued stock.more than 30% of the corporation's issued stock.less than 2025% of the corporation's issued stock.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

The per share amount normally assigned by the board of directors to a large stock dividend isthe market value of the stock on the date of declaration.the average price paid by stockholders on outstanding shares.the par or stated value of the stock.zero.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: Business Economics

The per share amount normally assigned by the board of directors to a small stock dividend isthe market value of the stock on the date of declaration.the average price paid by stockholders on outstanding shares.the par or stated value of the stock.zero.

Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: Business Economics

Identify the effect the declaration and distribution of a stock dividend has on the par value per share.Par Value per Share

IncreaseDecreaseIncrease or decreaseNo effect

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: Reporting

The declaration of a stock dividend willincrease paid-in capital.change the total of stockholders' equity.increase total liabilities.increase total assets.


Which of the following show the proper effect of a stock split and a stock dividend?Item Stock Split Stock Dividend

Total paid-in capital Increase IncreaseTotal retained earnings Decrease DecreaseTotal par value (common) Decrease IncreasePar value per share Decrease No change

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

A stock splitmay occur in the absence of retained earnings.will increase total paid-in capital.will increase the total par value of the stock.will have no effect on the par value per share of stock.

Ans:LO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

Outstanding stock of the Zone Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 5%, $10 par noncumulative preferred stock. In 2012, Zone declared and paid dividends of $2,000. In 2013, Zone declared and paid dividends of $6,000. How much of the 2013 dividend was distributed to preferred shareholders?$3,000$3,500$2,500None of the above

Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Outstanding stock of the Core Corporation included 20,000 shares of $5 par common stock and 10,000 shares of 5%, $10 par noncumulative preferred stock. In 2012, Core declared and paid dividends of $4,000. In 2013, Core declared and paid dividends of $12,000. How much of the 2013 dividend was distributed to preferred shareholders?$7,000$4,000$5,000None of the above


On January 1, Collins Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 15% stock dividend. Market value of the stock was $15/share. As a result of this event,Collins Paid-in Capital in Excess of Par account increased $600,000.Collins total stockholders equity was unaffected.Collins Stock Dividends account increased $1,800,000.All of the above.

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

On January 1, Edison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 20% stock dividend. Market value of the stock was $15/share. As a result of this event,Edisons Paid-in Capital in Excess of Par account increased $1,000,000.Edisons total stockholders equity was unaffected.Edisons Stock Dividends account increased $3,000,000.d All of the above.

Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Start Inc. has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2013. What is the annual dividend on the preferred stock?$60 per share$30,000 in total$50,000 in total$0.60 per share


Arm, Inc., has 10,000 shares of 6%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2013. If the board of directors declares a $200,000 dividend, thepreferred stockholders will receive 1/10th of what the common stockholders will receive.preferred stockholders will receive the entire $200,000.$60,000 will be held as restricted retained earnings and paid out at some future date.preferred stockholders will receive $60,000 and the common stockholders will receive $140,000.


Aim, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2013. There were no dividends declared in 2012. The board of directors declares and pays a $120,000 dividend in 2013. What is the amount of dividends received by the common stockholders in 2013?$0$50,000$20,000$70,000


Last Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2013, and December 31, 2012. The board of directors declared and paid a $5,000 dividend in 2012. In 2013, $24,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2013?$17,000$12,000$7,000$6,000


Art, Inc., has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2013. There were no dividends declared in 2011. The board of directors declares and pays a $45,000 dividend in 2012 and in 2013. What is the amount of dividends received by the common stockholders in 2013?$15,000$25,000$45,000$0


Crawl Inc., has 1,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012, and December 31, 2013. The board of directors declared and paid a $2,000 dividend in 2012. In 2013, $12,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2013?$8,000$6,000$4,000$3,000


On January 1, Sway Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17, the company declared a 15% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The entry to record the transaction of March 17 would include acredit to Stock Dividends for $27,000.credit to Cash for $117,000.credit to Common Stock Dividends Distributable for $90,000.debit to Common Stock Dividends Distributable for $90,000.


On January 1, Sway Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17, the company declared a 18% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The stock was distributed on March 30. The entry to record the transaction of March 30 would include acredit to Cash for $108,000.debit to Common Stock Dividends Distributable for $108,000.credit to Paid-in Capital in Excess of Par for $32,400.debit to Stock Dividends for $32,400.

Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

On January 1, Soft Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 15% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The entry to record the transaction of June 17 would include adebit to Stock Dividends for $180,000.credit to Cash for $180,000.credit to Common Stock Dividends Distributable for $180,000.credit to Common Stock Dividends Distributable for $60,000.


On January 1, Soft Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 15% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The stock was distributed on June 30. The entry to record the transaction of June 30 would include acredit to Common Stock for $120,000.debit to Common Stock Dividends Distributable for $180,000.credit to Paid-in Capital in Excess of Par for $60,000.debit to Stock Dividends for $60,000.


Cork Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 7%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Cork distribute to the common stockholders?$76,000.$84,000.$118,000.None.


Land Inc. has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 200,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Land declares a 10% stock dividend on its common stock:net income will decrease by $100,000.retained earnings will decrease by $100,000 and total stockholders' equity will increase by $100,000.retained earnings will decrease by $600,000 and total stockholders' equity will increase by $600,000.retained earnings will decrease by $600,000 and total paid-in capital will increase by $600,000.


On December 31, 2013, Stock, Inc. has 3,000 shares of 6% $100 par value cumulative preferred stock and 45,000 shares of $10 par value common stock outstanding. On December 31, 2013, the directors declare a $15,000 cash dividend. The entry to record the declaration of the dividend would include:a credit of $3,000 to Cash Dividends.a note in the financial statements that dividends of $3 per share are in arrears on preferred stock for 2012.a debit of $15,000 to Common Stock.a credit of $15,000 to Dividends Payable.


Saint, Inc. declares a 10% common stock dividend when it has 30,000 shares of $10 par value common stock outstanding. If the market value of $24 per share is used, the amounts debited to Stock Dividends and credited to Paid-in Capital in Excess of Par are:Paid-in Capital in

Stock Dividends Excess of Par

$30,000 $0$72,000 $42,000$72,000 $30,000$30,000 $42,000


Cloud Manufacturing declared a 10% stock dividend when it had 350,000 shares of $3 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit toStock Dividends for $105,000.Paid-in Capital in Excess of Par for $315,000.Common Stock for $105,000.Common Stock Dividends Distributable for $420,000.

Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

The following selected amounts are available for Clark Company.Retained earnings (beginning) $800

Net loss 150

Cash dividends declared 100

Stock dividends declared 100

What is its ending retained earnings balance?

$650$700$450$600


Car and Auto Sisters had retained earnings of $15,000 on the balance sheet but disclosed in the footnotes that $3,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?$11,000$12,000$15,000$9,000


Moore, Inc. had 250,000 shares of common stock outstanding before a stock split occurred, and 750,000 shares outstanding after the stock split. The stock split was2-for-5.5-for-1.1-for-5.3-for-1.

Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Restricting retained earnings for the cost of treasury stock purchased is acontractual restriction.legal restriction.stock restriction.voluntary restriction.


A prior period adjustment that corrects income of a prior period requires that an entry be made toan income statement account.a current year revenue or expense account.the retained earnings account.an asset account.

Ans:LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is todecrease total assets and total stockholders' equity.increase stockholders' equity and decrease total liabilities.decrease total retained earnings and increase total liabilities.reduce the amount of retained earnings available for dividend declarations.


A credit balance in retained earnings representsthe amount of cash retained in the business.a claim on specific assets of the corporation.a claim on the aggregate assets of the corporation.the amount of stockholders' equity exempted from the stockholders' claim on total assets.


A net lossoccurs if operating expenses exceed cost of goods sold.is not closed to Retained Earnings if it would result in a debit balance.is closed to Retained Earnings even if it would result in a debit balance.is closed to the paid-in capital account of the stockholders' equity section of the balance sheet.


Prior period adjustments are reportedin the footnotes of the current year's financial statements.on the current year's balance sheet.on the current year's income statement.on the current year's retained earnings statement.


Retained earnings are occasionally restrictedto set aside cash for dividends.to keep the legal capital associated with paid-in capital intact.due to contractual loan restrictions.if preferred dividends are in arrears.


Retained earnings is increased by each of the following exceptnet income.prior period adjustments.some disposals of treasury stock.All of these increase retained earnings.


A prior period adjustment for understatement of net income willbe credited to the Retained Earnings account.be debited to the Retained Earnings account.show as a gain on the current year's Income Statement.show as an asset on the current year's Balance Sheet.


The retained earnings statementis the owners' equity statement for a corporation.will show an addition to the beginning retained earnings balance for an understatement of net income in a prior year.will not reflect net losses.will, in some cases, fail to reconcile the beginning and ending retained earnings balances.

Ans:LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

In the stockholders' equity section of the balance sheet,Common Stock Dividends Distributable will be classified as part of additional paid-in capital.Common Stock Dividends Distributable will appear in its own subsection of the stockholders' equity.Additional Paid-in Capital appears under the subsection Paid-in Capital.Dividends in arrears will appear as a restriction of Retained Earnings.


The return on common stockholders' equity is computed by dividing net income available to common stockholders byending total stockholders' equity.ending common stockholders' equity.average total stockholders' equity.average common stockholders' equity.

Ans:LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

The return on common stockholders equity is computed by dividingnet income by ending common stockholders equity.net income by average common stockholders equity.net income less preferred dividends by ending common stockholders equity.net income less preferred dividends by average common stockholders equity.

Ans:LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Communication, IMA: FSA

Kong Inc. reported net income of $270,000 during 2013 and paid dividends of $26,000 on common stock. It also has 10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. Common stockholders' equity was $1,200,000 on January 1, 2013, and $1,600,000 on December 31, 2013. The company's return on common stockholders' equity for 2013 is:17.4%15.0%13.1%19.3%

Ans:LO: 7, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

King Corporation had net income of $250,000 and paid dividends of $40,000 to common stockholders and $10,000 to preferred stockholders in 2013. King Corporations common stockholders equity at the beginning and end of 2013 was $870,000 and $1,130,000, respectively. There are 100,000 weighted-average shares of common stock outstanding.King Corporations return on common stockholders equity was

10%.24%.20%.17.7%.


Assume that all balance sheet amounts for Marley Company represent average balance figures.Stockholders equitycommon $150,000

Total stockholders equity 200,000

Sales 100,000

Net income 27,000

Number of shares of common stock 10,000

Common stock dividends 10,000

Preferred stock dividends 4,000

What is the return on common stockholders equity ratio for Marley?

18.0%15.3%11.3%8.7%










Vegas total paid-in capital was

$23,480,000.$23,795,000.$23,165,000.$13,530,000.










Vegas total stockholders equity was

$26,669,000.$46,690,000.$27,269,000.$26,639,000.


Bacon Corporation began business by issuing 150,000 shares of $5 par value common stock for $25 per share. During its first year, the corporation sustained a net loss of $25,000. The year-end balance sheet would showCommon stock of $750,000.Common stock of $3,750,000.Total paid-in capital of $3,725,000.Total paid-in capital of $775,000.


Realistic Corporations December 31, 2013 balance sheet showed the following:8% preferred stock, $20 par value, cumulative, 20,000 shares



1,950,000 shares issued, 1,930,000 shares outstanding 19,500,000





Realistics total paid-in capital was

$46,760,000.$47,390,000.$46,130,000.$27,060,000.


Rouse Corporations December 31, 2013 balance sheet showed the following:8% preferred stock, $10 par value, cumulative, 20,000 shares



1,950,000 shares issued, 1,930,000 shares outstanding 19,500,000





Rouses total stockholders equity was

$54,990,000.$46,710,000.$54,360,000.$53,730,000.

Ans:LO: 7, Bloom: AP, Difficulty: Medium,

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ACC 557 Week 8 Quiz – Strayer NEW