Question 1

Which of the following is not a basic right of shareholders?

Accepted Answer

A)  To inspect the books of account and to insist upon an audit in the event of dissatisfaction with results revealed by such inspection. 
B)  To participate in the management of the corporation through taking part in and voting in shareholders' meetings. 
C)  To participate in the profits of the corporation through dividends declared by the board of directors. 
D)  To share in the distribution of assets of the corporation at liquidation or through liquidating dividends. 
E)  To sell shares in the corporation at a price exceeding its cost. 
A)  To inspect the books of account and to insist upon an audit in the event of dissatisfaction with results revealed by such inspection. 
B)  To participate in the management of the corporation through taking part in and voting in shareholders' meetings. 
C)  To participate in the profits of the corporation through dividends declared by the board of directors. 
D)  To share in the distribution of assets of the corporation at liquidation or through liquidating dividends. 
E)  To sell shares in the corporation at a price exceeding its cost. A

Question 2

Effective April 8,2014,the shareholders of Kim Corporation approved a 2 for 1 split of the company's common shares,and an increase in authorized common shares from 100,000 shares to 200,000 shares.Kim's shareholders' equity accounts immediately before issuance of the stock split shares were as follows: Common shares,100,000 shares authorized;   What should be the balances in Kim's common shares and retained earnings accounts immediately after the stock split?

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 D

Question 3

The Treasury Share account is debited and credited at the cost of the shares repurchased.

Accepted Answer

A) True 
 B)False  False

Question 4

During December 2019,BRC declared and issued a 1 for 5 stock dividend on its 100,000 outstanding common shares.The per share amounts were: original average issue price $16; current market price (end 2019)$13; and the average market price for 1999,$15.Give the required journal entry to record the simultaneous declaration and issuance of the stock dividend.

Accepted Answer

Small stoc

Question 5

Owners' equity must equal the:

Accepted Answer

A)  Total contributed capital plus retained earnings less liabilities. 
B)  Sum of the share capital account balances plus the total contributed capital in excess of par (or stated value). 
C)  Total assets minus total liabilities. 
D)  Total contributed capital less total retained earnings. 
A)  Total contributed capital plus retained earnings less liabilities. 
B)  Sum of the share capital account balances plus the total contributed capital in excess of par (or stated value). 
C)  Total assets minus total liabilities. 
D)  Total contributed capital less total retained earnings.

Question 6

PQR Inc.had 1,000 common shares outstanding with a par value of $10 per share.There was $20,000 of contributed surplus arising from previous retirements of shares in this class.Assume that half of these shares were retired for $14 per share.The journal entry to record this transaction would include:

Accepted Answer

A)  a debit to retained earnings of $40,000. 
B)  an income statement loss of $40,000. 
C)  a credit to retained earnings of $40,000. 
D)  a debit to retained earnings of $20,000 and a debit to contributed surplus of $20,000. 
A)  a debit to retained earnings of $40,000. 
B)  an income statement loss of $40,000. 
C)  a credit to retained earnings of $40,000. 
D)  a debit to retained earnings of $20,000 and a debit to contributed surplus of $20,000.

Question 7

Common share subscriptions receivable should always be reported as a current asset.

Accepted Answer

A) True 
 B)False

Question 8

ABC had 20,000 shares of treasury common stock,which it purchased for $7 per share.Until now,this was ABC's only treasury stock transaction.The shares were originally sold and issued at $5 per share.ABC uses the single-transaction method.ABC is now selling the treasury shares for $5 per share.The entry to record the resale would include a:

Accepted Answer

A)  Credit to Treasury stock for $100,000. 
B)  Debit to Retained earnings for $40,000. 
C)  Debit to common shares for $140,000. 
D)  Credit to common shares for $100,000. 
A)  Credit to Treasury stock for $100,000. 
B)  Debit to Retained earnings for $40,000. 
C)  Debit to common shares for $140,000. 
D)  Credit to common shares for $100,000.

Question 9

The order in which dividends are allocated to common and preferred shares depends upon the provisions in the respective stock contracts.Choose the correct statement regarding this allocation.

Accepted Answer

A)  When noncumulative preferred shares are fully participating, the rate of dividends allocated to preferred shares is the ratio of total par of preferred shares outstanding to total par of both classes of shares outstanding. 
B)  When noncumulative preferred shares are not participating, the rate of dividends to common shares are limited to the ratio of total par of common shares outstanding to total par of both classes of shares outstanding. 
C)  When 8% cumulative preferred shares are participating to a total of 12%, any arrear dividends are ignored in the allocation since they pertain to a previous year. 
D)  When 8% noncumulative preferred shares are participating to a total of 12%, the preferred shares must receive all arrear dividends and 12% of total preferred shares par outstanding prior to common shares receiving any dividends. 
A)  When noncumulative preferred shares are fully participating, the rate of dividends allocated to preferred shares is the ratio of total par of preferred shares outstanding to total par of both classes of shares outstanding. 
B)  When noncumulative preferred shares are not participating, the rate of dividends to common shares are limited to the ratio of total par of common shares outstanding to total par of both classes of shares outstanding. 
C)  When 8% cumulative preferred shares are participating to a total of 12%, any arrear dividends are ignored in the allocation since they pertain to a previous year. 
D)  When 8% noncumulative preferred shares are participating to a total of 12%, the preferred shares must receive all arrear dividends and 12% of total preferred shares par outstanding prior to common shares receiving any dividends.

Question 10

A large stock split should be accounted for by capitalizing the current market value of the stock.

Accepted Answer

A) True 
 B)False

Question 11

The following owners' equity section of a firm's balance sheet relates to the current year (end-of-year data):   How many common shares are issued?

Accepted Answer

A)  8,000 
B)  6,000 
C)  7,000 
D)  There is insufficient information provided to answer the question. 
A)  8,000 
B)  6,000 
C)  7,000 
D)  There is insufficient information provided to answer the question.

Question 12

CB Corporation issued a 2 for 1 stock split.Which of the following is NOT a true statement concerning the effect of the split?

Accepted Answer

A)  The number of shares outstanding is increased. 
B)  There is a transfer of retained earnings to contributed capital. 
C)  A proportionate reduction in the par value per share occurs. 
D)  There is a continuation of retained earnings with no reduction in its balance. 
A)  The number of shares outstanding is increased. 
B)  There is a transfer of retained earnings to contributed capital. 
C)  A proportionate reduction in the par value per share occurs. 
D)  There is a continuation of retained earnings with no reduction in its balance.

Question 13

Treasury shares held by management are considered to be issued but not outstanding.

Accepted Answer

A) True 
 B)False

Question 14

You happened to look across the balance sheet of a firm,which discloses $40,000 of ending retained earnings,$10,000 of which is appropriated for plant expansion.This firm is not a natural resources firm.Therefore:

Accepted Answer

A)  the firm has $30,000 of cash 
B)  the firm has $40,000 of cash 
C)  the maximum allowable dividend cannot exceed $30,000 
D)  the firm has never distributed a stock dividend 
A)  the firm has $30,000 of cash 
B)  the firm has $40,000 of cash 
C)  the maximum allowable dividend cannot exceed $30,000 
D)  the firm has never distributed a stock dividend

Question 15

If a company desires to pay a cash dividend,but does not want to increase its liabilities,it can:

Accepted Answer

A)  pay the dividend only out of retained earnings. 
B)  issue a scrip dividend. 
C)  pay the dividend on declaration date. 
D)  pay the dividend on the ex-dividend date. 
A)  pay the dividend only out of retained earnings. 
B)  issue a scrip dividend. 
C)  pay the dividend on declaration date. 
D)  pay the dividend on the ex-dividend date.

Question 16

A stock dividend:

Accepted Answer

A)  If less than 20% to 25%, reduces retained earnings by the par value of shares distributed in the dividend 
B)  Increases the wealth of the recipient if the market value of the shares are unchanged by the stock dividend 
C)  Alters the par value of the common shares 
D)  If 100%, has no effect on the market value of the shares 
A)  If less than 20% to 25%, reduces retained earnings by the par value of shares distributed in the dividend 
B)  Increases the wealth of the recipient if the market value of the shares are unchanged by the stock dividend 
C)  Alters the par value of the common shares 
D)  If 100%, has no effect on the market value of the shares

Question 17

On July 1,2019,NDC had outstanding 20,000 common shares,(originally sold at $5 per share); the current quoted market price is $7 per share.The company declared and issued a 10% common stock dividend; however,stock rights for 100 fractional shares were issued (10 shares).The rights currently had a quoted market price of $.80 each.Give the entry to record the dividend.

Accepted Answer

The answer of On July 1,2019,NDC had outstanding 20,000 common...

Question 18

Gains on sale of treasury stock should be credited to:

Accepted Answer

A)  Additional contributed capital. 
B)  Other income. 
C)  Share capital. 
D)  Retained earnings. 
A)  Additional contributed capital. 
B)  Other income. 
C)  Share capital. 
D)  Retained earnings.

Question 19

Fractional share rights are usually issued:

Accepted Answer

A)  When a corporation issues a stock split. 
B)  At the time a property dividend is declared. 
C)  At the time a cash dividend is declared. 
D)  At the time a stock dividend is declared. 
A)  When a corporation issues a stock split. 
B)  At the time a property dividend is declared. 
C)  At the time a cash dividend is declared. 
D)  At the time a stock dividend is declared.

Question 20

Which of the following dividends does not reduce retained earnings?

Accepted Answer

A)  Scrip dividend. 
B)  Stock dividend. 
C)  Cash dividend. 
D)  Property dividend. 
E)  Liquidating dividend. 
A)  Scrip dividend. 
B)  Stock dividend. 
C)  Cash dividend. 
D)  Property dividend. 
E)  Liquidating dividend.

Which of the following is not a basic right of shareholders?

The Treasury Share account is debited and credited at the cost of the shares repurchased.

Owners' equity must equal the:

PQR Inc.had 1,000 common shares outstanding with a par value of $10 per share.There was $20,000 of contributed surplus arising from previous retirements of shares in this class.Assume that half of these shares were retired for $14 per share.The journal entry to record this transaction would include:

Common share subscriptions receivable should always be reported as a current asset.

The order in which dividends are allocated to common and preferred shares depends upon the provisions in the respective stock contracts.Choose the correct statement regarding this allocation.

A large stock split should be accounted for by capitalizing the current market value of the stock.

The following owners' equity section of a firm's balance sheet relates to the current year (end-of-year data): How many common shares are issued?

CB Corporation issued a 2 for 1 stock split.Which of the following is NOT a true statement concerning the effect of the split?

Treasury shares held by management are considered to be issued but not outstanding.

You happened to look across the balance sheet of a firm,which discloses $40,000 of ending retained earnings,$10,000 of which is appropriated for plant expansion.This firm is not a natural resources firm.Therefore:

If a company desires to pay a cash dividend,but does not want to increase its liabilities,it can:

A stock dividend:

Gains on sale of treasury stock should be credited to:

Fractional share rights are usually issued:

Which of the following dividends does not reduce retained earnings?

The Framework for Financial Reporting

Accounting Judgements

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 3: Statements of Income and Comprehensive Income

Which of the following is not a basic right of shareholders?

The Treasury Share account is debited and credited at the cost of the shares repurchased.

Owners' equity must equal the:

Common share subscriptions receivable should always be reported as a current asset.

The order in which dividends are allocated to common and preferred shares depends upon the provisions in the respective stock contracts.Choose the correct statement regarding this allocation.

A large stock split should be accounted for by capitalizing the current market value of the stock.

The following owners' equity section of a firm's balance sheet relates to the current year (end-of-year data): How many common shares are issued?

CB Corporation issued a 2 for 1 stock split.Which of the following is NOT a true statement concerning the effect of the split?

Treasury shares held by management are considered to be issued but not outstanding.

You happened to look across the balance sheet of a firm,which discloses $40,000 of ending retained earnings,$10,000 of which is appropriated for plant expansion.This firm is not a natural resources firm.Therefore:

If a company desires to pay a cash dividend,but does not want to increase its liabilities,it can:

A stock dividend:

Gains on sale of treasury stock should be credited to:

Fractional share rights are usually issued:

Which of the following dividends does not reduce retained earnings?

The Framework for Financial Reporting

Accounting Judgements

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters