Question 1

A company would rarely sell its stock for below par value.

Accepted Answer

A) True 
 B)False

Question 2

Most preferred stock currently being issued is participating,while it is very unusual to find cumulative preferred stock.

Accepted Answer

A) True 
 B)False

Question 3

To calculate dividends on par-value preferred stock:

Accepted Answer

A) multiply the number of shares times rate. 
B) multiply rate times par-value. 
C) multiply number of shares outstanding times rate times par-value. 
D) None of these answers are correct.

Question 4

The par value of stock represents the legal capital of the corporation.

Accepted Answer

A) True 
 B)False

Question 5

Cumulative preferred stock means that the preferred stockholders have a right to a certain dividend every year.

Accepted Answer

A) True 
 B)False

Question 6

A corporation is not required to pay dividends.

Accepted Answer

A) True 
 B)False

Question 7

The stockholders of a corporation have mutual agency.

Accepted Answer

A) True 
 B)False

Question 8

Jane Kathryn has 30,000 shares outstanding of $10 par value,10% preferred stock and 100,000 shares outstanding $5 par value common stock.In the first 3 years of operations,the company paid dividends in Year 1,$0; Year 2,$40,000; Year 3,$100,000.Calculate the dividend paid to preferred and common stockholders under the following independent situations:
a)Preferred is non-cumulative and nonparticipating.
 $\begin{array} { l } 
\underline{\text { Year }}& \underline{\text {Preferred}}&\underline{\text {Common}}\
1 &\underline{\quad\quad}&\underline{\quad\quad}\
2&\underline{\quad\quad} &\underline{\quad\quad}\
3&\underline{\quad\quad}&\underline{\quad\quad}
\end{array}$ b)Preferred is cumulative and nonparticipating.
 $\begin{array} { l } 
\underline{\text { Year }}& \underline{\text {Preferred}}&\underline{\text {Common}}\
1 &\underline{\quad\quad}&\underline{\quad\quad}\
2&\underline{\quad\quad} &\underline{\quad\quad}\
3&\underline{\quad\quad}&\underline{\quad\quad}
\end{array}$  c)Preferred is cumulative and participating.
 $\begin{array} { l } 
\underline{\text { Year }}& \underline{\text {Preferred}}&\underline{\text {Common}}\
1 &\underline{\quad\quad}&\underline{\quad\quad}\
2&\underline{\quad\quad} &\underline{\quad\quad}\
3&\underline{\quad\quad}&\underline{\quad\quad}
\end{array}$

Accepted Answer

The answer of Jane Kathryn has 30,000 shares outstanding of...

Question 9

Using the following accounts:
[1]	Cash
[2]	Subscription receivable common stock
[3]	Machinery
[4]	Building
[5]	Land
[6]	Organization costs
[7]	Preferred stock
[8]	Common stock
[9]	Paid in capital in excess of par preferred stock
[10]	Paid in capital in excess of par common stock
[11]	Common stock subscribed
[12]	Discount on common stock
[13]	Amortization expense organization costs
Indicate the account(s) to be debited and credited to record the following transactions.
-Purchased machinery for cash.
Debit ________ & ________ & ________ Credit ________ & ________ & ________

Accepted Answer

The answer of Using the following accounts:
[1]	Cash
[2]	Subscription receivable common stock
[3]	Machinery
[4]	Building
[5]	Land
[6]	Organization...

Question 10

When a stock subscription is received,Common Stock subscribed is credited for the total par value.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would normally not appear in the Stockholders' Equity section of the balance sheet?

Accepted Answer

A) Cash 
B) Paid-in Capital 
C) Common Stock 
D) Preferred Stock

Question 12

Using the following accounts:
[1]	Cash
[2]	Subscription receivable common stock
[3]	Machinery
[4]	Building
[5]	Land
[6]	Organization costs
[7]	Preferred stock
[8]	Common stock
[9]	Paid in capital in excess of par preferred stock
[10]	Paid in capital in excess of par common stock
[11]	Common stock subscribed
[12]	Discount on common stock
[13]	Amortization expense organization costs
Indicate the account(s) to be debited and credited to record the following transactions.
-Exchanged common stock for machinery when the stock was selling at a premium.
Debit ________& ________ & ________ Credit ________ & ________ & ________

Accepted Answer

The answer of Using the following accounts:
[1]	Cash
[2]	Subscription receivable common stock
[3]	Machinery
[4]	Building
[5]	Land
[6]	Organization...

Question 13

Double taxation is said to be a disadvantage of a corporation.

Accepted Answer

A) True 
 B)False

Question 14

Alpha-Omega Industries has 30,000 shares of $12 par common stock and 15,000 shares of $50 par,5% preferred stock outstanding.Total dividends available are $162,000.Compute the dividends to be distributed to preferred and common stockholders under the following condition.
The preferred stock is participating and cumulative with no dividends distributed last year.

Accepted Answer

The answer of Alpha-Omega Industries has 30,000 shares of $12...

Question 15

Five hundred shares of $25 par common stock was exchanged for a piece of equipment with a fair market value of $13,500.The journal entry to record the transaction would include a credit to:

Accepted Answer

A) Equipment for $12,500. 
B) Debit to Common Stock for $12,500. 
C) Credit to Paid-In Capital in Excess of Par-Common for $1,000. 
D) Credit to Common Stock for $13,500.

Question 16

The journal entry for the receipt of a cash payment on common stock subscriptions would include:

Accepted Answer

A) debiting Subscriptions Receivable-Common Stock ; crediting Common Stock. 
B) debiting Common Stock; crediting Subscriptions Receivable-Common Stock. 
C) debiting Cash; crediting Subscriptions Receivable-Common Stock. 
D) debiting Cash; crediting Common Stock Subscribed.

Question 17

Common stockholders have all the following rights except:

Accepted Answer

A) the right to prior claims of profit over preferred stockholders. 
B) the right to vote. 
C) the right to sell their stock. 
D) the right to share in assets upon liquidation after creditors and preferred stockholders.

Question 18

R.Red formed a corporation with an authorization of 20,000 shares of $50 par,6% non-cumulative preferred stock and 100,000 shares of $10 par common stock.The following selected transactions were completed during the first year of operations.Journalize the transactions omitting explanations.
$\text {Jan 10}$ $\quad $  $\text {Issued 20,000 shares of common stock at par for cash.}$
 $\quad $  $\quad $  $\quad $ $\text {31}$$\text { Issued 20,000 shares of common stock in exchange for land, buildings, and}$
 $\quad $ $\quad $ $\quad $ $\text {Equipment with fair market prices of $\$ 52,000 , \$ 125,000$, and $\$ 48,000$, respectively.}$
$\text {Feb 24}$  $\quad $$\text {Issued 2,000 shares of preferred stock at $\$ 54$ for cash.}$

Accepted Answer

The answer of R.Red formed a corporation with an authorization...

Question 19

Nature's Honey Corporation received the final installment of $1,000 on a stock subscription for 20 shares of $100 par value common stock.After recording the cash receipt,the entry to issue the stock would include a:

Accepted Answer

A) debit to Paid-in Capital in Excess of Par for $2,000. 
B) credit to Paid-in Capital in excess of Par for $2,000. 
C) credit to Common Stock for $2,000. 
D) credit to Organization Cost for $2,000.

Question 20

The two main sources of stockholders' equity are investments by stockholders and net income retained in the corporation.

Accepted Answer

A) True 
 B)False

Exam 18: Corporations: Organizations and Stock

A company would rarely sell its stock for below par value.

Most preferred stock currently being issued is participating,while it is very unusual to find cumulative preferred stock.

To calculate dividends on par-value preferred stock:

The par value of stock represents the legal capital of the corporation.

Cumulative preferred stock means that the preferred stockholders have a right to a certain dividend every year.

A corporation is not required to pay dividends.

The stockholders of a corporation have mutual agency.

When a stock subscription is received,Common Stock subscribed is credited for the total par value.

Which of the following would normally not appear in the Stockholders' Equity section of the balance sheet?

Double taxation is said to be a disadvantage of a corporation.

Five hundred shares of $25 par common stock was exchanged for a piece of equipment with a fair market value of $13,500.The journal entry to record the transaction would include a credit to:

The journal entry for the receipt of a cash payment on common stock subscriptions would include:

Common stockholders have all the following rights except:

Nature's Honey Corporation received the final installment of $1,000 on a stock subscription for 20 shares of $100 par value common stock.After recording the cash receipt,the entry to issue the stock would include a:

The two main sources of stockholders' equity are investments by stockholders and net income retained in the corporation.