Question 1

Which of the following is/are true regarding stock rights?

Accepted Answer

A) U.S.GAAP does not require recognition of the rights on the date of the grant. 
B) Firms often issue stock rights to raise new capital from current shareholders. 
C) Shareholders may exercise the stock rights or sell them to others. 
D) IFRS does not require recognition of the rights on the date of the grant. 
E) all of the above 
A) U.S.GAAP does not require recognition of the rights on the date of the grant. 
B) Firms often issue stock rights to raise new capital from current shareholders. 
C) Shareholders may exercise the stock rights or sell them to others. 
D) IFRS does not require recognition of the rights on the date of the grant. 
E) all of the above

Question 2

When a firm uses the par value method to account for treasury shares, ________________. The par value method requires specific identification of the date and initial proceeds of the shares repurchased, which is why firms seldom use this method.

Accepted Answer

A) the accountant debits the Treasury Stock-Common account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price and the original issue price. 
B) the accountant debits the Common Stock account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price and the original issue price. 
C) the accountant debits the Common Stock account for the par value of the repurchased shares, credits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price and the original issue price. 
D) the accountant debits the Retained Earnings account for the par value of the repurchased shares, credits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Common Stock account for any difference between the repurchase price and the original issue price. 
E) the accountant debits the Retained Earnings account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Common Stock account for any difference between the repurchase price and the original issue price. 
A) the accountant debits the Treasury Stock-Common account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price and the original issue price. 
B) the accountant debits the Common Stock account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price and the original issue price. 
C) the accountant debits the Common Stock account for the par value of the repurchased shares, credits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price and the original issue price. 
D) the accountant debits the Retained Earnings account for the par value of the repurchased shares, credits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Common Stock account for any difference between the repurchase price and the original issue price. 
E) the accountant debits the Retained Earnings account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Common Stock account for any difference between the repurchase price and the original issue price.

Question 3

Which of the following is/are true?

Accepted Answer

A) Preferred shares usually entitle their holders to dividends at a certain rate, which the firm must pay before it can pay dividends to common shareholders. 
B) Firms may sometimes postpone or omit preferred dividends. 
C) Most preferred shares have cumulative dividend rights. 
D) all of the above 
E) none of the above 
A) Preferred shares usually entitle their holders to dividends at a certain rate, which the firm must pay before it can pay dividends to common shareholders. 
B) Firms may sometimes postpone or omit preferred dividends. 
C) Most preferred shares have cumulative dividend rights. 
D) all of the above 
E) none of the above

Question 4

Which of the following is/are not true?

Accepted Answer

A) Stock rights give their holder the right to acquire shares of stock at a specified price. 
B) Firms grant stock rights to current shareholders. 
C) Shareholders may exercise the stock rights or sell them to others. 
D) The stock rights usually trade in public markets. 
E) Employees receive stock rights as a form of compensation. 
A) Stock rights give their holder the right to acquire shares of stock at a specified price. 
B) Firms grant stock rights to current shareholders. 
C) Shareholders may exercise the stock rights or sell them to others. 
D) The stock rights usually trade in public markets. 
E) Employees receive stock rights as a form of compensation.

Question 5

Which of the following is not true regarding firms use of net assets (assets minus liabilities)?

Accepted Answer

A) Firms use net assets to generate more net assets through the earnings 
B) Firms typically retain some or all of the net assets generated by earnings, causing net assets to increase, along with retained earnings, which is the component of shareholders' equity showing the cause of that increase in net assets. 
C) The retention of net assets generated by earnings generally increases the market price of the firm's common shares. 
D) Some firms pay periodic dividends to the common shareholders out of net assets. 
E) Regardless of whether a firm has more than one class of common stock and their dividend rights differ, each common shareholder always receives the same dividend per share as all other common shareholders. 
A) Firms use net assets to generate more net assets through the earnings 
B) Firms typically retain some or all of the net assets generated by earnings, causing net assets to increase, along with retained earnings, which is the component of shareholders' equity showing the cause of that increase in net assets. 
C) The retention of net assets generated by earnings generally increases the market price of the firm's common shares. 
D) Some firms pay periodic dividends to the common shareholders out of net assets. 
E) Regardless of whether a firm has more than one class of common stock and their dividend rights differ, each common shareholder always receives the same dividend per share as all other common shareholders.

Question 6

Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?

Accepted Answer

A) The right to vote for the board of directors. 
B) The right to maintain one's proportional interest in the corporation. 
C) The right to receive a full cash dividend before dividends are paid to other classes of stock. 
D) The right to vote on major corporate issues. 
E) The right to transfer dividend revenue to common shareholders. 
A) The right to vote for the board of directors. 
B) The right to maintain one's proportional interest in the corporation. 
C) The right to receive a full cash dividend before dividends are paid to other classes of stock. 
D) The right to vote on major corporate issues. 
E) The right to transfer dividend revenue to common shareholders.

Question 7

Which of the following is/are true?

Accepted Answer

A) U.S.GAAP and IFRS classify preferred stock subject to redemption only at the option of the issuing firm as shareholders' equity. 
B) U.S.GAAP and IFRS classify preferred stock subject to mandatory redemption is a liability. 
C) U.S.GAAP classify preferred stock subject to redemption at the option of the preferred shareholders appears between liabilities and shareholders' equity. 
D) IFRS classify preferred stock subject to redemption at the option of the preferred shareholders appears as a liability. 
E) all of the above 
A) U.S.GAAP and IFRS classify preferred stock subject to redemption only at the option of the issuing firm as shareholders' equity. 
B) U.S.GAAP and IFRS classify preferred stock subject to mandatory redemption is a liability. 
C) U.S.GAAP classify preferred stock subject to redemption at the option of the preferred shareholders appears between liabilities and shareholders' equity. 
D) IFRS classify preferred stock subject to redemption at the option of the preferred shareholders appears as a liability. 
E) all of the above

Question 8

On January 1, 2013, the records of the Camrole Corporation showed these balances:
 Common stock--authorized 78,000 shares at $100 par;
issued 30,800 shares ................................	$3,080,000
Paid-In capital in excess of par ......................	264,800
Retained earnings .....................................	2,960,000

Accepted Answer

During 2013 and 2014, these tr

Question 9

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are not true?

Accepted Answer

A) The board may declare dividends "out of capital," that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners. 
B) The board may declare dividends "out of earnings" by debiting them against the Retained Earnings account, which results from earnings transactions. 
C) "Capital" may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders. 
D) Some jurisdictions allow corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period 
E) none of the above 
A) The board may declare dividends "out of capital," that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners. 
B) The board may declare dividends "out of earnings" by debiting them against the Retained Earnings account, which results from earnings transactions. 
C) "Capital" may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders. 
D) Some jurisdictions allow corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period 
E) none of the above

Question 10

Stock warrants outstanding should be classified as

Accepted Answer

A) liabilities. 
B) reductions of capital contributed in excess of par value. 
C) capital stock. 
D) additions to contributed capital. 
E) None of these choices is correct. 
A) liabilities. 
B) reductions of capital contributed in excess of par value. 
C) capital stock. 
D) additions to contributed capital. 
E) None of these choices is correct.

Question 11

Preferred stock subject to redemption at the option of the preferred shareholders appears between liabilities and shareholders' equity in U.S.GAAP and as a liability in IFRS.

Accepted Answer

A) True 
 B)False

Question 12

To settle debts of general partnerships and sole proprietorships, creditors have a claim on the owners' business and personal assets.

Accepted Answer

A) True 
 B)False

Question 13

Treasury stock or treasury shares are shares a firm has previously issued and later reacquired. Which of the following is/are true?

Accepted Answer

A) To fulfill commitments to deliver shares to its employees under employee stock option plans, the employer can reacquire shares so that the number of shares outstanding remains approximately constant. 
B) Doing so avoids diluting existing shareholders' voting interest and perhaps maintaining earnings per share. 
C) The firm would project the expected number of shares needed for the exercise of employee stock options and repurchase that amount of shares in the open market. 
D) all of the above 
E) none of the above 
A) To fulfill commitments to deliver shares to its employees under employee stock option plans, the employer can reacquire shares so that the number of shares outstanding remains approximately constant. 
B) Doing so avoids diluting existing shareholders' voting interest and perhaps maintaining earnings per share. 
C) The firm would project the expected number of shares needed for the exercise of employee stock options and repurchase that amount of shares in the open market. 
D) all of the above 
E) none of the above

Question 14

Describe the accounting for stock splits and reverse stock splits.

Accepted Answer

STOCK SPLITS
Stock splits (or, more tech

Question 15

Prepare the journal entries necessary to record the following transactions for the Falcon Company:
 a.	On January 1, Year 1, the company issued 10,000 shares of common stock (par value $5) at $15 per share.
b.	On January 1, Year 2, the company issued $200,000 of convertible bonds at par. The bonds have a face value of $1,000, pay 8% annually and are convertible into 40 shares of common shares. Without the conversion feature, the bonds would have been issued at 98.
c.	On June 1, Year 2, the company repurchased 8,000 of the common shares when the market price per share was $25.
d.	On January 1, Year 3, the convertible bonds were exchanged for treasury shares. The market price of common stock on that date is $30. (Hint: recognize a gain or loss on conversion.)

Accepted Answer

The answer of Prepare the journal entries necessary to record...

Question 16

Based on the following information, determine how many shares of common stock would be outstanding if all conversion features were exercised.
 $\begin{array}{lr}
\text { Convertible Bonds Payable } & \$80,000 \
\text { Convertible Preferred Stock - par } & 50,000 \
\text { Common Stock - par } & 2,000,000 \
\text { Additional Paid-in Capital } & 1,800,000 \
\text { Retained Earnings } & 3,000,000 \
\text { Shares held in Treasury } & (600,000)
\end{array}$

Additional information:

a.	Common stock was issued when the market price was $10 per share
b.	The treasury stock was acquired when the market value per share was $15.
c.	Current fair market value of the common stock is $18 per share.
d.	Each share of $1,000 par value preferred stock is convertible to 50 shares of common stock.
e.	Each $1,000 face value bond can be converted to 40 shares of common stock. The bonds were issued at par.

Accepted Answer

The answer of Based on the following information, determine how...

Question 17

U.S.GAAP provides several approaches to the accounting for treasury shares which include cost, par value, and constructive retirement methods.

Accepted Answer

A) True 
 B)False

Question 18

Discuss the accounting for a firm paying dividends in cash, other assets, or shares of its common stock.

Accepted Answer

ACCOUNTING FOR DIVIDENDS
A firm may pay

Question 19

Only the corporate form of business organization provides the owner with limited liability.

Accepted Answer

A) True 
 B)False

Question 20

Earnings per share tells the shareholder the amount of

Accepted Answer

A) cash generated per share of common stock. 
B) dividends earned by each common shareholder. 
C) dividend per share of common stock. 
D) income per share as if preferred stock dividends had been paid. 
E) income per share as if common and preferred stock dividends had been paid. 
A) cash generated per share of common stock. 
B) dividends earned by each common shareholder. 
C) dividend per share of common stock. 
D) income per share as if preferred stock dividends had been paid. 
E) income per share as if common and preferred stock dividends had been paid.

Which of the following is/are true regarding stock rights?

When a firm uses the par value method to account for treasury shares, ________________. The par value method requires specific identification of the date and initial proceeds of the shares repurchased, which is why firms seldom use this method.

Which of the following is/are true?

Which of the following is/are not true?

Which of the following is not true regarding firms use of net assets (assets minus liabilities)?

Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?

Which of the following is/are true?

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are not true?

Stock warrants outstanding should be classified as

Preferred stock subject to redemption at the option of the preferred shareholders appears between liabilities and shareholders' equity in U.S.GAAP and as a liability in IFRS.

To settle debts of general partnerships and sole proprietorships, creditors have a claim on the owners' business and personal assets.

Treasury stock or treasury shares are shares a firm has previously issued and later reacquired. Which of the following is/are true?

Describe the accounting for stock splits and reverse stock splits.

U.S.GAAP provides several approaches to the accounting for treasury shares which include cost, par value, and constructive retirement methods.

Discuss the accounting for a firm paying dividends in cash, other assets, or shares of its common stock.

Only the corporate form of business organization provides the owner with limited liability.

Earnings per share tells the shareholder the amount of

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 15: Shareholders Equity: Capital Contributions and Distributions

Which of the following is/are true regarding stock rights?

When a firm uses the par value method to account for treasury shares, ________________. The par value method requires specific identification of the date and initial proceeds of the shares repurchased, which is why firms seldom use this method.

Which of the following is/are true?

Which of the following is/are not true?

Which of the following is not true regarding firms use of net assets (assets minus liabilities)?

Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?

Which of the following is/are true?

Jurisdiction-specific corporate laws limit directors' freedom to declare dividends.Which of the following is/are not true?

Stock warrants outstanding should be classified as

Preferred stock subject to redemption at the option of the preferred shareholders appears between liabilities and shareholders' equity in U.S.GAAP and as a liability in IFRS.

To settle debts of general partnerships and sole proprietorships, creditors have a claim on the owners' business and personal assets.

Treasury stock or treasury shares are shares a firm has previously issued and later reacquired. Which of the following is/are true?

Describe the accounting for stock splits and reverse stock splits.

U.S.GAAP provides several approaches to the accounting for treasury shares which include cost, par value, and constructive retirement methods.

Discuss the accounting for a firm paying dividends in cash, other assets, or shares of its common stock.

Only the corporate form of business organization provides the owner with limited liability.

Earnings per share tells the shareholder the amount of

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters