Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Agler Corporation purchased 3,000 shares of its $5 par value common stock for a cash price of $12 per share. Two months later, Agler sold the treasury stock for a cash price of $10 per share.
Instructions
Prepare the journal entry to record the sale of the treasury stock assuming
(a) No balance in Paid-in Capital from Treasury Stock.
(b) A $4,000 balance in Paid-in Capital from Treasury Stock.

Accepted Answer

The answer of Agler Corporation purchased 3,000 shares of its...

Question 3

Rebel Inc. issued 3,000 shares of no-par common stock with a stated value of $3 per share. The market price of the stock on the date of issuance was $12 per share. The entry to record this transaction includes a

Accepted Answer

A)  debit to Cash for $9,000. 
B)  credit to Common Stock for $36,000. 
C)  credit to Common Stock for $9,000. 
D)  debit to Paid-in Capital in Excess of Par Value for $36,000. 
A)  debit to Cash for $9,000. 
B)  credit to Common Stock for $36,000. 
C)  credit to Common Stock for $9,000. 
D)  debit to Paid-in Capital in Excess of Par Value for $36,000.

Question 4

The two ways that a corporation can be classified by ownership are

Accepted Answer

A)  publicly held and privately held. 
B)  stock and non-stock. 
C)  inside and outside. 
D)  majority and minority. 
A)  publicly held and privately held. 
B)  stock and non-stock. 
C)  inside and outside. 
D)  majority and minority.

Question 5

On September 5, Bertolli Corporation acquired 2,500 shares of its own $1 par common stock for $22 per share. On October 15, 1,000 shares of the treasury stock is sold for $25 per share.
Instructions
Journalize the purchase and sale of the treasury stock assuming that the company uses the cost method.

Accepted Answer

The answer of On September 5, Bertolli Corporation acquired 2,500...

Question 6

Retained earnings are a part of stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 7

The _______________ feature of preferred stock gives the preferred stockholders the right to receive current-year dividends and unpaid prior-year dividends before common stockholders receive any dividends.

Accepted Answer

The answer of The _______________ feature of preferred stock gives...

Question 8

Treasury stock is generally accounted for by the

Accepted Answer

A)  cost method. 
B)  market value method. 
C)  par value method. 
D)  stated value method. 
A)  cost method. 
B)  market value method. 
C)  par value method. 
D)  stated value method.

Question 9

Dividends are declared out of retained earnings.

Accepted Answer

A) True 
 B)False

Question 10

If Vickers Company issues 4,000 shares of $5 par value common stock for $140,000,

Accepted Answer

A)  Common Stock will be credited for $140,000. 
B)  Paid-In Capital in Excess of Par Value will be credited for $20,000. 
C)  Paid-In Capital in Excess of Par Value will be credited for $120,000. 
D)  Cash will be debited for $120,000. 
A)  Common Stock will be credited for $140,000. 
B)  Paid-In Capital in Excess of Par Value will be credited for $20,000. 
C)  Paid-In Capital in Excess of Par Value will be credited for $120,000. 
D)  Cash will be debited for $120,000.

Question 11

Which of the following is not true of a corporation?

Accepted Answer

A)  It may buy, own, and sell property. 
B)  It may sue and be sued. 
C)  The acts of its owners bind the corporation. 
D)  It may enter into binding legal contracts in its own name. 
A)  It may buy, own, and sell property. 
B)  It may sue and be sued. 
C)  The acts of its owners bind the corporation. 
D)  It may enter into binding legal contracts in its own name.

Question 12

Cole 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 reported

Accepted Answer

A)  entirely within the capital stock section. 
B)  entirely within the additional paid-in capital section. 
C)  under both the capital stock and additional paid-in capital sections. 
D)  entirely under the retained earnings section. 
A)  entirely within the capital stock section. 
B)  entirely within the additional paid-in capital section. 
C)  under both the capital stock and additional paid-in capital sections. 
D)  entirely under the retained earnings section.

Question 13

Treasury Stock is a(n)

Accepted Answer

A)  contra asset account. 
B)  retained earnings account. 
C)  asset account. 
D)  contra stockholders' equity account. 
A)  contra asset account. 
B)  retained earnings account. 
C)  asset account. 
D)  contra stockholders' equity account.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Beckham Company has 1,000 shares of 6%, $100 par cumulative preferred stock outstanding at December 31, 2010. No dividends have been paid on this stock for 2009 or 2010. Dividends in arrears at December 31, 2010 total

Accepted Answer

A)  $0. 
B)  $600. 
C)  $6,000. 
D)  $12,000. 
A)  $0. 
B)  $600. 
C)  $6,000. 
D)  $12,000.

Question 16

Preferred stock has contractual provisions that give it a preference over common stock as to ___________________ and to ___________________ in the event of liquidation.

Accepted Answer

The answer of Preferred stock has contractual provisions that give...

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Eby Corporation issued 200,000 shares of $20 par value, cumulative, 6% preferred stock on January 1, 2009, for $4,500,000. In December 2011, Eby declared its first dividend of $800,000.
Instructions
(a) Prepare Eby's journal entry to record the issuance of the preferred stock.
(b) If the preferred stock is not cumulative, how much of the $800,000 would be paid to common stockholders?
(c) If the preferred stock is cumulative, how much of the $800,000 would be paid to common stockholders?

Accepted Answer

The answer of Eby Corporation issued 200,000 shares of $20...

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 13: Corporations: Organization and Capital Stock Transactions

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

Rebel Inc. issued 3,000 shares of no-par common stock with a stated value of $3 per share. The market price of the stock on the date of issuance was $12 per share. The entry to record this transaction includes a

The two ways that a corporation can be classified by ownership are

Retained earnings are a part of stockholders' equity.

The _______________ feature of preferred stock gives the preferred stockholders the right to receive current-year dividends and unpaid prior-year dividends before common stockholders receive any dividends.

Treasury stock is generally accounted for by the

Dividends are declared out of retained earnings.

If Vickers Company issues 4,000 shares of $5 par value common stock for $140,000,

Which of the following is not true of a corporation?

Cole 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 reported

Treasury Stock is a(n)

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

Beckham Company has 1,000 shares of 6%, $100 par cumulative preferred stock outstanding at December 31, 2010. No dividends have been paid on this stock for 2009 or 2010. Dividends in arrears at December 31, 2010 total

Preferred stock has contractual provisions that give it a preference over common stock as to ___________________ and to ___________________ in the event of liquidation.

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.

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

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

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

Preferred stock has contractual provisions that give it a preference over common stock as to _ and to _ in the event of liquidation.