Reference no: EM13596021

1.For small stock dividends, by what amount are retained earnings reduced?

A. Par value of the stock

B. Par value of the dividend

C. Book value of the dividend

D. Market value of the dividend

2.Which one of the following selections is a not component of paid-In capital?

A. Retained earnings

B. Common stock

C. Additional paid-In capital

D. All of the above

3.In October, 2011, Bandar Corporation distributed profits to its preferred shareholders before its common shareholders. What is the name of the preference that allows this?

A. Asset distribution preference

B. Dividend preference

C. Profits preference

D. Treasury preference

4.Aaron Company plans to issue a large stock dividend. In accounting for this transaction, what effects occur to the contributed capital section of stockholders' equity?

A. Common stock increases by the number of dividend shares x par value per share, and retained earnings decreases for the same amount

B. Retained earnings increases by the number of dividend shares x par value per share, and additional paid-in capital increases for the balance

C. Common stock increases by the number of dividend shares x par value per share, and retained earnings increases for the balance

D. Common stock increases by the total market value of the dividend

5.As a preferred stockholder, you are entitled to numerous preferences and privileges over common stockholders. If you are a preferred stockholder of a company that has fallen on economic hardship and is likely to go bankrupt, which preference or privilege of preferred stock is going to be most useful to you?
Answer

A. Dividend preference

B. Asset distribution preference

C. Conversion privileges

D. Participation privilege

6.On September 1, 2011, Core Company's balance sheet indicates there are 600,000 shares of $30 par value common shares in the Common Stock account and $4,500,000 in the Additional Paid-in Capital account. There are 2,000,000 shares authorized. On September 2, Core splits its stock 2 for 1. How many Core's shares of common stock are issued and outstanding immediately after the stock split?
Answer

A. 4,000,000

B. 300,000

C. 1,400,000

D. 1,200,000

7.Jasper Company has 30,000 shares of $80 par value, 5% cumulative preferred stock and 140,000 shares of $20 par value common stock. Jasper declares and pays cash dividends amounting to $225,000. If no arrearage on the preferred stock exits, how much in dividends per share is paid to the common stockholders?
Answer

A. $0.75

B. $4.00

C. $1.00

D. $1.61

8.Which of the following is an organizational advantage of a corporation?

A. Nontaxable entity

B. Legal entity separate from the owners

C. Unlimited liability of owners

D. Limited ability to raise capital

E. None of the above

9.A corporation:

eparate capital and drawing accounts for each owner

B. May acquire assets, incur debt, and enter into contracts in its own name

C. Issues articles of incorporation as evidence of ownership in the corporation

D. Pays state income taxes but is not subject to the federal income tax

E. None of the above

10.The face value for a share of stock, printed on the stock certificate, is the stock's:
Answer

A. Liquidation value

B. Stated value

C. Par value

D. Book value

E. None of the above

11.When only one class of stock is issued by a corporation, it should be termed:

A. Treasury stock

B. Authorized stock

C. Common stock

D. Class B stock

E. Preferred stock

12.Which of the following rights allows a shareholder of a corporation to maintain his or her proportionate interest in the corporation?

A. Preemptive right

B. Participation right

C. Preferred right

D. Cumulative right

E. None of the above

13.Squire, Inc., has outstanding 9,000 shares of $25 par value, 6% nonparticipating, cumulative preferred stock and 16,000 shares of $5 par value common stock. If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $85,000, then the total amounts distributed to preferred and common stockholders, respectively, are:
Answer

A. $40,500 and $44,500

B. $13,500 and $71,500

C. $31,875 and $53,125

D. $27,000 and $58,000

E. None of the above

14.Noble, Inc. has outstanding 10,000 shares of $40 par value, 6% nonparticipating, cumulative preferred stock, and 30,000 shares of $10 par value common stock. If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $207,000, the total amounts distributed to preferred and common stockholders are, respectively:

A. $48,000 and $159,000

B. $51,750 and $155,250

C. $24,000 and $183,000

D. $72,000 and $135,000

E. None of the above

15.Assume that a corporation's dividends are two years in arrears for its outstanding preferred stock. In the corporation's financial statements, these arrearages are:
Answer

A. Disclosed as a current liability in the balance sheet

B. Disclosed as a long-term liability in the balance sheet

C. Disclosed in the notes to the financial statements

D. Disclosed as a current liability (for the most recent arrearage) and a long-term liability (for the oldest arrearage) in the balance sheet

E. Not disclosed

16.Riepen, Inc., issued for $20 per share 3,000 shares of $15 par value common stock. The journal entry to record this transaction is:
Answer

A. Cash 60,000
Common Stock 60,000

B. Cash 60,000
Common Stock 45,000
Paid-in Capital in Excess of Par Value 15,000

C. Cash 60,000
Common Stock 45,000
Retained Earnings 15,000

D. Cash 60,000
Common Stock 45,000
Gain on Sale of Stock 15,000

E. None of the above

17.Spartan Corporation was organized on January 1, 2011, with an authorization of 1,000,000 shares of $5 par value common stock. During 2011, Spartan had the following common stock transactions:
Jan. 4: Issued 100,000 shares @ $6 per share.
Apr. 8: Issued 200,000 shares @ $7 per share.
June 9: Issued 60,000 shares @ $10 per share.
July 29: Purchased 40,000 shares (treasury) @ $9 per share.
Dec. 31: Sold 40,000 shares held in treasury @ $12 per share.

Spartan had no other transactions affecting paid-in capital. At December 31, 2011, what is the total amount of paid-in capital?

A. $2,720,000

B. $1,800,000

C. $ 920,000

D. $ 800,000

E. None of the above

18.At December 31, 2011, Riley Corporation had 40,000 shares outstanding of $15 par value common stock. The shares were originally issued for $42 per share. On January 1, 2012, Riley split its common stock 3 for 1 with a corresponding reduction in the stock's par value. The market price of the stock just before the split was $75 per share. After the split, the balance in the common stock account is:
Answer

A. $ 600,000

B. $3,000,000

C. $1,800,000

D. $1,680,000

E. None of the above

19.The excess of the sales price of treasury stock over its cost should be credited to:

A. Retained Earnings

B. Paid-in Capital from Treasury Stock

C. Treasury Stock

D. Extraordinary Gain

E. None of the above

20.Larkspur Corporation purchased 300 shares of its own $10 par value common stock for $7,500. Later, these shares are sold for $7,800 cash. The journal entry to record the sale includes a:
Answer

A. $ 300 credit to Paid-in Capital from Treasury Stock

B. $4,800 credit to Paid-in Capital from Treasury Stock

C. $ 300 credit to Gain on Sale of Treasury Stock

D. $7,800 credit to Treasury Stock

E. None of the above