Question 1

A liability for dividends exists:

Accepted Answer

A)  On the date of payment. 
B)  When cumulative preferred stock is sold. 
C)  On the date of record. 
D)  For dividends in arrears on cumulative preferred stock. 
E)  On the date of declaration. 
A)  On the date of payment. 
B)  When cumulative preferred stock is sold. 
C)  On the date of record. 
D)  For dividends in arrears on cumulative preferred stock. 
E)  On the date of declaration.

Question 2

A corporation is responsible for its own acts and debts because it is considered a__________ .

Accepted Answer

separate l

Question 3

The Paid-in Capital, Treasury Stock account can have a zero or credit balance.

Accepted Answer

A) True 
 B)False

Question 4

A company reported the following stockholders' equity on January 1 of the current year:
 $\begin{array}{|l|c|}
\hline \begin{array}{l}
\text { Common stock, } \$ 10 \text { par, } 1,000,000 \text { shares } \
\text { authorized, } 250,000 \text { shares issued } \ldots \ldots . .
\end{array} & \$ 2,500,000 \
\hline \text { Paid-in capital in excess of par, common } & 1,260,000 \
\hline \text { Retained earnings } & 1,675,000 \
\hline\text { Total stockholders' equity }&\$5,435,000
\end{array}$
 Prepare journal entries for the following selected transactions related to this company's stock during
the current year:
Mar. 1 Purchased 10,000 shares of treasury stock for $18 per share. May 5 Sold 4,000 shares of treasury stock for $16 per share.
Oct. 12 Sold 2,000 shares of treasury stock for $19 per share.

Accepted Answer

None

Question 5

A liability for a dividend does not exist until the directors declare a dividend.

Accepted Answer

A) True 
 B)False

Question 6

Retained earnings:

Accepted Answer

A)  Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception. 
B)  Represents the amount shareholders are guaranteed to receive upon company liquidation. 
C)  Represent an amount of cash available to pay shareholders. 
D)  Are never adjusted for anything other than net income or dividends. 
E)  Can only be appropriated by setting aside a cash fund. 
A)  Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception. 
B)  Represents the amount shareholders are guaranteed to receive upon company liquidation. 
C)  Represent an amount of cash available to pay shareholders. 
D)  Are never adjusted for anything other than net income or dividends. 
E)  Can only be appropriated by setting aside a cash fund.

Question 7

Alto Company issued 7% preferred stock with a $100 par value. This means that:

Accepted Answer

A)  The market price per share will approximate $100 per share. 
B)  The amount of the potential dividend is $7 per year per preferred share. 
C)  Preferred shareholders are entitled to 7% of the annual income. 
D)  Preferred shareholders have a guaranteed dividend. 
E)  Only 7% of the total paid-in capital can be preferred stock. 
A)  The market price per share will approximate $100 per share. 
B)  The amount of the potential dividend is $7 per year per preferred share. 
C)  Preferred shareholders are entitled to 7% of the annual income. 
D)  Preferred shareholders have a guaranteed dividend. 
E)  Only 7% of the total paid-in capital can be preferred stock.

Question 8

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Accepted Answer

A)  Debit Common Dividends Payable $4,000; credit Cash $4,000. 
B)  Debit Common Dividends Payable $4,500; credit Cash $4,500. 
C)  Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000. 
D)  Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500. 
E)  Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000. 
A)  Debit Common Dividends Payable $4,000; credit Cash $4,000. 
B)  Debit Common Dividends Payable $4,500; credit Cash $4,500. 
C)  Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000. 
D)  Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500. 
E)  Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

Question 9

A stock dividend, declared by a corporations's directors, is a distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return.

Accepted Answer

A) True 
 B)False

Question 10

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Accepted Answer

A) True 
 B)False

Question 11

Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.

Accepted Answer

A) True 
 B)False

Question 12

Wiggins Company has 1,000 shares of $10 par preferred stock, which were issued at par. It also has 25,000 shares of common stock outstanding, and its total stockholders' equity equals $500,000. The book value per common share is:

Accepted Answer

A)  $19.60. 
B)  $10.00. 
C)  $16.00. 
D)  $20.00. 
E)  $19.96. 
A)  $19.60. 
B)  $10.00. 
C)  $16.00. 
D)  $20.00. 
E)  $19.96.

Question 13

Boron Company is authorized to issue 50,000 shares of $50 par value, 8%, cumulative, fully participating preferred stock, and 750,000 shares of $5 par value common stock. Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:

May 5 Exchanged 2,200 shares of preferred stock for a building with a market value of $135,000.
July 20 Sold 1,550 shares of preferred stock for $50 cash per share. 
Dec. 20 Sold 1,000 shares of preferred stock at $52 cash per share.

Accepted Answer

The answer of Boron Company is authorized to issue 50,000...

Question 14

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Accepted Answer

A)  Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000. 
B)  Debit Common Stock $26,000; credit Cash $26,000. 
C)  Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value, Common Stock $286,000. 
D)  Debit Common Stock $26,000; debit Paid-in Capital in Excess of Par Value, Common Stock $286,000; credit Cash $312,000. 
E)  Debit Cash for $312,000; credit Common Stock $312,000. 
A)  Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000. 
B)  Debit Common Stock $26,000; credit Cash $26,000. 
C)  Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value, Common Stock $286,000. 
D)  Debit Common Stock $26,000; debit Paid-in Capital in Excess of Par Value, Common Stock $286,000; credit Cash $312,000. 
E)  Debit Cash for $312,000; credit Common Stock $312,000.

Question 15

Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.

Accepted Answer

A) True 
 B)False

Question 16

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

Accepted Answer

A) True 
 B)False

Question 17

The price at which a share of stock is bought or sold is known as par value.

Accepted Answer

A) True 
 B)False

Question 18

The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.

Accepted Answer

A) True 
 B)False

Question 19

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Accepted Answer

A) True 
 B)False

Question 20

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Accepted Answer

A)  Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100. 
B)  Debit Common Dividends Payable $104,500; credit Cash $104,500. 
C)  Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000. 
D)  Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500. 
E)  Debit Common Dividends Payable $100,100; credit Cash $100,100. 
A)  Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100. 
B)  Debit Common Dividends Payable $104,500; credit Cash $104,500. 
C)  Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000. 
D)  Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500. 
E)  Debit Common Dividends Payable $100,100; credit Cash $100,100.

Exam 13: Accounting for Corporations

A liability for dividends exists:

A corporation is responsible for its own acts and debts because it is considered a__________ .

The Paid-in Capital, Treasury Stock account can have a zero or credit balance.

A liability for a dividend does not exist until the directors declare a dividend.

Retained earnings:

Alto Company issued 7% preferred stock with a $100 par value. This means that:

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

A stock dividend, declared by a corporations's directors, is a distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return.

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.

Wiggins Company has 1,000 shares of $10 par preferred stock, which were issued at par. It also has 25,000 shares of common stock outstanding, and its total stockholders' equity equals $500,000. The book value per common share is:

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

The price at which a share of stock is bought or sold is known as par value.

The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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