Question 1

Total stockholders' equity represents

Accepted Answer

A)  a claim to specific assets contributed by the owners. 
B)  the maximum amount that can be borrowed by a company. 
C)  a claim against a portion of the total assets of a company. 
D)  only the amount of earnings that have been retained in the business. 
A)  a claim to specific assets contributed by the owners. 
B)  the maximum amount that can be borrowed by a company. 
C)  a claim against a portion of the total assets of a company. 
D)  only the amount of earnings that have been retained in the business.

Question 2

Porter Corp. purchased its own par value stock on January 1, 2014 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from

Accepted Answer

A)  additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. 
B)  additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein. 
C)  retained earnings. 
D)  net income. 
A)  additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. 
B)  additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein. 
C)  retained earnings. 
D)  net income.

Question 3

Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were purchased in 2011 for $90,000. On November 15, 2015, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 90,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Accepted Answer

The answer of Pierson Corporation owned 10,000 shares of Hunter...

Question 4

Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 5

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

Accepted Answer

A)  Retained Earnings. 
B)  a paid-in capital account. 
C)  Accumulated Depletion. 
D)  Accumulated Depreciation. 
A)  Retained Earnings. 
B)  a paid-in capital account. 
C)  Accumulated Depletion. 
D)  Accumulated Depreciation.

Question 6

The residual interest in a corporation belongs to the

Accepted Answer

A)  management. 
B)  creditors. 
C)  common stockholders. 
D)  preferred stockholders. 
A)  management. 
B)  creditors. 
C)  common stockholders. 
D)  preferred stockholders.

Question 7

Stinson Corporation owned 30,000 shares of Matile Corporation. These shares were purchased in 2011 for $270,000. On November 15, 2015, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a stockholder. On that date, when the market price of Matile was $28 per share, there were 270,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Accepted Answer

The answer of Stinson Corporation owned 30,000 shares of Matile...

Question 8

If management wishes to "capitalize" part of the earnings, it may issue a

Accepted Answer

A)  cash dividend. 
B)  stock dividend. 
C)  property dividend. 
D)  liquidating dividend. 
A)  cash dividend. 
B)  stock dividend. 
C)  property dividend. 
D)  liquidating dividend.

Question 9

The current project of the IASB and the FASB related to financial statement presentation indicates

Accepted Answer

A)  that the IFRS statement of recognized income and expenses will most likely be adopted by the FASB as a U.S. requirement in the near future. 
B)  that the IFRS statement of recognized income and expenses will probably be eliminated. 
C)  that the U.S. GAAP standard for reporting comprehensive income will most likely be adopted by the IASB for IFRS. 
D)  that hybrid financial instruments are unacceptable. 
A)  that the IFRS statement of recognized income and expenses will most likely be adopted by the FASB as a U.S. requirement in the near future. 
B)  that the IFRS statement of recognized income and expenses will probably be eliminated. 
C)  that the U.S. GAAP standard for reporting comprehensive income will most likely be adopted by the IASB for IFRS. 
D)  that hybrid financial instruments are unacceptable.

Question 10

The preemptive right allows stockholders the right to vote for directors of the company.

Accepted Answer

A) True 
 B)False

Question 11

On January 1, 2014, Dodd, Inc., declared a 15% stock dividend on its common stock when the fair value of the common stock was $30 per share. Stockholders' equity before the stock dividend was declared consisted of:   What was the effect on Dodd's retained earnings as a result of the above transaction?

Accepted Answer

A)  $270,000 decrease 
B)  $540,000 decrease 
C)  $900,000 decrease 
D)  $450,000 decrease 
A)  $270,000 decrease 
B)  $540,000 decrease 
C)  $900,000 decrease 
D)  $450,000 decrease

Question 12

At the beginning of 2015, Flaherty Company had retained earnings of $350,000. During the year Flaherty reported net income of $100,000, sold treasury stock at a "gain" of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2015 was

Accepted Answer

A)  $330,000. 
B)  $360,000. 
C)  $366,000. 
D)  $396,000. 
A)  $330,000. 
B)  $360,000. 
C)  $366,000. 
D)  $396,000.

Question 13

Under IFRS compliance requirements the revaluation surplus is not considered contributed capital.

Accepted Answer

A) True 
 B)False

Question 14

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

Accepted Answer

A)  increases common stock outstanding and increases total stockholders' equity. 
B)  decreases retained earnings but does not change total stockholders' equity. 
C)  may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity. 
D)  increases retained earnings and increases total stockholders' equity. 
A)  increases common stock outstanding and increases total stockholders' equity. 
B)  decreases retained earnings but does not change total stockholders' equity. 
C)  may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity. 
D)  increases retained earnings and increases total stockholders' equity.

Question 15

How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

Accepted Answer

A)  As ordinary earnings shown on the income statement. 
B)  As paid-in capital from treasury stock transactions. 
C)  As an increase in the amount shown for common stock. 
D)  As an extraordinary item shown on the income statement. 
A)  As ordinary earnings shown on the income statement. 
B)  As paid-in capital from treasury stock transactions. 
C)  As an increase in the amount shown for common stock. 
D)  As an extraordinary item shown on the income statement.

Question 16

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year.Assuming that $366,000 will be distributed, and the preferred stock is also participating, how much will the common stockholders receive?

Accepted Answer

A)  $222,000. 
B)  $180,000. 
C)  $186,000. 
D)  $ 96,000. 
A)  $222,000. 
B)  $180,000. 
C)  $186,000. 
D)  $ 96,000.

Question 17

What effect does the issuance of a 2-for-1 stock split have on each of the following?

Accepted Answer

The answer of What effect does the issuance of a...

Question 18

When a corporation sells treasury stock below its cost, it usually debits the difference between cost and selling price to Paid-in Capital from Treasury Stock.

Accepted Answer

A) True 
 B)False

Question 19

The payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders.

Accepted Answer

A) True 
 B)False

Question 20

All dividends, except for liquidating dividends, reduce the total stockholders' equity of a corporation.

Accepted Answer

A) True 
 B)False

Exam 15: Stockholders Equity

Total stockholders' equity represents

Porter Corp. purchased its own par value stock on January 1, 2014 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from

Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

The residual interest in a corporation belongs to the

If management wishes to "capitalize" part of the earnings, it may issue a

The current project of the IASB and the FASB related to financial statement presentation indicates

The preemptive right allows stockholders the right to vote for directors of the company.

Under IFRS compliance requirements the revaluation surplus is not considered contributed capital.

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

What effect does the issuance of a 2-for-1 stock split have on each of the following?

When a corporation sells treasury stock below its cost, it usually debits the difference between cost and selling price to Paid-in Capital from Treasury Stock.

The payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders.

All dividends, except for liquidating dividends, reduce the total stockholders' equity of a corporation.

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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