Question 1

Which of the following is true of a corporation?

Accepted Answer

A) Stock of a corporation can be publicly or privately held. 
B) A corporation has to pay income taxes on its business earnings. 
C) A corporation has a limited life. 
D) The owners of a corporation have unlimited liabilities for the corporation's debts. 
A) Stock of a corporation can be publicly or privately held. 
B) A corporation has to pay income taxes on its business earnings. 
C) A corporation has a limited life. 
D) The owners of a corporation have unlimited liabilities for the corporation's debts. B

Question 2

Rick Co. purchases 8,500 shares of the company's $6 par common stock for $8 per share. Journalize the transaction.

Accepted Answer

The answer of Rick Co. purchases 8,500 shares of the...

Question 3

The account to be debited when a stock dividend is declared and distributed on the same date would be:

Accepted Answer

A) Common Stock-Par Value. 
B) Retained Earnings. 
C) Cash. 
D) Paid-In Capital in Excess of Par-Common. 
A) Common Stock-Par Value. 
B) Retained Earnings. 
C) Cash. 
D) Paid-In Capital in Excess of Par-Common. B

Question 4

Which of the following best describes the appropriation of retained earnings?

Accepted Answer

A) restricting a certain amount of retained earnings for expansion or contingencies 
B) cash set aside for expansion 
C) designating certain amounts of retained earnings for cash dividends to be paid out to shareholders 
D) limiting company transactions in order to boost earnings and profits 
A) restricting a certain amount of retained earnings for expansion or contingencies 
B) cash set aside for expansion 
C) designating certain amounts of retained earnings for cash dividends to be paid out to shareholders 
D) limiting company transactions in order to boost earnings and profits

Question 5

Landess Corporation currently has 120,000 shares outstanding of $1 par value common stock. The stock was originally issued for $12 per share. On March 15, the board of directors declares and distributes a 10% stock dividend when the stock is selling for $16 per share. Prepare the journal entry to record the stock dividend.

Accepted Answer

The answer of Landess Corporation currently has 120,000 shares outstanding...

Question 6

The two basic sources of stockholders' equity are:

Accepted Answer

A) common stock and bonds. 
B) common stock and preferred stock. 
C) paid-in capital and retained earnings. 
D) loans from banks and gifts from donors. 
A) common stock and bonds. 
B) common stock and preferred stock. 
C) paid-in capital and retained earnings. 
D) loans from banks and gifts from donors.

Question 7

When a company sells stock for less than the par value, it will record a gain on sale for the amount in excess of par.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following requires a formal journal entry?

Accepted Answer

A) new CEO selected 
B) stock dividend distribution 
C) stock split 
D) CFO promoted 
A) new CEO selected 
B) stock dividend distribution 
C) stock split 
D) CFO promoted

Question 9

A company originally issued 10,000 shares of $5 par value common stock at $7 per share. The board of directors declares a 10% stock dividend when the market price of the stock is $8 a share. Which of the following is included in the entry to record the declaration of a stock dividend?

Accepted Answer

A) Retained Earnings is debited for $8,000. 
B) Retained Earnings is credited for $8,000. 
C) Retained Earnings is debited for $7,000. 
D) Paid-in Capital in Excess of Par-Common is credited for $7,000. 
A) Retained Earnings is debited for $8,000. 
B) Retained Earnings is credited for $8,000. 
C) Retained Earnings is debited for $7,000. 
D) Paid-in Capital in Excess of Par-Common is credited for $7,000.

Question 10

Which of the following actions could increase the balance in the Paid-In Capital in Excess of Par-Common Account?

Accepted Answer

A) cash dividend declared 
B) stock split 
C) 10% stock dividend declared 
D) purchase of treasury stock 
A) cash dividend declared 
B) stock split 
C) 10% stock dividend declared 
D) purchase of treasury stock

Question 11

Which of the following is true of preferred stock?

Accepted Answer

A) Preferred shareholders generally receive a fixed amount of dividends before common stockholders do. 
B) Preferred shareholders are guaranteed that they will not take a loss on their investment. 
C) Preferred shareholders have higher voting rights than common shareholders. 
D) Preferred shareholders may sell their shares for a price higher than that of common stock. 
A) Preferred shareholders generally receive a fixed amount of dividends before common stockholders do. 
B) Preferred shareholders are guaranteed that they will not take a loss on their investment. 
C) Preferred shareholders have higher voting rights than common shareholders. 
D) Preferred shareholders may sell their shares for a price higher than that of common stock.

Question 12

Revival Corporation's annual report is as follows.   If the current market price is $15 on March 31, 2015, find the price/earnings ratio on March 31, 2015.

Accepted Answer

A) $8.29 
B) $2.20 
C) $1.81 
D) $6.81 
A) $8.29 
B) $2.20 
C) $1.81 
D) $6.81

Question 13

Lerner Company had the following transactions in 2015, its first year of operations. • Issued 20,000 shares of common stock. Stock has par value of $1.00 per share and was issued at $14.00 per share.
• Issued 1,000 shares of $100 par value preferred stock. Shares were issued at par.
• Earned net income of $35,000.
• Paid no dividends.
At the end of 2015, what is the total amount of stockholders' equity?

Accepted Answer

A) $415,000 
B) $120,000 
C) $260,000 
D) $380,000 
A) $415,000 
B) $120,000 
C) $260,000 
D) $380,000

Question 14

Which of the following statements is true?

Accepted Answer

A) Appropriations of retained earnings require journal entries, but restrictions on retained earnings do not. 
B) No journal entries are needed to either appropriate or restrict retained earnings. 
C) Both appropriations and restrictions of retained earnings require journal entries. 
D) Restrictions on retained earnings must be journalized, but appropriations do not need to be journalized. 
A) Appropriations of retained earnings require journal entries, but restrictions on retained earnings do not. 
B) No journal entries are needed to either appropriate or restrict retained earnings. 
C) Both appropriations and restrictions of retained earnings require journal entries. 
D) Restrictions on retained earnings must be journalized, but appropriations do not need to be journalized.

Question 15

Preferred stockholders receive a dividend preference over common stockholders.

Accepted Answer

A) True 
 B)False

Question 16

Earnings per share is calculated as net income plus preferred dividends divided by the weighted average number of common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 17

Peterson Company issued 4,000 shares of preferred stock for $240,000. The stock has a par value of $60 per share. The journal entry to record this transaction would:

Accepted Answer

A) credit Cash $240,000, debit Preferred Stock-$60 Par Value $4,000, and debit Paid-In Capital in Excess of Par-Preferred $236,000. 
B) debit Cash $240,000, credit Preferred Stock-$60 Par Value $4,000, and credit Paid-In Capital in Excess of Par-Preferred $236,000. 
C) credit Cash $240,000 and debit Preferred Stock-$60 Par Value $240,000. 
D) debit Cash $240,000 and credit Preferred Stock-$60 Par Value $240,000. 
A) credit Cash $240,000, debit Preferred Stock-$60 Par Value $4,000, and debit Paid-In Capital in Excess of Par-Preferred $236,000. 
B) debit Cash $240,000, credit Preferred Stock-$60 Par Value $4,000, and credit Paid-In Capital in Excess of Par-Preferred $236,000. 
C) credit Cash $240,000 and debit Preferred Stock-$60 Par Value $240,000. 
D) debit Cash $240,000 and credit Preferred Stock-$60 Par Value $240,000.

Question 18

Orleans Company was incorporated on January 1, 2012. Orleans issued 4,000 shares of common stock and 500 shares of preferred stock on that date. The preferred shares are cumulative, $100 par, with an 8% dividend rate. Orleans has not paid any dividends yet. In 2015, Orleans had its first profitable year, and on November 1, 2015, Orleans declared a total dividend of $28,000. What is the total amount that will be paid out to preferred shareholders?

Accepted Answer

A) $4,000 
B) $16,000 
C) $3,200 
D) $28,000 
A) $4,000 
B) $16,000 
C) $3,200 
D) $28,000

Question 19

Moretown Company had the following transactions in 2015, its first year of operations. • Issued 30,000 shares of common stock. Stock has par value of $1.00 per share and was issued at $18.00 per share.
• Earned net income of $70,000.
• Paid no dividends.
At the end of 2015, what is the total amount of paid-in capital?

Accepted Answer

A) $30,000 
B) $610,000 
C) $540,000 
D) $70,000 
A) $30,000 
B) $610,000 
C) $540,000 
D) $70,000

Question 20

All classes and types of a corporation's stock carry the same degrees of risk for the shareholder.

Accepted Answer

A) True 
 B)False

Exam 13: Corporations

Which of the following is true of a corporation?

Rick Co. purchases 8,500 shares of the company's $6 par common stock for $8 per share. Journalize the transaction.

The account to be debited when a stock dividend is declared and distributed on the same date would be:

Which of the following best describes the appropriation of retained earnings?

The two basic sources of stockholders' equity are:

When a company sells stock for less than the par value, it will record a gain on sale for the amount in excess of par.

Which of the following requires a formal journal entry?

A company originally issued 10,000 shares of $5 par value common stock at $7 per share. The board of directors declares a 10% stock dividend when the market price of the stock is $8 a share. Which of the following is included in the entry to record the declaration of a stock dividend?

Which of the following actions could increase the balance in the Paid-In Capital in Excess of Par-Common Account?

Which of the following is true of preferred stock?

Revival Corporation's annual report is as follows. If the current market price is $15 on March 31, 2015, find the price/earnings ratio on March 31, 2015.

Which of the following statements is true?

Preferred stockholders receive a dividend preference over common stockholders.

Earnings per share is calculated as net income plus preferred dividends divided by the weighted average number of common shares outstanding.

Peterson Company issued 4,000 shares of preferred stock for $240,000. The stock has a par value of $60 per share. The journal entry to record this transaction would:

All classes and types of a corporation's stock carry the same degrees of risk for the shareholder.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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