Question 1

Refer to the information above. How many shares of common stock are outstanding?

Accepted Answer

A)  600,000. 
B)  606,000. 
C)  594,000. 
D)  1,000,000. 
A)  600,000. 
B)  606,000. 
C)  594,000. 
D)  1,000,000.

Question 2

Common stock is considered the legal capital of the corporation.

Accepted Answer

A) True 
 B)False

Question 3

The average issue price per share of preferred stock: $_____ per share

Accepted Answer

($700,000 + $400,000

Question 4

Interpreting stockholders' equity section
The stockholders' equity section of the balance sheet of Powell Corporation (with certain details omitted) appears below:
 
Answer the following questions based on the stockholders' equity section given above:
(a) What is the total amount of legal capital?
(b) What is the total amount of dividends paid annually to the preferred stockholders?
(c) What is the average issue price of a share of common stock?
(d) The balance in retained earnings at the beginning of the current year was $1,351,500, and there were no dividends in arrears. Net income for the current year was $700,000. What is the amount of the dividends declared on each share of common stock during the current year?

Accepted Answer

(a) $2,850,000
(b) $

Question 5

Coronet Corp. has total stockholders' equity of $7,400,000. The company's outstanding capital stock includes 100,000 shares of $10 par value common stock and 20,000 shares of 6%, $100 par value preferred stock. (No dividends are in arrears.) The book value per share of common stock is:

Accepted Answer

A)  $39. 
B)  $49. 
C)  $54. 
D)  $74. 
A)  $39. 
B)  $49. 
C)  $54. 
D)  $74.

Question 6

The entry to record the issuance of common stock at a price above its par value includes:

Accepted Answer

A)  A credit to Cash. 
B)  A credit to a liability account for the difference between the price paid by the stockholders and the par value of the stock. 
C)  A credit to Additional Paid-in Capital: Common Stock. 
D)  A debit to Common Stock. 
A)  A credit to Cash. 
B)  A credit to a liability account for the difference between the price paid by the stockholders and the par value of the stock. 
C)  A credit to Additional Paid-in Capital: Common Stock. 
D)  A debit to Common Stock.

Question 7

Stock values
Presented below is an excerpt from the stock listings of a recent issue of the Wall Street Journal.
Answer the following questions based on the information about the Russell Corporation given above:
(a) How many shares of Russell Corporation stock were sold on this day?
(b) If you had purchased 10 shares of Russell Corporation stock at the lowest price of the day, what would be the total price that you would have paid for the stock?
(c) What was the closing price of Russell Corporation Stock on the previous day?
(d) If the board of directors of Russell Corporation increased the amount of the annual dividends to $1.00 per share, what would be the amount of the yield percentage on the stock?

Accepted Answer

(a) 1,640 x 100 = 164,000
(b)

Question 8

Refer to the information above. How many shares of preferred stock are issued and outstanding?

Accepted Answer

A)  75,000 shares. 
B)  6,000 shares. 
C)  60,000 shares. 
D)  120,000 shares. 
A)  75,000 shares. 
B)  6,000 shares. 
C)  60,000 shares. 
D)  120,000 shares.

Question 9

A stock split will decrease the total par value of the stock.

Accepted Answer

A) True 
 B)False

Question 10

The purchase of treasury stock for cash will have which effect upon the following items?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 11

Refer to the information above. What was the average issue price per share of common stock?

Accepted Answer

A)  $2.75. 
B)  $1.25. 
C)  $1.50. 
D)  $3.75. 
A)  $2.75. 
B)  $1.25. 
C)  $1.50. 
D)  $3.75.

Question 12

Financial reporting of net losses and retained earnings
A recent annual report of Dobbs, Inc., reported a net loss of approximately $63 million and retained earnings of approximately $1.6 billion.
(a) Which financial statement shows computation of the $63 million net loss?
(b) Which financial statement includes the retained earnings figure of $1.6 billion?
(c) Explain how it is possible for Dobbs to report both a net loss of $63 million and retained earnings of $1.6 billion in a single set of financial statements.

Accepted Answer

(a) Income statement (or statement of op

Question 13

Cash dividends and two classes of stock
Raymond Inc., has two classes of capital stock outstanding: 25,000 shares of 5%, $100 par value cumulative preferred and 30,000 shares of $10 par value common. The company had a deficit (negative balance in retained earnings) of $160,000 at the beginning of the current year, and preferred dividends were three years in arrears. During the current year, the company earned net income of $970,000. What will be the balance in the Retained Earnings account at the end of the current year if the company takes all the actions necessary to pay a dividend of $2.50 per share on the common stock? $_______________

Accepted Answer

The answer of Cash dividends and two classes of stock
Raymond...

Question 14

Refer to the information above. If Amelia did not pay a dividend for the last two years, but declared a $250,000 dividend this year, how much will the common stockholders receive?

Accepted Answer

A)  $152,800. 
B)  $250,000. 
C)  $97,200. 
D)  $217,600. 
A)  $152,800. 
B)  $250,000. 
C)  $97,200. 
D)  $217,600.

Question 15

When treasury stock is reissued at a price above cost:

Accepted Answer

A)  The corporation recognizes a gain to be recorded on the income statement. 
B)  Total paid-in capital is increased. 
C)  The re-issuance is treated as an extraordinary item in the corporation's income statement. 
D)  Retained earnings is increased. 
A)  The corporation recognizes a gain to be recorded on the income statement. 
B)  Total paid-in capital is increased. 
C)  The re-issuance is treated as an extraordinary item in the corporation's income statement. 
D)  Retained earnings is increased.

Question 16

On April 16, 2010, Rodriguez Corporation reacquired 12,000 shares of its own $10 par stock for $660,000 cash. On November 4, 2011, 1,000 of the treasury shares were reissued at a price of $65 per share. The journal entry to record the reissuance of the 1,000 shares of stock on November 4 includes a:

Accepted Answer

A)  Credit to Common Stock of $10,000. 
B)  Credit to Additional Paid-In Capital: Treasury Stock Transactions of $10,000. 
C)  Credit to Gain on Treasury Stock Transactions of $10,000. 
D)  Credit to Treasury Stock Reissued of $65,000. 
A)  Credit to Common Stock of $10,000. 
B)  Credit to Additional Paid-In Capital: Treasury Stock Transactions of $10,000. 
C)  Credit to Gain on Treasury Stock Transactions of $10,000. 
D)  Credit to Treasury Stock Reissued of $65,000.

Question 17

Refer to the information above. If Brookdale Corporation had reacquired 7,000 shares of treasury stock early in 2010, and this was the company's only treasury stock transaction, then some treasury stock must have been sold during 2010 for:

Accepted Answer

A)  $32 per share. 
B)  $38 per share. 
C)  $27 per share. 
D)  $6 per share. 
A)  $32 per share. 
B)  $38 per share. 
C)  $27 per share. 
D)  $6 per share.

Question 18

A 2-for-1 stock split:

Accepted Answer

A)  Is accounted for in the same way as a 100% stock dividend. 
B)  Increases the number of outstanding shares of common stock, but par value per share remains the same as before the split. 
C)  Is recorded by transferring the par value of additional shares from retained earnings to the common stock account. 
D)  Should logically cause the market price per share to drop by approximately 50%. 
A)  Is accounted for in the same way as a 100% stock dividend. 
B)  Increases the number of outstanding shares of common stock, but par value per share remains the same as before the split. 
C)  Is recorded by transferring the par value of additional shares from retained earnings to the common stock account. 
D)  Should logically cause the market price per share to drop by approximately 50%.

Question 19

The balance in Retained Earnings at the beginning of the year was $950,000, and there were no dividends in arrears. Net income for 2009 was $980,000. What was the amount of dividend declared on each share of common stock during 2009?

Accepted Answer

A)  $2.50. 
B)  $2.08. 
C)  $2.00. 
D)  $2.68. 
A)  $2.50. 
B)  $2.08. 
C)  $2.00. 
D)  $2.68.

Question 20

The rights of a common stockholder do not include the right:

Accepted Answer

A)  To vote for directors. 
B)  To withdraw a share of corporate net assets proportionate to the person's stockholdings. 
C)  To receive a proportionate share of corporate assets upon liquidation, after creditors have been paid. 
D)  To share in profits when the board of directors declares a dividend. 
A)  To vote for directors. 
B)  To withdraw a share of corporate net assets proportionate to the person's stockholdings. 
C)  To receive a proportionate share of corporate assets upon liquidation, after creditors have been paid. 
D)  To share in profits when the board of directors declares a dividend.

Exam 11: Stockholders Equity: Paid-In Capital

Refer to the information above. How many shares of common stock are outstanding?

Common stock is considered the legal capital of the corporation.

The average issue price per share of preferred stock: $_____ per share

Coronet Corp. has total stockholders' equity of $7,400,000. The company's outstanding capital stock includes 100,000 shares of $10 par value common stock and 20,000 shares of 6%, $100 par value preferred stock. (No dividends are in arrears.) The book value per share of common stock is:

The entry to record the issuance of common stock at a price above its par value includes:

Refer to the information above. How many shares of preferred stock are issued and outstanding?

A stock split will decrease the total par value of the stock.

The purchase of treasury stock for cash will have which effect upon the following items?

Refer to the information above. What was the average issue price per share of common stock?

Refer to the information above. If Amelia did not pay a dividend for the last two years, but declared a $250,000 dividend this year, how much will the common stockholders receive?

When treasury stock is reissued at a price above cost:

Refer to the information above. If Brookdale Corporation had reacquired 7,000 shares of treasury stock early in 2010, and this was the company's only treasury stock transaction, then some treasury stock must have been sold during 2010 for:

A 2-for-1 stock split:

The balance in Retained Earnings at the beginning of the year was $950,000, and there were no dividends in arrears. Net income for 2009 was $980,000. What was the amount of dividend declared on each share of common stock during 2009?

The rights of a common stockholder do not include the right:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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