Question 1

Treasury stock is stock that is issued and outstanding but not authorized.

Accepted Answer

A) True 
 B)False

Question 2

The ownership of common stock in a corporation usually carries the following rights:

Accepted Answer

A)  To vote for directors. 
B)  To declare dividends. 
C)  To share in a distribution of assets if the corporation is to be liquidated. 
D)  Both declare dividends and share in a distribution of assets if the corporation is to be liquidated. 
A)  To vote for directors. 
B)  To declare dividends. 
C)  To share in a distribution of assets if the corporation is to be liquidated. 
D)  Both declare dividends and share in a distribution of assets if the corporation is to be liquidated.

Question 3

Determining book value per share
Shown below is information relating to the stockholders' equity of Churchill, Inc.:
  
From the above information, compute the following:
(a) Number of shares of preferred stock issued and outstanding
(b) Average issue price per share of common stock
(c) Total paid-in capital
(d) Total stockholders' equity
(e) Book value per share of common stock

Accepted Answer

(a) 12,000 shares
(b

Question 4

Marks Corporation has total stockholders' equity of $7,400,000. The company has outstanding 300,000 shares of $1 par value common stock and 20,000 shares of 8% preferred stock, $100 par value. (No dividends are in arrears.) The book value per share of common stock is:

Accepted Answer

A)  $9.00. 
B)  $24.06. 
C)  $24.66. 
D)  $18.00. 
A)  $9.00. 
B)  $24.06. 
C)  $24.66. 
D)  $18.00.

Question 5

On December 10, 2010, Smitty Corporation reacquired 2,000 shares of its own $5 par value common stock at a price of $60 per share. In 2011, 500 of the treasury shares are reissued at a price of $70 per share. Which of the following statements is correct?

Accepted Answer

A)  The treasury stock purchased is recorded at cost and is shown in Smitty's December 31, 2010 balance sheet as an asset. 
B)  The two treasury stock transactions result in an overall net reduction in Smitty's stockholders' equity of $85,000. 
C)  Smitty recognizes a gain of $10 per share on the reissuance of the 500 treasury shares in 2011. 
D)  Smitty's stockholders' equity was increased by $110,000 when the treasury stock was acquired. 
A)  The treasury stock purchased is recorded at cost and is shown in Smitty's December 31, 2010 balance sheet as an asset. 
B)  The two treasury stock transactions result in an overall net reduction in Smitty's stockholders' equity of $85,000. 
C)  Smitty recognizes a gain of $10 per share on the reissuance of the 500 treasury shares in 2011. 
D)  Smitty's stockholders' equity was increased by $110,000 when the treasury stock was acquired.

Question 6

On September 1, 2011, Miami Corporation's common stock was selling at a market price of $25 per share. On that date, Miami announced a 1 for 4 stock split. At what price would you expect the stock to trade immediately after the split goes into effect?

Accepted Answer

A)  $100. 
B)  $25. 
C)  $6.25. 
D)  $50. 
A)  $100. 
B)  $25. 
C)  $6.25. 
D)  $50.

Question 7

Shore and Gardiner each own 10,000 shares of S&G Corporation $12 par value stock which they purchased for $38 per share directly from the corporation. If Shore sells his stock to Gardiner for $475,000:

Accepted Answer

A)  Stockholders' equity of S&G Corporation increases. 
B)  Assets of S&G Corporation increase. 
C)  Stockholders' equity of S&G Corporation decreases. 
D)  No account of S&G Corporation is affected. 
A)  Stockholders' equity of S&G Corporation increases. 
B)  Assets of S&G Corporation increase. 
C)  Stockholders' equity of S&G Corporation decreases. 
D)  No account of S&G Corporation is affected.

Question 8

Treasury stock is stock of a corporation that has been issued and then reacquired and then cancelled.

Accepted Answer

A) True 
 B)False

Question 9

Treasury stock:

Accepted Answer

A)  Is an asset. 
B)  Increases total stockholders' equity. 
C)  Decreases total stockholders' equity. 
D)  Does not change total stockholders' equity. 
A)  Is an asset. 
B)  Increases total stockholders' equity. 
C)  Decreases total stockholders' equity. 
D)  Does not change total stockholders' equity.

Question 10

Stock that had been issued by a corporation, and later reacquired, is classified as:

Accepted Answer

A)  Treasury stock. 
B)  Non-participating preferred stock. 
C)  Restricted stock. 
D)  Issued shares. 
A)  Treasury stock. 
B)  Non-participating preferred stock. 
C)  Restricted stock. 
D)  Issued shares.

Question 11

If capital stock is issued by a corporation at a price lower than par value, the difference represents a loss in the period in which the shares of stock are issued.

Accepted Answer

A) True 
 B)False

Question 12

When shares of stock are sold from one investor to another, they will trade at:

Accepted Answer

A)  Par value. 
B)  Book value. 
C)  Market value. 
D)  Stated Value. 
A)  Par value. 
B)  Book value. 
C)  Market value. 
D)  Stated Value.

Question 13

Refer to the information above. The average issue price per share of the preferred stock was:

Accepted Answer

A)  $40. 
B)  $80. 
C)  $120. 
D)  $160. 
A)  $40. 
B)  $80. 
C)  $120. 
D)  $160.

Question 14

Which of the following is not a characteristic of the corporate form of organization?

Accepted Answer

A)  The owners of a corporation cannot lose more than the amount of their investment. 
B)  Shares of stock in a corporation are more readily transferable than is an interest in a partnership. 
C)  Stockholders have authority to decide by majority vote the amount of dividends to be paid. 
D)  The corporation is a very efficient vehicle for obtaining large amounts of capital required for large-scale production. 
A)  The owners of a corporation cannot lose more than the amount of their investment. 
B)  Shares of stock in a corporation are more readily transferable than is an interest in a partnership. 
C)  Stockholders have authority to decide by majority vote the amount of dividends to be paid. 
D)  The corporation is a very efficient vehicle for obtaining large amounts of capital required for large-scale production.

Question 15

In order to limit the use of a shell company, the SEC has proposed:

Accepted Answer

A)  Greater financial disclosures. 
B)  Eliminating this type of company. 
C)  Arresting promoters of shell companies for fraud. 
D)  That its stock only be sold in foreign countries. 
A)  Greater financial disclosures. 
B)  Eliminating this type of company. 
C)  Arresting promoters of shell companies for fraud. 
D)  That its stock only be sold in foreign countries.

Question 16

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

Accepted Answer

A)  $10.00 per share. 
B)  $2.40 per share. 
C)  $15.00 per share. 
D)  $8.00 per share. 
A)  $10.00 per share. 
B)  $2.40 per share. 
C)  $15.00 per share. 
D)  $8.00 per share.

Question 17

Century Corporation issued 400,000 shares of $4 par value common stock at the time of its incorporation. The stock was issued for cash at a price of $16 per share. During the first year of operations, the company sustained a net loss of $100,000. The year-end balance sheet would show the balance of the Common Stock account to be:

Accepted Answer

A)  $1,600,000. 
B)  $1,500,000. 
C)  $6,300,000. 
D)  $6,400,000. 
A)  $1,600,000. 
B)  $1,500,000. 
C)  $6,300,000. 
D)  $6,400,000.

Question 18

Book value per share and other computations
Shown below is information relating to the stockholders' equity of Silver Waste Management at December 31, 2009:
$$\begin{array} { | l | l | } 
\hline 8 \% \text { preferred stock, } \$ 150 \text { par, } 10,000 \text { shares } & \
\hline \text { authorized and } 6,000 \text { issued } & \$ 900,000 \
\hline \text { Common stock, } \$ 6.50 \text { par, } 500,000 \text { shares authorized } & \
400,000 \text { shares issued and outstanding } & \$ 2,600,00 \
& 0 \
\hline \text { Additional paid-in capital: preferred stock } & \$ 132,000 \
\hline \text { Additional paid in capital: common stock } & \$ 2,970,00 \
\hline \text { Retained earnings } & 0 \
\hline \text { (Assume there are no dividends in arrears) } & \$ 1,551,00 \
\hline
\end{array}$$
(a) White's total legal capital at December 31, 2009, is $_______________.
(b) The total amount of Silver's paid-in capital at December 31, 2009, is $________________.
(c) The average issue price per share of Silver's preferred stock was $_______.
(d) The book value per share of common stock is $_________ per share.
(e) The balance in Retained Earnings at the beginning of the year was $1,237,500, and net income for 2009 was $1,600,000. What was the amount of dividend declared on each share of common stock during 2007? $______ per share.

Accepted Answer

(a) $900,000 + $2,600,000 = $3,500,000 t

Question 19

Which of the following best describes the relationship between revenue and retained earnings?

Accepted Answer

A)  Revenue increases net income, which in turn increases retained earnings. 
B)  Revenue represents a cash receipt; retained earnings is an element of stockholders' equity. 
C)  Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends. 
D)  Retained earnings is equal to assets minus expenses. 
A)  Revenue increases net income, which in turn increases retained earnings. 
B)  Revenue represents a cash receipt; retained earnings is an element of stockholders' equity. 
C)  Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends. 
D)  Retained earnings is equal to assets minus expenses.

Question 20

Inside directors of a corporation may be officers of the corporation and therefore are not considered independent.

Accepted Answer

A) True 
 B)False

Exam 11: Stockholders Equity: Paid-In Capital

Treasury stock is stock that is issued and outstanding but not authorized.

The ownership of common stock in a corporation usually carries the following rights:

Marks Corporation has total stockholders' equity of $7,400,000. The company has outstanding 300,000 shares of $1 par value common stock and 20,000 shares of 8% preferred stock, $100 par value. (No dividends are in arrears.) The book value per share of common stock is:

On December 10, 2010, Smitty Corporation reacquired 2,000 shares of its own $5 par value common stock at a price of $60 per share. In 2011, 500 of the treasury shares are reissued at a price of $70 per share. Which of the following statements is correct?

On September 1, 2011, Miami Corporation's common stock was selling at a market price of $25 per share. On that date, Miami announced a 1 for 4 stock split. At what price would you expect the stock to trade immediately after the split goes into effect?

Shore and Gardiner each own 10,000 shares of S&G Corporation $12 par value stock which they purchased for $38 per share directly from the corporation. If Shore sells his stock to Gardiner for $475,000:

Treasury stock is stock of a corporation that has been issued and then reacquired and then cancelled.

Treasury stock:

Stock that had been issued by a corporation, and later reacquired, is classified as:

If capital stock is issued by a corporation at a price lower than par value, the difference represents a loss in the period in which the shares of stock are issued.

When shares of stock are sold from one investor to another, they will trade at:

Refer to the information above. The average issue price per share of the preferred stock was:

Which of the following is not a characteristic of the corporate form of organization?

In order to limit the use of a shell company, the SEC has proposed:

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

Which of the following best describes the relationship between revenue and retained earnings?

Inside directors of a corporation may be officers of the corporation and therefore are not considered independent.

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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