Question 1

If preferred stock is noncumulative,the company is required to pay dividends that were passed in previous years.

Accepted Answer

A) True 
 B)False

Question 2

The statement of retained earnings reports how the company's retained earnings balance changed from the beginning of the period to the end of the period.

Accepted Answer

A) True 
 B)False

Question 3

Electric,Inc.was incorporated on January 1,2016.Electric issued 4000 shares of common stock and 1200 shares of preferred stock on that date.The preferred stock is cumulative,$100 par,with an 12% dividend rate.Electric has not paid any dividends yet.In 2019,Electric had its first profitable year,and on November 1,2019,Electric declared a total dividend of $63,000.What is the total amount that will be paid to preferred shareholders?

Accepted Answer

A)  $14,400 
B)  $57,600 
C)  $13,200 
D)  $63,000 
A)  $14,400 
B)  $57,600 
C)  $13,200 
D)  $63,000

Question 4

Which of the following is TRUE of a corporation?

Accepted Answer

A)  A corporation cannot be privately held. 
B)  The earnings of a corporation may be subject to double taxation. 
C)  A corporation has a limited life. 
D)  The stockholders of a corporation have unlimited liability for the corporation's debt. 
A)  A corporation cannot be privately held. 
B)  The earnings of a corporation may be subject to double taxation. 
C)  A corporation has a limited life. 
D)  The stockholders of a corporation have unlimited liability for the corporation's debt.

Question 5

Which of the following actions could increase the balance in the Paid-In Capital in Excess of Par-Common account?

Accepted Answer

A)  cash dividend declared 
B)  stock split 
C)  10% stock dividend declared 
D)  purchase of treasury stock 
A)  cash dividend declared 
B)  stock split 
C)  10% stock dividend declared 
D)  purchase of treasury stock

Question 6

On December 2,2018,Eshares,Inc.purchases land.In payment for the land,Eshares,Inc.issues 6000 shares of common stock with $6 par value.The land has been appraised at a market value of $430,000.Which of the following is included in the journal entry to record this transaction?

Accepted Answer

A)  debit Common Stock-$6 Par Value for $36,000 and debit Paid-In Capital in Excess of Par -Common $394,000 
B)  credit Common Stock-$6 Par Value for $36,000 and credit Paid-In Capital in Excess of Par-Common $394,000 
C)  credit Common Stock-$6 Par Value for $430,000 
D)  debit Cash $430,000 
A)  debit Common Stock-$6 Par Value for $36,000 and debit Paid-In Capital in Excess of Par -Common $394,000 
B)  credit Common Stock-$6 Par Value for $36,000 and credit Paid-In Capital in Excess of Par-Common $394,000 
C)  credit Common Stock-$6 Par Value for $430,000 
D)  debit Cash $430,000

Question 7

Which of the following actions will decrease 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 8

When the corporation declares a stock dividend,a stockholder's percentage ownership in the stock of the corporation ________.

Accepted Answer

A)  will decrease 
B)  can increase or decrease 
C)  will increase 
D)  remains unchanged 
A)  will decrease 
B)  can increase or decrease 
C)  will increase 
D)  remains unchanged

Question 9

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 10

If treasury shares are sold for less than their cost,the difference is recorded as a loss.

Accepted Answer

A) True 
 B)False

Question 11

Preferred stockholders receive a dividend preference over common stockholders.

Accepted Answer

A) True 
 B)False

Question 12

Stated value stock is no-par stock that has been assigned an amount similar to par value.

Accepted Answer

A) True 
 B)False

Question 13

Regarding discontinued operations,which of the following statements is incorrect?

Accepted Answer

A)  Gains and losses on the sale of plant assets and equipment are reported as Other Income and (Expenses). 
B)  A loss on discontinued operations is reported with an addition for the applicable income tax. 
C)  The sale of an identifiable division of the business is reported on the income statement under the category Discontinued Operations. 
D)  The Discontinued Operations category of the income statement includes information about segments of the business that have been sold. 
A)  Gains and losses on the sale of plant assets and equipment are reported as Other Income and (Expenses). 
B)  A loss on discontinued operations is reported with an addition for the applicable income tax. 
C)  The sale of an identifiable division of the business is reported on the income statement under the category Discontinued Operations. 
D)  The Discontinued Operations category of the income statement includes information about segments of the business that have been sold.

Question 14

Rather Corporation's annual report is as follows. $$\begin{array} { | l | r | r | } 
\hline & \text { March 31, 2018 } & \text { March 31, 2019 } \
\hline \text { Net Income } & \$ 358,000 & \$ 429,500 \
\hline \text { Preferred Dividends } & 0 & 0 \
\hline \text { Total Stockholders' Equity } & \$ 4,220,000 & \$ 5,112,000 \
\hline \text { Stockholders' Equity attributable to Preferred } & & \
\text { Stock } & 0 & 0 \
\hline \text { Number of Common Shares Outstanding } & 275,464 & 200,168 \
\hline
\end{array}$$ If the current market price is $17 on March 31,2019,compute the price/earnings ratio on March 31,2019.(Round any intermediate calculations and your final answer to the nearest cent.)

Accepted Answer

A)  9.39 
B)  2.15 
C)  1.81 
D)  7.91 
A)  9.39 
B)  2.15 
C)  1.81 
D)  7.91

Question 15

On the date of record for a dividend,the company ________.

Accepted Answer

A)  issues new shares of stock on that date 
B)  disburses dividend payments to stockholders on that date 
C)  records the dividend payable amount on that date 
D)  determines who owns the shares of stock on that date 
A)  issues new shares of stock on that date 
B)  disburses dividend payments to stockholders on that date 
C)  records the dividend payable amount on that date 
D)  determines who owns the shares of stock on that date

Question 16

Milton,Inc.had the following transactions in 2019,its first year of operations: • Issued 8000 shares of common stock.Stock has par value of $0.01 per share and was issued at $40.00 per share.
• Earned net income of $200,000.
• Paid dividends of $8.00 per share.
At the end of 2019,what is total stockholders' equity?

Accepted Answer

A)  $320,000 
B)  $456,000 
C)  $136,000 
D)  $584,000 
A)  $320,000 
B)  $456,000 
C)  $136,000 
D)  $584,000

Question 17

The journal entry for the purchase of treasury stock includes a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 18

Preferred stockholders ________.

Accepted Answer

A)  are guaranteed that they will not have a loss on their investment 
B)  are guaranteed to receive an annual dividend payment 
C)  receive a set percentage of corporation net income 
D)  receive a dividend preference over common stockholders 
A)  are guaranteed that they will not have a loss on their investment 
B)  are guaranteed to receive an annual dividend payment 
C)  receive a set percentage of corporation net income 
D)  receive a dividend preference over common stockholders

Question 19

On July 31,2018,Baldwin,Inc.reported the following information in the equity section of their balance sheet:
 $$\begin{array} { | l | r | } 
\hline \text { Stockholders' Equity: } & \
\hline \begin{array} { l } 
\text { Common Stock, } \$ 1.00 \text { par, } 500,000 \text { shares authorized,20,000 shares issued } \
\text { and outstanding }
\end{array} & \$ 20,000 \
\hline \text { Paid-In Capital in Excess of Par-Common } & 3,180,000 \
\hline \text { Retained Earnings } & 3,200,000\
\hline\text { Total Stockholder's Equity }&\$ 4,400,000 \
\hline 
\end{array}$$ Assume that Baldwin splits its common stock 3-for-1.Prepare an equity section of the balance sheet that shows the effects of the stock split.(Please round all numbers to the nearest cent.)

Accepted Answer

Stockholders' equity:
Common stock,$0.33

Question 20

Which of the following requires a formal journal entry?

Accepted Answer

A)  selection of a new CEO 
B)  stock dividend distribution 
C)  stock split 
D)  date of record for cash dividends 
A)  selection of a new CEO 
B)  stock dividend distribution 
C)  stock split 
D)  date of record for cash dividends

Exam 13: Corporations

If preferred stock is noncumulative,the company is required to pay dividends that were passed in previous years.

The statement of retained earnings reports how the company's retained earnings balance changed from the beginning of the period to the end of the period.

Which of the following is TRUE of a corporation?

Which of the following actions could increase the balance in the Paid-In Capital in Excess of Par-Common account?

On December 2,2018,Eshares,Inc.purchases land.In payment for the land,Eshares,Inc.issues 6000 shares of common stock with $6 par value.The land has been appraised at a market value of $430,000.Which of the following is included in the journal entry to record this transaction?

Which of the following actions will decrease Retained Earnings?

When the corporation declares a stock dividend,a stockholder's percentage ownership in the stock of the corporation ________.

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

If treasury shares are sold for less than their cost,the difference is recorded as a loss.

Preferred stockholders receive a dividend preference over common stockholders.

Stated value stock is no-par stock that has been assigned an amount similar to par value.

Regarding discontinued operations,which of the following statements is incorrect?

On the date of record for a dividend,the company ________.

The journal entry for the purchase of treasury stock includes a credit to Cash.

Preferred stockholders ________.

Which of the following requires a formal journal entry?

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

Filters