Question 1

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

Accepted Answer

A)  Always equal to its par value. 
B)  Always equal to its stated value. 
C)  Referred to as paid-in capital. 
D)  Referred to as retained earnings. 
E)  Always below its stated value. 
A)  Always equal to its par value. 
B)  Always equal to its stated value. 
C)  Referred to as paid-in capital. 
D)  Referred to as retained earnings. 
E)  Always below its stated value.

Question 2

Callable preferred stock gives its holders the option of exchanging their preferred shares into common shares at a specified rate.

Accepted Answer

A) True 
 B)False

Question 3

A corporation is a legal entity separate from its owners.

Accepted Answer

A) True 
 B)False

Question 4

When no-par stock is not assigned a stated value, the total amount received is recorded as Common Stock.

Accepted Answer

A) True 
 B)False

Question 5

A company reports the following stockholders' equity:
Paid-in Capital:   Compute the (1) number of common shares outstanding and (2) book value per common share.

Accepted Answer

The answer of A company reports the following stockholders' equity:
Paid-in...

Question 6

A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

_____________ is the amount of income earned per share of a company's outstanding common stock.

Accepted Answer

The answer of _____________ is the amount of income earned...

Question 8

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Accepted Answer

A)  Issued. 
B)  Authorized. 
C)  Subscribed. 
D)  Outstanding. 
E)  In treasury. 
A)  Issued. 
B)  Authorized. 
C)  Subscribed. 
D)  Outstanding. 
E)  In treasury.

Question 9

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

Accepted Answer

A)  Financial leverage. 
B)  Discount on stock. 
C)  Premium on stock. 
D)  Preemptive right. 
E)  Capital gain. 
A)  Financial leverage. 
B)  Discount on stock. 
C)  Premium on stock. 
D)  Preemptive right. 
E)  Capital gain.

Question 10

Explain where each of the following items should appear in the financial statements of a corporation:
(1) The accounting department discovered that an entry was made last year to Prepaid Insurance instead of to Insurance Expense. The after-tax effect of the charge to Prepaid Insurance was $11,000.
(2) The company grants five of its employees the option to purchase 100 shares of its $5 par value common stock at its current market price of $20 per share anytime with the next five years. None of the employees exercised the options in the current year.

Accepted Answer

The answer of Explain where each of the following items...

Question 11

Prior period adjustments are reported in the:

Accepted Answer

A)  Multiple-step income statement. 
B)  Balance sheet. 
C)  Statement of retained earnings. 
D)  Statement of cash flows. 
E)  Single-step income statement. 
A)  Multiple-step income statement. 
B)  Balance sheet. 
C)  Statement of retained earnings. 
D)  Statement of cash flows. 
E)  Single-step income statement.

Question 12

Purchasing treasury stock reduces the corporation's assets and stockholders' equity by equal amounts.

Accepted Answer

A) True 
 B)False

Question 13

Preferred stock which confers no right to prior periods' unpaid dividends if they were not declared is called:

Accepted Answer

A)  Noncumulative preferred stock. 
B)  Participating preferred stock. 
C)  Callable preferred stock. 
D)  Cumulative preferred stock. 
E)  Convertible preferred stock. 
A)  Noncumulative preferred stock. 
B)  Participating preferred stock. 
C)  Callable preferred stock. 
D)  Cumulative preferred stock. 
E)  Convertible preferred stock.

Question 14

A company made an error in calculating and reporting depreciation expense in 2011. The error was discovered in 2012. The item should be reported as a prior period adjustment:

Accepted Answer

A)  on the 2011 statement of retained earnings. 
B)  on the 2011 income statement. 
C)  on the 2012 statement of retained earnings. 
D)  on the 2012 income statement. 
E)  accounted for with a cumulative "catch-up" adjustment. 
A)  on the 2011 statement of retained earnings. 
B)  on the 2011 income statement. 
C)  on the 2012 statement of retained earnings. 
D)  on the 2012 income statement. 
E)  accounted for with a cumulative "catch-up" adjustment.

Question 15

Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

Accepted Answer

A) True 
 B)False

Question 16

Prior to June 1, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 1 for $5,000. On July 1, it reissued 50 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?

Accepted Answer

A)  $5,050. 
B)  $2,600. 
C)  $100. 
D)  $50. 
E)  $0. 
A)  $5,050. 
B)  $2,600. 
C)  $100. 
D)  $50. 
E)  $0.

Question 17

The declaration of cash dividends reduces retained earnings.

Accepted Answer

A) True 
 B)False

Question 18

______________________________________ is the stockholders' equity applicable to common shares divided by the number of common shares outstanding.

Accepted Answer

Book value

Question 19

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IRFS are true except:

Accepted Answer

A)  U. S. GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock. 
B)  Only gains are recognized on retirements of treasury stock under IFRS. 
C)  IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock. 
D)  Gains are not recognized on retirements of treasury stock under U. S. GAAP. 
E)  A company's assets and equity are always reduced by the amount paid for the retiring stock. 
A)  U. S. GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock. 
B)  Only gains are recognized on retirements of treasury stock under IFRS. 
C)  IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock. 
D)  Gains are not recognized on retirements of treasury stock under U. S. GAAP. 
E)  A company's assets and equity are always reduced by the amount paid for the retiring stock.

Question 20

The following data has been collected about a company's stockholders' equity accounts:   The treasury shares were all purchased at the same price. The cost per share of the treasury stock is:

Accepted Answer

A)  $1.15. 
B)  $1.28. 
C)  $11.50. 
D)  $10.50. 
E)  $10.00. 
A)  $1.15. 
B)  $1.28. 
C)  $11.50. 
D)  $10.50. 
E)  $10.00.

Exam 13: Accounting for Corporations

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

Callable preferred stock gives its holders the option of exchanging their preferred shares into common shares at a specified rate.

A corporation is a legal entity separate from its owners.

When no-par stock is not assigned a stated value, the total amount received is recorded as Common Stock.

A company reports the following stockholders' equity: Paid-in Capital: Compute the (1) number of common shares outstanding and (2) book value per common share.

A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.

_____________ is the amount of income earned per share of a company's outstanding common stock.

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

Prior period adjustments are reported in the:

Purchasing treasury stock reduces the corporation's assets and stockholders' equity by equal amounts.

Preferred stock which confers no right to prior periods' unpaid dividends if they were not declared is called:

A company made an error in calculating and reporting depreciation expense in 2011. The error was discovered in 2012. The item should be reported as a prior period adjustment:

Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

The declaration of cash dividends reduces retained earnings.

______________________________________ is the stockholders' equity applicable to common shares divided by the number of common shares outstanding.

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IRFS are true except:

The following data has been collected about a company's stockholders' equity accounts: The treasury shares were all purchased at the same price. The cost per share of the treasury stock is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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