Question 1

How would retained earnings be affected by the declaration of each of the following?

Accepted Answer

The answer of How would retained earnings be affected by...

Question 2

How would the declaration of a liquidating dividend by a corporation affect each of the following?

Accepted Answer

The answer of How would the declaration of a liquidating...

Question 3

The issuance of shares of preferred stock to shareholders

Accepted Answer

A)  increases preferred stock outstanding. 
B)  has no effect on preferred stock outstanding. 
C)  increases preferred stock authorized. 
D)  decreases preferred stock authorized. 
A)  increases preferred stock outstanding. 
B)  has no effect on preferred stock outstanding. 
C)  increases preferred stock authorized. 
D)  decreases preferred stock authorized.

Question 4

When a property dividend is declared and the book value of the property exceeds its market value, the dividend is recorded at the

Accepted Answer

A)  market value of the property at the date of distribution. 
B)  book value of the property at the date of declaration. 
C)  book value of the property at the date of distribution if it still exceeds the market value of the property at the date of declaration. 
D)  market value of the property at the date of declaration. 
A)  market value of the property at the date of distribution. 
B)  book value of the property at the date of declaration. 
C)  book value of the property at the date of distribution if it still exceeds the market value of the property at the date of declaration. 
D)  market value of the property at the date of declaration.

Question 5

A company declared a cash dividend on its common stock in December 2010, payable in January 2011. Retained Earnings would

Accepted Answer

A)  increase on the date of declaration. 
B)  not be affected on the date of declaration. 
C)  not be affected on the date of payment. 
D)  decrease on the date of payment. 
A)  increase on the date of declaration. 
B)  not be affected on the date of declaration. 
C)  not be affected on the date of payment. 
D)  decrease on the date of payment.

Question 6

Select the statement that is incorrect concerning the appropriations of retained earnings.

Accepted Answer

A)  Appropriations of retained earnings do not change the total amount of stockholders' equity. 
B)  Appropriations of retained earnings reflect funds set aside for a designated purpose, such as plant expansion. 
C)  Appropriations of retained earnings can be made as a result of contractual requirements. 
D)  Appropriations of retained earnings can be made at the discretion of the board of directors. 
A)  Appropriations of retained earnings do not change the total amount of stockholders' equity. 
B)  Appropriations of retained earnings reflect funds set aside for a designated purpose, such as plant expansion. 
C)  Appropriations of retained earnings can be made as a result of contractual requirements. 
D)  Appropriations of retained earnings can be made at the discretion of the board of directors.

Question 7

Stock warrants outstanding should be classified as

Accepted Answer

A)  liabilities. 
B)  reductions of capital contributed in excess of par value. 
C)  capital stock. 
D)  additions to contributed capital. 
A)  liabilities. 
B)  reductions of capital contributed in excess of par value. 
C)  capital stock. 
D)  additions to contributed capital.

Question 8

The Amelia Corporation was incorporated on January 1, 2011, with the following authorized capitalization:
 
During 2011, Amelia issued 24,000 shares of common stock for a total of $1,200,000 and 6,000 shares of preferred stock at $16 per share. In addition, on December 20, 2011, subscriptions for 2,000 shares of preferred stock were taken at a purchase price of $17. These subscribed shares were paid for on January 2, 2012. What should Amelia report as total contributed capital on its December 31, 2011, balance sheet?

Accepted Answer

A)  $1,040,000 
B)  $1,262,000 
C)  $1,296,000 
D)  $1,330,000 
A)  $1,040,000 
B)  $1,262,000 
C)  $1,296,000 
D)  $1,330,000

Question 9

The following was abstracted from the accounts of the Oak Corp. at year-end:
 
What should be the current balance of Retained Earnings?

Accepted Answer

A)  $260,000 
B)  $290,000 
C)  $305,000 
D)  $335,000 
A)  $260,000 
B)  $290,000 
C)  $305,000 
D)  $335,000

Question 10

On January 2, 2011, Stoner Corporation granted stock options to key employees for the purchase of 60,000 shares of the company's common stock at $25 per share. The options are intended to compensate employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2013, by grantees still in the employ of the company. The fair value of the option determined by an option pricing model is $7 at the grant date. Stoner plans to distribute up to 60,000 shares of treasury stock when options are exercised. The treasury stock was acquired by Stoner at a cost of $28 per share and was recorded under the cost method. Assume that no stock options were terminated during the year. How much should Stoner charge to Compensation Expense for the year ended December 31, 2011?

Accepted Answer

A)  $420,000 
B)  $210,000 
C)  $180,000 
D)  $90,000 
A)  $420,000 
B)  $210,000 
C)  $180,000 
D)  $90,000

Question 11

On February 24, BMC Company purchased 4,000 shares of Winn Corp.'s newly issued 6 percent cumulative $75 par preferred stock for $304,000. Each share carried one detachable stock warrant entitling the holder to acquire at $10 one share of Winn no-par common stock. On February 25, the market price of the preferred stock ex-warrants was $72 per share, and the market price of the stock warrants was $8 per warrant. On December 29, BMC sold all the stock warrants for $41,000. The gain on the sale of the stock warrants was

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $9,000. 
D)  $10,600. 
A)  $0. 
B)  $1,000. 
C)  $9,000. 
D)  $10,600.

Question 12

Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?

Accepted Answer

A)  The right to vote for the board of directors 
B)  The right to maintain one's proportional interest in the corporation 
C)  The right to receive a full cash dividend before dividends are paid to other classes of stock 
D)  The right to vote on major corporate issues 
A)  The right to vote for the board of directors 
B)  The right to maintain one's proportional interest in the corporation 
C)  The right to receive a full cash dividend before dividends are paid to other classes of stock 
D)  The right to vote on major corporate issues

Question 13

Barker Corp. received a charter authorizing 120,000 shares of common stock at $15 par value per share. During the first year of operations, 40,000 shares were sold at $28 per share. 600 shares were issued in payment of a current operating debt of $18,600. In the first year, the net income was $142,000.
During the year, dividends of $36,000 were paid to stockholders. At the end of the year, total liabilities were $82,000. Use the given data to compute the following items at the end of the first year (show all computations):

Accepted Answer

(1) @#IMG-DLM& (2)$1,326,600 - $82,000 = $1,244,60

Question 14

NRE Corporation has a stock option plan for its continuing employees that provides that each qualified employee may receive an option for a specified number of shares of the company's $1 par value stock. Employees must continue working for the company for three years to earn the grants, which may be exercised any time after the three years, at an option price of $10 per share. On January 1, 2011, employees were granted options for 3,000 shares when the market price was $16 per share. The fair value of the options was $24 each. The expected annual forfeiture rate is 5%. The accounting period ends December 31. NRE uses SFAS No. 123R in accounting for these options. Assume that the estimated and actual forfeiture rates are equal.
Required:

Accepted Answer

The answer of NRE Corporation has a stock option plan...

Question 15

Which of the following presentation formats is permitted by Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"?

Accepted Answer

A)  Only I 
B)  I and III 
C)  I and II 
D)  I, II, and III 
A)  Only I 
B)  I and III 
C)  I and II 
D)  I, II, and III

Question 16

The FASB has been struggling with the issue of determining the difference between debt and equity financing for nearly twenty years. The Board is concerned that many provisions of U.S. GAAP conflict with the definition of a liability given in the Conceptual Framework. As a result, the Board is considering a new approach, called the basic ownership approach, to distinguishing between debt and equity financing.
As part of this new approach, the FASB has suggested that all share-based compensation instruments should be classified as liabilities.
Required:
Explain the FASB's rationale for classifying share-based compensation instruments as liabilities.

Accepted Answer

Stock options are exercised only if the

Question 17

How would the declaration of a 10 percent stock dividend by a corporation affect each of the following on its books?

Accepted Answer

The answer of How would the declaration of a 10...

Question 18

When a dividend is declared and paid in stock,

Accepted Answer

A)  total stockholders' equity does not change. 
B)  total stockholders' equity decreases. 
C)  the current ratio increases. 
D)  the amount of working capital decreases. 
A)  total stockholders' equity does not change. 
B)  total stockholders' equity decreases. 
C)  the current ratio increases. 
D)  the amount of working capital decreases.

Question 19

On June 1, Mason Company issued 8,000 shares of its $10 par common stock to Dixon for a tract of land. The stock had a fair market value of $18 per share on this date. On Dixon's last property tax bill, the land was assessed at $96,000. Mason should record an increase in Additional Paid-In Capital of

Accepted Answer

A)  $96,000. 
B)  $64,000. 
C)  $40,000. 
D)  $16,000. 
A)  $96,000. 
B)  $64,000. 
C)  $40,000. 
D)  $16,000.

Question 20

Which of the following is issued to shareholders by a corporation as evidence of the ownership of rights to acquire its unissued or treasury stock?

Accepted Answer

A)  Stock options 
B)  Stock rights 
C)  Stock dividends 
D)  Stock subscriptions 
A)  Stock options 
B)  Stock rights 
C)  Stock dividends 
D)  Stock subscriptions

How would retained earnings be affected by the declaration of each of the following?

How would the declaration of a liquidating dividend by a corporation affect each of the following?

The issuance of shares of preferred stock to shareholders

When a property dividend is declared and the book value of the property exceeds its market value, the dividend is recorded at the

A company declared a cash dividend on its common stock in December 2010, payable in January 2011. Retained Earnings would

Select the statement that is incorrect concerning the appropriations of retained earnings.

Stock warrants outstanding should be classified as

The following was abstracted from the accounts of the Oak Corp. at year-end: What should be the current balance of Retained Earnings?

Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?

Which of the following presentation formats is permitted by Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"?

How would the declaration of a 10 percent stock dividend by a corporation affect each of the following on its books?

When a dividend is declared and paid in stock,

Which of the following is issued to shareholders by a corporation as evidence of the ownership of rights to acquire its unissued or treasury stock?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 13: Equity Financing

How would retained earnings be affected by the declaration of each of the following?

How would the declaration of a liquidating dividend by a corporation affect each of the following?

The issuance of shares of preferred stock to shareholders

When a property dividend is declared and the book value of the property exceeds its market value, the dividend is recorded at the

A company declared a cash dividend on its common stock in December 2010, payable in January 2011. Retained Earnings would

Select the statement that is incorrect concerning the appropriations of retained earnings.

Stock warrants outstanding should be classified as

The following was abstracted from the accounts of the Oak Corp. at year-end: What should be the current balance of Retained Earnings?

Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?

Which of the following presentation formats is permitted by Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"?

How would the declaration of a 10 percent stock dividend by a corporation affect each of the following on its books?

When a dividend is declared and paid in stock,

Which of the following is issued to shareholders by a corporation as evidence of the ownership of rights to acquire its unissued or treasury stock?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters