Question 1

Dante, Inc. reacquired 30,000 shares of its $1 par common stock for $19 per share on January 31. On March 1 they sold 7,000 treasury shares for $29 per share. On April 1 they sold 6,000 treasury shares for $16 per share. What is the necessary journal entry for April 1?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 570,000 & \
\hline \text { Treasury Stock } & & 480,000 \
\hline \begin{array} { l } 
\text { Addl. Paid-in Capital from Treasury Stock } \
\text { Transactions. }
\end{array} & &90,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 96,000 & \
\hline \text { Addl. Paid-in Capital from Treasury Stock Transactions. } & 18,000 & \
\hline \text { Treasury Stock } & & 114,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Retained Earnings } & 96,000 & \
\hline \text { Treasury Stock } & & 96,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 96,000 & \
\hline \text { Retained Earnings } & 18,000 & \
\hline \text { Treasury Stock } & & 114,000 \
\hline
\end{array}$$

Question 2

Illusions, Inc. reacquired 26,000 shares of its common stock for $16 per share on June 1. On July 1 they sold 7,000 treasury shares for $23 per share. On August 1 they sold 9,000 treasury shares for $13 per share. Assuming no prior balance in the Additional Paid-in Capital from Treasury Stock Transactions account, what is the ending balance in this account following these transactions?

Accepted Answer

A)  $7,000 debit balance 
B)  $9,000 credit balance 
C)  $22,000 debit balance 
D)  $22,000 credit balance

Question 3

Which of the following is not a part of Other Comprehensive Income?

Accepted Answer

A)  unrealized gains on available-for-sale debt securities 
B)  foreign currency translation adjustments 
C)  unrecognized pension costs 
D)  gains on the sale of equipment

Question 4

Convertible preferred shares are often accounted for as a liability under both GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 5

TNT Corporation is authorized to issue 75,000 shares of $1 par value common stock. Prepare the journal entries for the following transactions (omit explanations):
a. Issued 50,000 shares at $25 per share.
b. Issued 500 shares in exchange for consulting services; the estimated fair value is $20 per share.
c. Issued 7,000 shares at $30 per share, paying an underwriter $800 in stock issuance costs.

Accepted Answer

The answer of TNT Corporation is authorized to issue 75,000...

Question 6

S & C Company issues 2,400 shares of common stock with a $6 par value. The issue price of the stock is $14 per share, and the company paid an underwriter $800 in stock issue costs. What is the journal entry required to record the issuance of the shares?

Accepted Answer

A)  $$\begin{array} { | l | l | l | } 
\hline \text { Cash } & 33,600 & \
\hline \text { Common Stock - } \$ 6 \text { par } & & 14,400 \
\hline \text { Addl. Paid-in Capital in Excess of Par-Common } & & 19,200 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | } 
\hline \text { Cash } & 33,600 & \
\hline \text { Common Stock } - \$ 6 \text { par } & & 13,600 \
\hline \text { Addl. Paid-in Capital in Excess of Par-Common } & & 20,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | l | } 
\hline \text { Cash } & 32,800 & \
\hline \text { Common Stock } - \$ 6 \text { par } & & 14,400 \
\hline \text { Addl. Paid-in Capital in Excess of Par-Common } & & 18,400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Cash } & 32,000 & \
\hline \text { Common Stock } - \$ 6 \text { par } & & 13,600 \
\hline \text { Addl. Paid-in Capital in Excess of Par-Common } & & 18,400 \
\hline
\end{array}$$

Question 7

Omega Company has issued both common and preferred stock. The preferred stock is convertible into common stock. The following information is provided for Omega Company's Stockholders' equity:
 $$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Convertible Preferred Stock, } \$ 30 \text { par, } 25,000 \text { shares issued } \
\text { and outstanding }
\end{array} & \$ 750,000 \
\hline \text { Additional Paid-in Capital in Excess of Par-Preferred } & 150,000 \
\hline \text { Common Stock, } \$ 2 \text { par, } 125,000 \text { shares issued and } & \
\text { putstanding } & 250,000 \
\hline \text { Additional Paid-in Capital in Excess of Par-Common } & 3,125,000 \
\hline \text { Retained Earnings } & 1,600,000 \
\hline
\end{array}$$ 
What is the necessary journal entry if 5,000 shares of preferred are converted under each independent scenario:
a. Each share of convertible stock is convertible into 1.5 shares of common stock.
b. Each share of convertible stock is convertible into 4 shares of common stock.

Accepted Answer

The answer of Omega Company has issued both common and...

Question 8

Dante, Inc. reacquired 57,000 shares of its $1 par common stock for $19 per share on January 31. On March 1 they sold 9,000 treasury shares for $28 per share. On April 1 they sold 5,000 treasury shares for $15 per share. What is the necessary journal entry for March 1?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 252,000 & \
\hline \text { Treasury Stock } & & 171,000 \
\hline \text { Addl. Paid-in Capital from Treasury Stock } & & \
\text { Transactions. } & & 81,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 252,000 & \
\hline \text { Treasury Stock } & & 252,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 75,000 & \
\hline \text { Treasury Stock } & & 75,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 252,000 & \
\hline \text { Treasury Stock } & & 135,000 \
\hline \text { Addl. Paid-in Capital from Treasury Stock } & & \
\text { Transactions. } & & 117,000 \
\hline
\end{array}$$

Question 9

Archer, Inc. declared a stock dividend of 100,000 shares. Prior to the declaration, the company has 450,000 shares, $1 par value common stock issued and outstanding. At the date of the declaration, the company's common stock was selling for $15 per share.
Prepare the required journal entries to account for the declaration as if the 100,000 shares were considered:
a. a small stock dividend
b. a large stock dividend

Accepted Answer

The answer of Archer, Inc. declared a stock dividend of...

Question 10

The Magic Flute Company provides the following information from the Stockholders' Equity section of the balance sheet:
 $$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Common Stock, } \$ 1 \text { par value, } 200,000 \text { shares issued and } \
\text { putstanding }
\end{array} & \$ 200,000 \
\hline \text { Additional Paid-in Capital in Excess of Par-Common } & 1,400,000 \
\hline \text { Retained Earnings } & 1,520,000 \
\hline \text { Total Stockholders' Equity } & \$ 3,120,000 \
\hline
\end{array}$$ 
Magic Flute had the following transactions related to treasury shares:
January 1 Acquired 30,000 shares of its common stock in the open market for $12 per share
March 1 Sold 5,000 treasury shares for $16
April 1 Sold 5,000 treasury shares for $6
May 1 Retired 5,000 treasury shares
Prepare the necessary journal entries to record all treasury stock transactions.

Accepted Answer

The answer of The Magic Flute Company provides the following...

Question 11

Woods, Inc. issued 150 shares of its $8 par value common stock for $19 per share. They will record ________ in the common stock account at par value and ________ as additional paid-in capital in excess of par-common.

Accepted Answer

A)  $1,200; $1,650 
B)  $1,200; $2,850 
C)  $1,650; $1,200 
D)  $2,850; $1,200

Question 12

________ represents the amounts that common and preferred shareholders contribute in excess of the stated or par value.

Accepted Answer

A)  Par value 
B)  Retained earnings 
C)  Accumulated income 
D)  Additional paid-in capital

Question 13

Which of the following is not a type of dividend?

Accepted Answer

A)  cash dividend 
B)  liquidating dividend 
C)  property dividend 
D)  wage dividend

Question 14

A firm is under no legal obligation to distribute a ________ dividend, even after declaring one.

Accepted Answer

A)  cash 
B)  stock 
C)  wealth 
D)  both A & B

Question 15

________ are shares for which the issuing entity has the right to "buy back" the shares at a specified price and future date.

Accepted Answer

A)  Convertible preferred shares 
B)  Callable preferred shares 
C)  Redeemable preferred shares 
D)  Cumulative preferred shares

Question 16

Caesar Cruise Lines, Inc. issues 6,000 shares of common stock with a $1 par value. The issue price of the stock is $20 per share. What is the journal entry required to record the issuance of the shares?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 120,000 & \
\hline \text { Common Stock } - \$ 1 \text { par } & & 6,000 \
\hline \text { Addl. Paid-in Capital in Excess of Par-Common } & & 114,000 \
\hline
\end{array}$$ 
B)   $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 6,000 & \
\hline \text { Common Stock } & & 6,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 20,000 & \
\hline \text { Common Stock } - \$ 1 \text { par } & & 6,000 \
\hline \text { Addl. Paid-in Capital in Excess of Par-Common } & & 14,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Cash } & 120,000 & \
\hline \text { Common Stock } & & 120,000 \
\hline
\end{array}$$

Question 17

Mozart & Company paid cash dividends totaling $160,000 in 2016 and $85,000 in 2017. In 2018, the company will pay cash dividends of $800,000. There were no dividends in arrears as of January 1, 2016. There are 25,000 shares of common stock outstanding and 100,000 shares of 6 percent, $50 par cumulative preferred stock outstanding. What is the amount of cash dividends payable to common stockholders in 2018?

Accepted Answer

A)  $145,000 
B)  $140,000 
C)  $355,000 
D)  $800,000

Question 18

________ are paid from contributed capital instead of retained earnings.

Accepted Answer

A)  Liquidating dividends 
B)  Property dividends 
C)  Stock dividends 
D)  Fund dividends

Question 19

IFRS requires a company to disclose information that enables users to assess its objectives, policies, and processes for managing capital.

Accepted Answer