Question 1

Small and large stock dividends have no effect on the Common Stock account.

Accepted Answer

A) True 
 B)False

Question 2

Most states prohibit corporations from paying a dividend if a deficit will occur.

Accepted Answer

A) True 
 B)False

Question 3

Dividends in arrears are ________.

Accepted Answer

A)  a liability on the balance sheet 
B)  passed dividends on noncumulative preferred stock 
C)  passed dividends on cumulative preferred stock 
D)  passed dividends on common stock 
A)  a liability on the balance sheet 
B)  passed dividends on noncumulative preferred stock 
C)  passed dividends on cumulative preferred stock 
D)  passed dividends on common stock

Question 4

Treasury stock is a corporation's own stock that it has previously issued and later reacquired.

Accepted Answer

A) True 
 B)False

Question 5

Jefferson Anderson is a sole proprietor of a successful business.He is interested in incorporating to protect his personal assets.What are some disadvantages of organizing as a corporate entity?

Accepted Answer

Some disadvantages of organizing as a co

Question 6

Lack of mutual agency is best described as which of the following?

Accepted Answer

A)  The liabilities of the corporation cannot be extended to the personal assets of the stockholder. 
B)  Shares of stock can be readily purchased and sold by investors on an organized stock exchange. 
C)  Stockholders are not 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 corporate dividends. 
A)  The liabilities of the corporation cannot be extended to the personal assets of the stockholder. 
B)  Shares of stock can be readily purchased and sold by investors on an organized stock exchange. 
C)  Stockholders are not 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 corporate dividends.

Question 7

The retained earnings of a corporation is ________.

Accepted Answer

A)  internally generated equity that is earned by profitable operations that is not distributed to stockholders 
B)  externally generated equity that is contributed by shareholders 
C)  externally generated equity that is acquired from banks and other creditors 
D)  internally generated equity that is received from employee stock purchases 
A)  internally generated equity that is earned by profitable operations that is not distributed to stockholders 
B)  externally generated equity that is contributed by shareholders 
C)  externally generated equity that is acquired from banks and other creditors 
D)  internally generated equity that is received from employee stock purchases

Question 8

The following information is from the December 31,2018 balance sheet of January Corporation. $$\begin{array} { | l | r | } 
\hline \text { Preferred Stock, } \$ 100 \text { par } & \$ 270,000 \
\hline \text { Paid-In Capital in Excess of Par-Preferred } & 22,000 \
\hline \text { Common Stock, } \$ 1 \text { par } & 69,000 \
\hline \text { Paid-In Capital in Excess of Par-Common } & 206,000 \
\hline \text { Retained Earnings } & \underline { 56,600 } \
\hline \text { Total Stockholders' Equity } & \$ 623,600 \
\hline
\end{array}$$ What is the average issue price of the preferred stock shares? (Round answers to the nearest dollar.)

Accepted Answer

A)  $108 
B)  $100 
C)  $167 
D)  $106 
A)  $108 
B)  $100 
C)  $167 
D)  $106

Question 9

List the four basic rights of stockholders.

Accepted Answer

1.Participate in management by voting on

Question 10

Smart Electronics completed the following stock issuance transactions:
 $$\begin{array} { | l | l | } 
\hline&\text { Issued } 4,000 \text { shares of } \$ 3 \text { par value common stock for cash of }\
 \text { June 7 } & \$ 12 \text { per share } \
\hline \text { Aug. 16 } & \text { Issued 400 shares of no-par preferred stock for } \$ 25,000 \text { cash } \
\hline & \text { Received equipment with a market value of } \$ 75,000 \text { in } \
\text { Sept. 19 } & \text { exchange for 5,000 shares of the } \$ 3 \text { par value common stock } \
\hline
\end{array}$$ Prepare the journal entries to record these transactions.Explanations are not required.

Accepted Answer

None

Question 11

Prior period adjustments ________.

Accepted Answer

A)  always increase the beginning balance of retained earnings 
B)  are shown on the statement of retained earnings as corrections to the beginning balance 
C)  can be ignored because the financial statements have already been issued 
D)  must be recorded in the period in which the error occurred 
A)  always increase the beginning balance of retained earnings 
B)  are shown on the statement of retained earnings as corrections to the beginning balance 
C)  can be ignored because the financial statements have already been issued 
D)  must be recorded in the period in which the error occurred

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

On November 1,2019,Stateside,Inc.declared a dividend of $3.00 per share.Stateside,Inc.has 20,000 shares of common stock outstanding and no preferred stock.The date of record is November 15,and the payment date is November 30,2019.Provide the journal entry needed on November 30.Omit explanation.

Accepted Answer

\[\begin{array} { | c | r | r

Question 14

On June 30,2018,Padres,Inc.showed the following data on the equity section of their balance sheet: $$\begin{array} { | l | r | } 
\hline \text { Stockholders' Equity } & \
\hline \text { Common Stock, } \$ 1 \text { par; 197,000 shares authorized, } & \
146,000 \text { shares issued and outstanding } & \$ 146,000 \
\hline \text { Paid-In Capital in Excess of Par-Common } & \$ 263,000 \
\hline \text { Retained Earnings } & \$ 958,000 \
\hline \text { Total Stockholder's Equity } & \$ 1,367,000 \
\hline
\end{array}$$ On July 1,2018,the company declared and distributed a 10% stock dividend.The market value of the stock at that time was $15 per share.Following this transaction,what is the number of shares issued?

Accepted Answer

A)  86,500 
B)  297,300 
C)  160,600 
D)  146,000 
A)  86,500 
B)  297,300 
C)  160,600 
D)  146,000

Question 15

Which of the following items are NOT reported after income from continuing operations?

Accepted Answer

A)  earnings per share 
B)  gross profit 
C)  discontinued operations 
D)  net income 
A)  earnings per share 
B)  gross profit 
C)  discontinued operations 
D)  net income

Question 16

Retained earnings represents amounts received from stockholders of a corporation in exchange for stock.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is TRUE of a stock split and a stock dividend?

Accepted Answer

A)  A stock split will increase total stockholders' equity, but a stock dividend will not. 
B)  Neither a stock split nor a stock dividend will increase total stockholders' equity. 
C)  A stock dividend will increase total stockholders' equity, but a stock split will not. 
D)  A stock split will decrease retained earnings, but a stock dividend will not. 
A)  A stock split will increase total stockholders' equity, but a stock dividend will not. 
B)  Neither a stock split nor a stock dividend will increase total stockholders' equity. 
C)  A stock dividend will increase total stockholders' equity, but a stock split will not. 
D)  A stock split will decrease retained earnings, but a stock dividend will not.

Question 19

Regarding the issuance of stock,which of the following statements is incorrect?

Accepted Answer

A)  Large corporations cannot finance all their operations through borrowing, so they raise capital by issuing stock. 
B)  A company can sell its stock directly to stockholders, or it can use the services of the state's Securities and Exchange Commission. 
C)  The issue price is the amount the corporation receives from issuing its stock. 
D)  Large corporations need huge quantities of money. 
A)  Large corporations cannot finance all their operations through borrowing, so they raise capital by issuing stock. 
B)  A company can sell its stock directly to stockholders, or it can use the services of the state's Securities and Exchange Commission. 
C)  The issue price is the amount the corporation receives from issuing its stock. 
D)  Large corporations need huge quantities of money.

Question 20

Thomas Business Supply reported a negative amount in Retained Earnings.What term describes this negative amount? What can cause this to happen?

Accepted Answer

A NEGATIVE BALANCE IN RETAINED

Exam 13: Corporations

Small and large stock dividends have no effect on the Common Stock account.

Most states prohibit corporations from paying a dividend if a deficit will occur.

Dividends in arrears are ________.

Treasury stock is a corporation's own stock that it has previously issued and later reacquired.

Jefferson Anderson is a sole proprietor of a successful business.He is interested in incorporating to protect his personal assets.What are some disadvantages of organizing as a corporate entity?

Lack of mutual agency is best described as which of the following?

The retained earnings of a corporation is ________.

List the four basic rights of stockholders.

Prior period adjustments ________.

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

On November 1,2019,Stateside,Inc.declared a dividend of $3.00 per share.Stateside,Inc.has 20,000 shares of common stock outstanding and no preferred stock.The date of record is November 15,and the payment date is November 30,2019.Provide the journal entry needed on November 30.Omit explanation.

Which of the following items are NOT reported after income from continuing operations?

Retained earnings represents amounts received from stockholders of a corporation in exchange for stock.

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

Which of the following is TRUE of a stock split and a stock dividend?

Regarding the issuance of stock,which of the following statements is incorrect?

Thomas Business Supply reported a negative amount in Retained Earnings.What term describes this negative amount? What can cause this to happen?

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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