Question 1

Which of the following is NOT a date associated with cash dividends?

Accepted Answer

A) Date of issuance 
B) Date of declaration 
C) Date of payment 
D) Date of record

Question 2

Evergreen Building, Inc. has declared a $43,000 cash dividend to shareholders. The company has 4,500 shares of $20-par, 5% preferred stock and 20,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears?

Accepted Answer

A) $43,000 preferred, $0 common 
B) $4,500 preferred, $38,500 common 
C) $16,500 preferred, $26,500 common 
D) $21,500 preferred, $21,500 common

Question 3

The date of declaration creates a(n)________ for the corporation.

Accepted Answer

A) asset 
B) liability 
C) expense 
D) revenue

Question 4

Stars, Inc. has declared a $22,000 cash dividend to shareholders. The company has 3,000 shares of $14-par, 9% preferred stock and 12,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $8,000 in arrears?

Accepted Answer

A) $11,780 preferred, $10,220 common 
B) $8,000 preferred, $14,000 common 
C) $3,780 preferred, $18,220 common 
D) $22,000 preferred, $0 common

Question 5

Charmed, Inc. has a $30,000 credit balance in Paid-In Capital-Treasury Stock. It sells 600 shares of treasury stock, which the company reacquired at $22/share, for $18/share. After the transaction, what will the balance be in the Paid-In Capital in Excess of Par-Treasury account?

Accepted Answer

A) $32,400 credit 
B) $2,400 debit 
C) $27,600 credit 
D) $27,600 debit

Question 6

A stock split is recorded as a(n):

Accepted Answer

A) regular journal entry. 
B) memorandum entry. 
C) adjusting entry. 
D) closing entry.

Question 7

Carol owns 3% of the total shares in a company; if the company issues a dividend she will receive 3% of the dividend.

Accepted Answer

A) True 
 B)False

Question 8

Stockholders' Equity consists of:

Accepted Answer

A) contributed capital and paid-in capital. 
B) common stock and preferred stock. 
C) paid-in capital and Retained Earnings. 
D) legal capital and paid in capital.

Question 9

Mike's Motors has 220,000 shares of $6-par common stock outstanding. They have declared a 10% stock dividend. The current market price of the common stock is $14/share. The amount that will be credited to Common Stock on the date of declaration is:

Accepted Answer

A) $132,000. 
B) $440,000. 
C) $308,000. 
D) $184,800.

Question 10

If you own 700 shares (5% of a corporation's stock)and the corporation issues 17,000 new shares, how many total shares will you have after exercising your preemptive rights?

Accepted Answer

A) 665 
B) 850 
C) 1,550 
D)  0

Question 11

Paying dividends causes a decrease in total assets, but an increase in total Stockholders' Equity.

Accepted Answer

A) True 
 B)False

Question 12

The issue price of the stock usually is equal to the par value of the stock.

Accepted Answer

A) True 
 B)False

Question 13

Illusions Corp. issues 8,000 shares of $24 par common stock for $29 per share. The amount credited to paid-in capital in excess of par is:

Accepted Answer

A) $192,000. 
B) $40,000. 
C) $8,000. 
D) $232,000.

Question 14

Cumulative common stock will pay dividends in arrears.

Accepted Answer

A) True 
 B)False

Question 15

TLR Productions issued 40 shares of $16 par value stock to its accountant in full payment for her $1,300 fee for assisting in setting up the new company. The entry to record the issuance of the stock would include a:

Accepted Answer

A) debit to Common Stock for $640. 
B) credit to Common Stock for $1,300. 
C) credit to Common Stock for $640. 
D) debit to Paid-in Capital in Excess of Par-Common for $660.

Question 16

Accounting for stock at a stated value is almost identical to recording:

Accepted Answer

A) outstanding stock. 
B) no-par stock. 
C) issued stock. 
D) par stock.

Question 17

The formula for return on equity is net income divided by average Stockholders' Equity.

Accepted Answer

A) True 
 B)False

Question 18

A company issued 700 shares of $2 par common stock in exchange for a piece of equipment with a current market value of $24,000. Which of the following is the correct journal entry for this transaction?

Accepted Answer

A)  
B)  
C)  
D)

Question 19

Return on equity shows the relationship between net income and ending Stockholders' Equity.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is NOT a reason for a company to purchase treasury stock?

Accepted Answer

A) To reward valued employees 
B) To avoid a takeover by an outside company 
C) To buy the stock at a high price to increase total Stockholders' Equity 
D) To support the company's stock price

Exam 10: Corporations: Paid-In Capital and Retained Earnings

Which of the following is NOT a date associated with cash dividends?

The date of declaration creates a(n) ________ for the corporation.

Charmed, Inc. has a $30,000 credit balance in Paid-In Capital-Treasury Stock. It sells 600 shares of treasury stock, which the company reacquired at $22/share, for $18/share. After the transaction, what will the balance be in the Paid-In Capital in Excess of Par-Treasury account?

A stock split is recorded as a(n) :

Carol owns 3% of the total shares in a company; if the company issues a dividend she will receive 3% of the dividend.

Stockholders' Equity consists of:

Mike's Motors has 220,000 shares of $6-par common stock outstanding. They have declared a 10% stock dividend. The current market price of the common stock is $14/share. The amount that will be credited to Common Stock on the date of declaration is:

If you own 700 shares (5% of a corporation's stock) and the corporation issues 17,000 new shares, how many total shares will you have after exercising your preemptive rights?

Paying dividends causes a decrease in total assets, but an increase in total Stockholders' Equity.

The issue price of the stock usually is equal to the par value of the stock.

Illusions Corp. issues 8,000 shares of $24 par common stock for $29 per share. The amount credited to paid-in capital in excess of par is:

Cumulative common stock will pay dividends in arrears.

TLR Productions issued 40 shares of $16 par value stock to its accountant in full payment for her $1,300 fee for assisting in setting up the new company. The entry to record the issuance of the stock would include a:

Accounting for stock at a stated value is almost identical to recording:

The formula for return on equity is net income divided by average Stockholders' Equity.

A company issued 700 shares of $2 par common stock in exchange for a piece of equipment with a current market value of $24,000. Which of the following is the correct journal entry for this transaction?

Return on equity shows the relationship between net income and ending Stockholders' Equity.

Which of the following is NOT a reason for a company to purchase treasury stock?