Question 1

Stock that was reacquired and is still held by the issuing corporation is called:

Accepted Answer

A)  Capital stock. 
B)  Treasury stock. 
C)  Preferred stock. 
D)  Redeemed stock. 
E)  Callable stock. 
A)  Capital stock. 
B)  Treasury stock. 
C)  Preferred stock. 
D)  Redeemed stock. 
E)  Callable stock.

Question 2

Retained earnings are part of the stockholders' claims on the company's net assets.

Accepted Answer

A) True 
 B)False

Question 3

Treasury stock is stock that has been authorized, issued, and is outstanding.

Accepted Answer

A) True 
 B)False

Question 4

A company made an error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

Accepted Answer

A)  on the Year 2 income statement. 
B)  on the Year 1 statement of retained earnings. 
C)  on the Year 1 income statement. 
D)  accounted for with a cumulative "catch-up" adjustment in Year 2. 
E)  on the Year 2 statement of retained earnings. 
A)  on the Year 2 income statement. 
B)  on the Year 1 statement of retained earnings. 
C)  on the Year 1 income statement. 
D)  accounted for with a cumulative "catch-up" adjustment in Year 2. 
E)  on the Year 2 statement of retained earnings.

Question 5

Prior to May 1, Fortune Company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on May 1 for $5,000. On July 1, it reissued 50 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?

Accepted Answer

A)  $0. 
B)  $100. 
C)  $50. 
D)  $5,050. 
E)  $2,600. 
A)  $0. 
B)  $100. 
C)  $50. 
D)  $5,050. 
E)  $2,600.

Question 6

The following data has been collected about Keller Company's stockholders' equity accounts: $\begin{array}{lr}
\text { Common stock } \$ 10 \text { par value } 20,000 \text { shares } & \$ 100,000 \
\text { authorized and } 10,000 \text { shares issued, } 9,000 \text { shares outstanding } & \
\text { Paid-in capital in excess of par value, common stock } & 50,000 \
\text { Retained earnings } & 25,000 \
\text { Treasury stock } & 11,500
\end{array}$

- 
Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:

Accepted Answer

A)  1,150. 
B)  11,000. 
C)  1,000. 
D)  21,000. 
E)  575. 
A)  1,150. 
B)  11,000. 
C)  1,000. 
D)  21,000. 
E)  575.

Question 7

The following selected transactions took place during the current year for a company:
Feb 25 Declared a $2.50 per share cash dividend on 20,000 shares of common stock outstanding
Mar. 20 Paid the cash dividends declared on Feb. 25.
Dec 31 Closed the $72,000 credit balance in Income Summary that reflects net income to Retained Earnings.
(a) Prepare the journal entries for these transactions.
(b) If Retained Earnings had a $155,000 credit balance on January 1, calculate its year-end balance as of December 31.

Accepted Answer

None

Question 8

A stock split increases total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

Accepted Answer

A)  Current yield. 
B)  Earnings per share. 
C)  Dividend yield. 
D)  Dividend payout ratio. 
E)  Price-earnings ratio. 
A)  Current yield. 
B)  Earnings per share. 
C)  Dividend yield. 
D)  Dividend payout ratio. 
E)  Price-earnings ratio.

Question 10

The cumulative net income and loss not distributed as dividends to a corporation's shareholders is called ________.

Accepted Answer

The answer of The cumulative net income and loss not...

Question 11

A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $110, and its book value per share is $96. Its price-earnings ratio equals:

Accepted Answer

A)  19.2. 
B)  10.0. 
C)  1.15. 
D)  11.46. 
E)  0.87. 
A)  19.2. 
B)  10.0. 
C)  1.15. 
D)  11.46. 
E)  0.87.

Question 12

Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

Accepted Answer

A) True 
 B)False

Question 13

Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. 
-The company declared a $27,000 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

Accepted Answer

A)  $4.89. 
B)  $1.31. 
C)  $1.65. 
D)  $1.99. 
E)  $0.34. 
A)  $4.89. 
B)  $1.31. 
C)  $1.65. 
D)  $1.99. 
E)  $0.34.

Question 14

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Accepted Answer

A) True 
 B)False

Question 15

Parlay Corporation has 2,000,000 shares of $0.50 par value common stock outstanding. The following selected transactions related to the company's stock took place during the current year:
Apr. 15 Declared a 40% stock dividend to stockholders of record on May 1, to be issued May 10. The current market value is $15 per common share.
Prepare necessary journal entries to record the events of April 15, May 1 and May 10.

Accepted Answer

The answer of Parlay Corporation has 2,000,000 shares of $0.50...

Question 16

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

Accepted Answer

A)  Premium on stock. 
B)  Capital gain. 
C)  Discount on stock. 
D)  Preemptive right. 
E)  Financial leverage. 
A)  Premium on stock. 
B)  Capital gain. 
C)  Discount on stock. 
D)  Preemptive right. 
E)  Financial leverage.

Question 17

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 18

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:

Accepted Answer

A)  Callable preferred stock. 
B)  Participating preferred stock. 
C)  Cumulative preferred stock. 
D)  Convertible preferred stock. 
E)  Noncumulative preferred stock. 
A)  Callable preferred stock. 
B)  Participating preferred stock. 
C)  Cumulative preferred stock. 
D)  Convertible preferred stock. 
E)  Noncumulative preferred stock.

Question 19

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Accepted Answer

A large stock dividend is a distribution

Question 20

Changes in accounting estimates are accounted for in current and future periods.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

Stock that was reacquired and is still held by the issuing corporation is called:

Retained earnings are part of the stockholders' claims on the company's net assets.

Treasury stock is stock that has been authorized, issued, and is outstanding.

A company made an error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

A stock split increases total stockholders' equity.

The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

The cumulative net income and loss not distributed as dividends to a corporation's shareholders is called ________.

A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $110, and its book value per share is $96. Its price-earnings ratio equals:

Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. -The company declared a $27,000 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Changes in accounting estimates are accounted for in current and future periods.

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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