Question 1

The net assets of a corporation are equal to:

Accepted Answer

A)  Total assets-total liabilities. 
B)  Total assets-retained earnings. 
C)  Total assets + total liabilities. 
D)  Total assets + retained earnings. 
A)  Total assets-total liabilities. 
B)  Total assets-retained earnings. 
C)  Total assets + total liabilities. 
D)  Total assets + retained earnings.

Question 2

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

Accepted Answer

A)  $150. 
B)  $165. 
C)  $180. 
D)  $195. 
A)  $150. 
B)  $165. 
C)  $180. 
D)  $195.

Question 3

What's so "preferred" about preferred stocks?
Most preferred stocks do not have voting power, a basic right of common stock. Identify at least two features of most preferred stocks that justify or support use of the term preferred in describing these types of stock issues.

Accepted Answer

Student's answer should include two of t

Question 4

Preferred stockholders are owners of the corporation and have rights upon liquidation and to receive dividends.

Accepted Answer

A) True 
 B)False

Question 5

The purchase of treasury stock for cash will:

Accepted Answer

A)  Increase stockholders' equity. 
B)  Not increase nor decrease stockholders' equity. 
C)  Decrease stockholders' equity. 
D)  Not change total assets. 
A)  Increase stockholders' equity. 
B)  Not increase nor decrease stockholders' equity. 
C)  Decrease stockholders' equity. 
D)  Not change total assets.

Question 6

Preferred stockholders generally do not have the same voting rights as do common stockholders in a corporation.

Accepted Answer

A) True 
 B)False

Question 7

Most preferred stocks have the following characteristics, except:

Accepted Answer

A)  To receive dividends on a preferred basis. 
B)  Cumulative dividends. 
C)  Voting rights. 
D)  Callable at the option of the corporation. 
A)  To receive dividends on a preferred basis. 
B)  Cumulative dividends. 
C)  Voting rights. 
D)  Callable at the option of the corporation.

Question 8

Which of the following is not an addition to total paid-in-capital?

Accepted Answer

A)  Retained earnings. 
B)  Treasury stock. 
C)  Neither retained earnings nor treasury stock. 
D)  Both retained earnings and treasury stock. 
A)  Retained earnings. 
B)  Treasury stock. 
C)  Neither retained earnings nor treasury stock. 
D)  Both retained earnings and treasury stock.

Question 9

On September 1, 2009, Maryland Corporation's common stock was selling at a market price of $200 per share. On that date, Maryland announced a 3 for 2 stock split. At what price would you expect the stock to trade immediately after the split goes into effect?

Accepted Answer

A)  $100. 
B)  $200. 
C)  $133.33. 
D)  $225. 
A)  $100. 
B)  $200. 
C)  $133.33. 
D)  $225.

Question 10

Stockholders' Equity
Blake Corporation has the following accounts on December 31, 2010
Common Stock $.25 par, 1,000,000 authorized, 400,000 issued.
Preferred stock 6%, $100 par, cumulative, 5,000 shares authorized, 3,000 issued.
Treasury stock, 1,500 shares purchased at market value of $6 per share
$$\begin{array} { | l | l | } 
\hline \text { Paid-in capital - Preferred } & \$ 190,000 \
\hline \text { Paid-in capital - Common } & \$ 2,400,000 \
\hline \text { Dividends Payable } & \$ 415,000 \
\hline \text { Retained Earnings } & \$ 2,335,00 0\
\hline
\end{array}$$
Required:
(1) Prepare the stockholders' equity section of the balance sheet.
(2) Prepare the journal entry for the purchase of the treasury stock.
(3) Blake paid the liability for dividends on March 1. Prepare the journal entry for the payment.

Accepted Answer

The answer of Stockholders' Equity
Blake Corporation has the following accounts...

Question 11

When a stockholder sends in a proxy statement to a corporation he or she owns stock in, they relinquish their voting rights to the officers of the corporation.

Accepted Answer

A) True 
 B)False

Question 12

Treasury stock should most often be recorded:

Accepted Answer

A)  At cost. 
B)  Par value. 
C)  Fair market value at year end. 
D)  Face value. 
A)  At cost. 
B)  Par value. 
C)  Fair market value at year end. 
D)  Face value.

Question 13

Stockholders of a corporation are personally liable for the debts of the corporation if all shares of stock are owned by the officers of the corporation.

Accepted Answer

A) True 
 B)False

Question 14

It is illegal for the government to double tax corporate earnings.

Accepted Answer

A) True 
 B)False

Question 15

Accounting terminology
Listed below are nine technical accounting terms introduced in this chapter:
 
Each of the following statements may (or may not) describe one of these technical terms. In the space provided beside each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms.
____ (a) The type of stock whose owners have little say in management of the corporation and whose annual dividend is limited to a preset amount.
____ (b) Distribution of cash or other company assets to the owners of a corporation.
____ (c) An investment banking firm that guarantees an issuing corporation a specific price for a stock issue and then makes a profit by selling the shares to the investing public at a higher price.
____ (d) Shares of a corporation's stock that have been issued and then reacquired, but not cancelled.
____ (e) An element of stockholders' equity arising from the profitable operations of a business.
____ (f) The type of stock most likely to increase dramatically in value if the issuing corporation is extremely successful.
____ (g) Amounts invested in a corporation by its stockholders.

Accepted Answer

(a) Preferred stock, (b) Divid

Question 16

The purchase of treasury stock creates an asset for the corporation and is recorded at the cost of the shares purchased, not par value.

Accepted Answer

A) True 
 B)False

Question 17

A corporation continues in existence even if a stockholder dies or withdraws from the organization.

Accepted Answer

A) True 
 B)False

Question 18

Treasury stock transactions.
Jackson Corporation engaged in the following treasury stock transactions during the current year:
  
Complete the following three general journal entries to record these treasury stock transactions.

Accepted Answer

The answer of Treasury stock transactions.
Jackson Corporation engaged in the...

Question 19

The advantages of corporations going public include all of the following except:

Accepted Answer

A)  Professional management. 
B)  Transferability of ownership. 
C)  Limited shareholder liability. 
D)  Ability to remove assets. 
A)  Professional management. 
B)  Transferability of ownership. 
C)  Limited shareholder liability. 
D)  Ability to remove assets.

Question 20

The average issue price per share of Grant's preferred stock was:

Accepted Answer

A)  $112. 
B)  $100. 
C)  $110. 
D)  $66. 
A)  $112. 
B)  $100. 
C)  $110. 
D)  $66.

Exam 11: Stockholders Equity: Paid-In Capital

The net assets of a corporation are equal to:

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

What's so "preferred" about preferred stocks? Most preferred stocks do not have voting power, a basic right of common stock. Identify at least two features of most preferred stocks that justify or support use of the term preferred in describing these types of stock issues.

Preferred stockholders are owners of the corporation and have rights upon liquidation and to receive dividends.

The purchase of treasury stock for cash will:

Preferred stockholders generally do not have the same voting rights as do common stockholders in a corporation.

Most preferred stocks have the following characteristics, except:

Which of the following is not an addition to total paid-in-capital?

On September 1, 2009, Maryland Corporation's common stock was selling at a market price of $200 per share. On that date, Maryland announced a 3 for 2 stock split. At what price would you expect the stock to trade immediately after the split goes into effect?

When a stockholder sends in a proxy statement to a corporation he or she owns stock in, they relinquish their voting rights to the officers of the corporation.

Treasury stock should most often be recorded:

Stockholders of a corporation are personally liable for the debts of the corporation if all shares of stock are owned by the officers of the corporation.

It is illegal for the government to double tax corporate earnings.

The purchase of treasury stock creates an asset for the corporation and is recorded at the cost of the shares purchased, not par value.

A corporation continues in existence even if a stockholder dies or withdraws from the organization.

Treasury stock transactions. Jackson Corporation engaged in the following treasury stock transactions during the current year: Complete the following three general journal entries to record these treasury stock transactions.

The advantages of corporations going public include all of the following except:

The average issue price per share of Grant's preferred stock was:

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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