Question 1

In the event of liquidation, preferred shareholders:

Accepted Answer

A) are guaranteed to get their investment back in full. 
B) have first claim on remaining corporate assets after debts are paid. 
C) may sell their shares for higher amounts than common stock. 
D) may retain their proportionate share of voting rights. 
A) are guaranteed to get their investment back in full. 
B) have first claim on remaining corporate assets after debts are paid. 
C) may sell their shares for higher amounts than common stock. 
D) may retain their proportionate share of voting rights.

Question 2

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 common shareholders?

Accepted Answer

A) $4,000 
B) $16,000 
C) $12,000 
D) $28,000 
A) $4,000 
B) $16,000 
C) $12,000 
D) $28,000

Question 3

Stock sold for amounts in excess of par value results in a gain reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 4

A higher price/earnings ratio signifies a higher return on investment.

Accepted Answer

A) True 
 B)False

Question 5

Pearland Company has 5,000 shares of preferred stock outstanding. The preferred stock has a $90 par value, a 5% dividend rate, and is noncumulative. If Pearland has sufficient funds to pay dividends, what is the total amount of dividends that will be paid out to preferred shareholders?

Accepted Answer

A) $10,800 
B) $22,500 
C) $9,000 
D) $4,500 
A) $10,800 
B) $22,500 
C) $9,000 
D) $4,500

Question 6

The declaration and payment of cash dividends cause a decrease in both assets (Cash)and stockholders' equity (Retained Earnings)for the corporation.

Accepted Answer

A) True 
 B)False

Question 7

On November 1, 2015, Oster Company declared a dividend of $3.00 per share. Oster Company has 10,000 shares of common stock outstanding and 20,000 preferred shares. The date of record is November 15, and the payment date is November 30, 2014. Which of the following statements is true of the date of record?

Accepted Answer

A) No journal entry is made on the date of record. 
B) The liability must be recorded on the date of record. 
C) Cash is disbursed to shareholders on the date of record. 
D) The company transfers cash to a brokerage firm on the date of record. 
A) No journal entry is made on the date of record. 
B) The liability must be recorded on the date of record. 
C) Cash is disbursed to shareholders on the date of record. 
D) The company transfers cash to a brokerage firm on the date of record.

Question 8

Which of the following types of stock is considered least risky for investors?

Accepted Answer

A) common stock 
B) par value stock 
C) no-par stock 
D) preferred stock 
A) common stock 
B) par value stock 
C) no-par stock 
D) preferred stock

Question 9

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.   What will the total number of shares issued be after the declaration and distribution of a 10% stock dividend?

Accepted Answer

A) 20,000 common shares 
B) 154,000 common shares 
C) 140,000 common shares 
D) 14,000 common shares 
A) 20,000 common shares 
B) 154,000 common shares 
C) 140,000 common shares 
D) 14,000 common shares

Question 10

Treasury stock causes the number of:

Accepted Answer

A) issued shares to go down. 
B) issued shares to exceed authorized shares. 
C) outstanding shares to go up. 
D) outstanding shares to go down. 
A) issued shares to go down. 
B) issued shares to exceed authorized shares. 
C) outstanding shares to go up. 
D) outstanding shares to go down.

Question 11

Revival Corporation's annual report is as follows.   Based on the information provided above, find the earnings per share of Revival Corporation as of March 31, 2015.

Accepted Answer

A) $(2.20) 
B) $2.20 
C) $1.81 
D) $1.49 
A) $(2.20) 
B) $2.20 
C) $1.81 
D) $1.49

Question 12

Which of the following would be included in the entry to record the payment of a previously declared dividend of $0.25 per share on 12,500 shares of common stock?

Accepted Answer

A) Retained Earnings would be debited for $3,125. 
B) Cash would be debited for $3,125. 
C) Retained Earnings would be credited for $3,125. 
D) Dividends Payable would be debited for $3,125. 
A) Retained Earnings would be debited for $3,125. 
B) Cash would be debited for $3,125. 
C) Retained Earnings would be credited for $3,125. 
D) Dividends Payable would be debited for $3,125.

Question 13

Which of the following will decrease the balance in Retained Earnings?

Accepted Answer

A) repayment of bond principal 
B) stock split 
C) stock dividend declared 
D) purchase of treasury stock 
A) repayment of bond principal 
B) stock split 
C) stock dividend declared 
D) purchase of treasury stock

Question 14

Stock dividends have no impact on the total amount of stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 15

Bradley Corporation issued 10,000 shares of common stock on January 1, 2015. The stock has a par value of $0.01 per share and was sold for cash at par. Which of the following is the correct journal entry to record this transaction?

Accepted Answer

A) Cash debited for $100 and Common Stock-$0.01 Par Value credited for $100 
B) Cash credited for $10,000 and Common Stock-$0.01 Par Value debited for $10,000 
C) Paid-In Capital in Excess of Par-Common debited for $9,900 and Common Stock-$0.01 Par Value credited for $9,900 
D) Cash debited for $10,000, Common Stock-$0.01 Par Value credited for $100, and Paid-In Capital in Excess of Par-Common credited for $9,900 
A) Cash debited for $100 and Common Stock-$0.01 Par Value credited for $100 
B) Cash credited for $10,000 and Common Stock-$0.01 Par Value debited for $10,000 
C) Paid-In Capital in Excess of Par-Common debited for $9,900 and Common Stock-$0.01 Par Value credited for $9,900 
D) Cash debited for $10,000, Common Stock-$0.01 Par Value credited for $100, and Paid-In Capital in Excess of Par-Common credited for $9,900

Question 16

Which of the following represents one of the basic rights of stockholders?

Accepted Answer

A) Stockholders may sell their stock back to the company if they wish. 
B) Stockholders may authorize a business contract on behalf of the corporation. 
C) Stockholders may receive dividends from corporate earnings. 
D) Stockholders may determine at what price the company issues stock. 
A) Stockholders may sell their stock back to the company if they wish. 
B) Stockholders may authorize a business contract on behalf of the corporation. 
C) Stockholders may receive dividends from corporate earnings. 
D) Stockholders may determine at what price the company issues stock.

Question 17

A deficit occurs when a company has reoccurring losses and/or declares dividends in excess of retained earnings.

Accepted Answer

A) True 
 B)False

Question 18

The price that the corporation receives from issuing stock is called the issue price.

Accepted Answer

A) True 
 B)False

Question 19

The declaration of a cash dividend does not create an obligation (liability)for the corporation.

Accepted Answer

A) True 
 B)False

Question 20

Preferred shareholders:

Accepted Answer

A) are guaranteed that they will not take a loss on their investment. 
B) have higher voting rights than common shareholders. 
C) are sold for a price lower than that of common stock. 
D) have the first claim on dividend funds. 
A) are guaranteed that they will not take a loss on their investment. 
B) have higher voting rights than common shareholders. 
C) are sold for a price lower than that of common stock. 
D) have the first claim on dividend funds.

Exam 13: Corporations

In the event of liquidation, preferred shareholders:

Stock sold for amounts in excess of par value results in a gain reported on the income statement.

A higher price/earnings ratio signifies a higher return on investment.

Pearland Company has 5,000 shares of preferred stock outstanding. The preferred stock has a $90 par value, a 5% dividend rate, and is noncumulative. If Pearland has sufficient funds to pay dividends, what is the total amount of dividends that will be paid out to preferred shareholders?

The declaration and payment of cash dividends cause a decrease in both assets (Cash)and stockholders' equity (Retained Earnings)for the corporation.

Which of the following types of stock is considered least risky for investors?

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. What will the total number of shares issued be after the declaration and distribution of a 10% stock dividend?

Treasury stock causes the number of:

Revival Corporation's annual report is as follows. Based on the information provided above, find the earnings per share of Revival Corporation as of March 31, 2015.

Which of the following would be included in the entry to record the payment of a previously declared dividend of $0.25 per share on 12,500 shares of common stock?

Which of the following will decrease the balance in Retained Earnings?

Stock dividends have no impact on the total amount of stockholders' equity.

Bradley Corporation issued 10,000 shares of common stock on January 1, 2015. The stock has a par value of $0.01 per share and was sold for cash at par. Which of the following is the correct journal entry to record this transaction?

Which of the following represents one of the basic rights of stockholders?

A deficit occurs when a company has reoccurring losses and/or declares dividends in excess of retained earnings.

The price that the corporation receives from issuing stock is called the issue price.

The declaration of a cash dividend does not create an obligation (liability)for the corporation.

Preferred shareholders:

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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