Question 1

The statement of stockholders' equity reports the number of shares and any changes during the year in preferred,common,and treasury stock.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is TRUE of a corporation?

Accepted Answer

A)  Shareholders can be required to pay debts of the corporation. 
B)  Shares of stock cannot be readily purchased and sold by investors on an organized stock exchange. 
C)  Shareholders are authorized to sign contracts or make business commitments on behalf of the corporation. 
D)  Corporations pay income tax on corporate earnings, and shareholders pay income tax on the dividends received. 
A)  Shareholders can be required to pay debts of the corporation. 
B)  Shares of stock cannot be readily purchased and sold by investors on an organized stock exchange. 
C)  Shareholders are authorized to sign contracts or make business commitments on behalf of the corporation. 
D)  Corporations pay income tax on corporate earnings, and shareholders pay income tax on the dividends received.

Question 3

Stockholders of a corporation are not personally liable for the corporation's debt.

Accepted Answer

A) True 
 B)False

Question 4

Rosiland,Inc.purchases 16,000 shares of its previously issued $2 par value common stock for $460 per share.Which of the following is the correct journal entry to record this transaction?

Accepted Answer

A)  Debit Common Stock-$2 Par Value $7,360,000, and credit Cash $7,360,000. 
B)  Debit Cash $7,328,000, and credit Paid-In Capital in Excess of Par-Common $7,328,000. 
C)  Debit Cash $7,328,000, and credit Treasury Stock-Common $7,328,000. 
D)  Debit Treasury Stock-Common $7,360,000, and credit Cash $7,360,000. 
A)  Debit Common Stock-$2 Par Value $7,360,000, and credit Cash $7,360,000. 
B)  Debit Cash $7,328,000, and credit Paid-In Capital in Excess of Par-Common $7,328,000. 
C)  Debit Cash $7,328,000, and credit Treasury Stock-Common $7,328,000. 
D)  Debit Treasury Stock-Common $7,360,000, and credit Cash $7,360,000.

Question 5

A corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $15.00 per share. $$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Common Stock, } \$ 6 \text { par, } 106,000 \text { shares authorized, } 57,000 \text { shares issued } \
\text { and outstanding }
\end{array} & \$ 342,000 \
\hline \text { Paid in Capital in Excess of Par } & 150,000 \
\hline \text { Retained Earnings } & \$ 50,000 \
\hline \text { Total Stockholders' Equity } & \$ 992,000 \
\hline
\end{array}$$ Which of the following would be included in the entry to record the distribution of a 15% stock dividend?

Accepted Answer

A)  Common Stock-$6 Par Value would be credited for $51,300. 
B)  Stock Dividends would be debited for $95,400. 
C)  Paid-In Capital in Excess of Par-Common is debited for $95,400. 
D)  Stock Dividends would be credited for $51,300. 
A)  Common Stock-$6 Par Value would be credited for $51,300. 
B)  Stock Dividends would be debited for $95,400. 
C)  Paid-In Capital in Excess of Par-Common is debited for $95,400. 
D)  Stock Dividends would be credited for $51,300.

Question 6

Which of the following statements is TRUE?

Accepted Answer

A)  Appropriations of retained earnings require journal entries, but restrictions on retained earnings are usually reported in notes to the financial statements. 
B)  No journal entries are needed to 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 are usually reported in notes to the financial statements. 
A)  Appropriations of retained earnings require journal entries, but restrictions on retained earnings are usually reported in notes to the financial statements. 
B)  No journal entries are needed to 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 are usually reported in notes to the financial statements.

Question 7

O'Malley,Inc.issued 60,000 shares of common stock in exchange for manufacturing equipment.The equipment has a fair value of $1,420,000.The stock has a par value of $0.05 per share.The journal entry to record this transaction includes a ________.

Accepted Answer

A)  debit to Cash for $14,170,000 
B)  credit to Gain on Sale of Common Stock for $1,480,000 
C)  credit to Paid-In Capital in Excess of Par-Common for $1,417,000 
D)  credit to Common Stock-$0.05 Par Value for $1,420,000 
A)  debit to Cash for $14,170,000 
B)  credit to Gain on Sale of Common Stock for $1,480,000 
C)  credit to Paid-In Capital in Excess of Par-Common for $1,417,000 
D)  credit to Common Stock-$0.05 Par Value for $1,420,000

Question 8

Element Corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $20.25 per share. $$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Common Stock, } \$ 5 \text { par, } 337,000 \text { shares authorized, } 157,000 \text { shares issued } \
\text { and outstanding }
\end{array} & \$ 785,000 \
\hline \text { Paid-In Capital in Excess of Par-Common } & 140,000 \
\hline \text { Retained Earnings } & 301,000 \
\hline \text { Total Stockholders' Equity } & \$ 1,226,000 \
\hline
\end{array}$$ After a 2-for-1 stock split,what is the number of issued shares?

Accepted Answer

A)  280,000 
B)  314,000 
C)  297,000 
D)  140,000 
A)  280,000 
B)  314,000 
C)  297,000 
D)  140,000

Question 9

The distribution of a stock dividend ________.

Accepted Answer

A)  decreases both assets and liabilities 
B)  decreases assets and increase liabilities 
C)  effects only stockholder's equity accounts 
D)  increases both dividends payable and cash 
A)  decreases both assets and liabilities 
B)  decreases assets and increase liabilities 
C)  effects only stockholder's equity accounts 
D)  increases both dividends payable and cash

Question 10

Refer to the following information for Tolan Corporation: • Common Stock,$1.00 par,106,000 shares issued,100,000 shares outstanding
• Paid-In Capital in Excess of Par-Common: $2,190,000
• Retained Earnings: $920,000
• Treasury Stock: 6000 shares purchased at $21 per share
If Tolan resold 2500 shares of treasury stock for $22.50 per share,which of the following statements would be TRUE?

Accepted Answer

A)  The Treasury Stock account would decrease by $26,250. 
B)  The Paid-In Capital in Excess of Par-Common account would increase by $2500. 
C)  The Treasury Stock account would decrease by $52,500. 
D)  The Retained Earnings account would increase by $56,250. 
A)  The Treasury Stock account would decrease by $26,250. 
B)  The Paid-In Capital in Excess of Par-Common account would increase by $2500. 
C)  The Treasury Stock account would decrease by $52,500. 
D)  The Retained Earnings account would increase by $56,250.

Question 11

Which of the following is NOT a reason for which a company may purchase treasury stock?

Accepted Answer

A)  to avoid a takeover by an outside party by increasing the number of outstanding shares that have voting rights 
B)  to increase net assets by buying low and selling high 
C)  to support the company's stock price 
D)  to reward valued employees with stock 
A)  to avoid a takeover by an outside party by increasing the number of outstanding shares that have voting rights 
B)  to increase net assets by buying low and selling high 
C)  to support the company's stock price 
D)  to reward valued employees with stock

Question 12

The statement of stockholders' equity has less information than the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 13

Double taxation occurs when corporations make dividend payments to stockholders.

Accepted Answer

A) True 
 B)False

Question 14

Retired shares of treasury stock may later be reissued.

Accepted Answer

A) True 
 B)False

Question 15

Charger 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.Omit explanation.

Accepted Answer

\[\begin{array} { | l| r | r | } 
\hline

Question 16

The par value of a stock has no relation to the market value.

Accepted Answer

A) True 
 B)False

Question 17

Accounting for stated value common stock is identical to accounting for par value stock.

Accepted Answer

A) True 
 B)False

Question 18

April,Inc.issued 4000 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 $4000, and debit Paid-In Capital in Excess of Par-Preferred $236,000 
B)  debit Cash $240,000, credit Preferred Stock-$60 Par Value $4000, 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 $4000, and debit Paid-In Capital in Excess of Par-Preferred $236,000 
B)  debit Cash $240,000, credit Preferred Stock-$60 Par Value $4000, 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 19

A company originally issued 13,000 shares of $6 par value common stock at $12 per share.The board of directors declares a 12% stock dividend when the market price of the stock is $22 a share.Which of the following is included in the entry to record the declaration of a stock dividend?

Accepted Answer

A)  Stock Dividends is debited for $34,320. 
B)  Stock Dividends is credited for $34,320. 
C)  Stock Dividends is debited for $18,720. 
D)  Paid-In Capital in Excess of Par-Common is credited for $18,720. 
A)  Stock Dividends is debited for $34,320. 
B)  Stock Dividends is credited for $34,320. 
C)  Stock Dividends is debited for $18,720. 
D)  Paid-In Capital in Excess of Par-Common is credited for $18,720.

Question 20

On June 30,2018,Chris Brothers,Inc.showed the following data on the equity section of their balance sheet: $$\begin{array} { | l | r | } 
\hline \text { Stockholders' Equity } & \
\hline \text { Common Stock, } \$ 1 \text { par; 197,000 shares authorized, } & \
146,000 \text { shares issued and outstanding } & \$ 146,000 \
\hline \text { Paid-In Capital in Excess of Par-Common } & \$ 271,000 \
\hline \text { Retained Earnings } & \$ 941,000 \
\hline \text { Total Stockholder's Equity } & \$ 1,358,000 \
\hline
\end{array}$$ On July 1,2018,the company declared and distributed a 8% stock dividend.The market value of the stock at that time was $17 per share.Following this transaction,what is the balance of Paid-In Capital in Excess of Par-Common?

Accepted Answer

A)  $227,640 
B)  $523,160 
C)  $271,000 
D)  $457,880 
A)  $227,640 
B)  $523,160 
C)  $271,000 
D)  $457,880

Exam 13: Corporations

The statement of stockholders' equity reports the number of shares and any changes during the year in preferred,common,and treasury stock.

Which of the following statements is TRUE of a corporation?

Stockholders of a corporation are not personally liable for the corporation's debt.

Rosiland,Inc.purchases 16,000 shares of its previously issued $2 par value common stock for $460 per share.Which of the following is the correct journal entry to record this transaction?

Which of the following statements is TRUE?

O'Malley,Inc.issued 60,000 shares of common stock in exchange for manufacturing equipment.The equipment has a fair value of $1,420,000.The stock has a par value of $0.05 per share.The journal entry to record this transaction includes a ________.

The distribution of a stock dividend ________.

Which of the following is NOT a reason for which a company may purchase treasury stock?

The statement of stockholders' equity has less information than the statement of retained earnings.

Double taxation occurs when corporations make dividend payments to stockholders.

Retired shares of treasury stock may later be reissued.

The par value of a stock has no relation to the market value.

Accounting for stated value common stock is identical to accounting for par value stock.

April,Inc.issued 4000 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 ________.

A company originally issued 13,000 shares of $6 par value common stock at $12 per share.The board of directors declares a 12% stock dividend when the market price of the stock is $22 a share.Which of the following is included in the entry to record the declaration of a stock dividend?

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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