Reference no: EM131609396

PRINCIPLES OF FINANCIAL ACCOUNTING                    

Directions: Each of the questions or incomplete statements below is followed by several suggested answer completions. Select the one that is best.

Q1. Which of the following is generally considered an internal user of accounting information?

a. Stockholders of corporation

b. Bank lending officers

c. Financial analysts

d. Factory managers

Q2. Financial statements are primarily designed to

a. provide managers with detailed information tailored to those managers specific information need

b. provide people outside the business organization with information about the company's financial position and operating results

c. report to the Internal Revenue Service the company's taxable income

d. indicate to investors in a particular company the current market values of their investments

Q3. Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each its market value. Using these market value figures on the balance sheet violates the

a. accounting equation

b. stable-dollar assumption

c. business entity concept

d. cost principle

Q4. If total assets $180,000 and total liabilities equal $135,000, what is the total owners' equity?

a. $45,000

b. $135,000

c. $180,000

d. $315,000

Q5. If a company purchases equipment for $70,000 cash, then the total

a. assets will increase by $70,000

b. assets will decrease by $70,000

c. assets will remain the same

d. owners' equity will decrease

Q6. The valuation of assets in the balance sheet is based primarily upon

a. what it would cost to replace the assets

b. cost, because cost is usually factual and verifiable

c. current fair market value as established by independent appraisers

d. depreciated cost, because in the event of liquidation the assets would be sold at an amount equal their original cost

Q7. If a transaction causes an asset account to decrease, which of the following related effects may occur?

a. An increase of equal amount in an owners' equity account

b. An increase in a liability account

c. An increase of equal amount in another asset account

d. An increase in the combined total of liabilities and owners' equity

Q8. Blue Wholesale Shirt Co. sold shirts to Pink Retail Shop. Blue Wholesale agreed to accept payment from Pink Retail at a later date. Blue Wholesale is a

a. borrower

b. liability

c. creditor

d. debtor

Q9. Which of the following will cause owners' equity in a business to increase?

a. Payments of cash to the owners

b. Losses from unprofitable operation of the business

c. Earnings from profitable operation of the business

d. Borrowing from a commercial bank

Q10. A balance sheet is designed to show the

a. worth of the business

b. profitability of the business during the current year

c. assets, liabilities, and owners' equity of a business as of a particular date

d. cost of replacing the assets and paying off the liabilities at December 31

Q11. Which of the following is true of the proper form of a balance sheet?

a. The heading sets forth the period of time covered.

b. Cash is always the first asset listed, followed by permanent assets (such as land and buildings), and finally by assets such as receivables and supplies.

c. Liabilities are listed before owners' equity.

d. A subtotal for total assets plus total liabilities is shown.

Q12. If total assets equal $315,000 and total owners' equity equal $90,000, what are total liabilities?

a. $225,000

b. $270,000

c. $315,000

d. $405,000

At December 31, 20XX, the accounting records of Braun Corporation contain the following items:

Accounts Payable	$16,000		Accounts Receivable	$40,000
Land	$240,000		Cash	?
Capital Stock	?		Equipment	$120,000
Building	$180,000		Notes Payable	$190,000
Retained Earnings	$160,000

Q13. If Capital Stock is $260,000, what is cash balance at December 31, 20XX?

a. $46,000

b. $86,000

c. $94,000

d. $686,000

At December 31, 20XX, the accounting records of Braun Corporation contain the following items:

Accounts Payable	$16,000		Accounts Receivable	$40,000
Land	$240,000		Cash	?
Capital Stock	?		Equipment	$120,000
Building	$180,000		Notes Payable	$190,000
Retained Earnings	$160,000

Q14. If Capital Stock is $320,000, what are total assets at December 31, 20XX?

a. $106,000

b. $686,000

c. $726,000

d. $926,000

Q15. Bethpage Corporation recently borrowed $60,000 cash from its bank. Which of the following was NOT affected by this transaction?

a. Assets

b. Liabilities

c. Owners' equity

d. Cash

Q16. The manager of a company purchased several cash registers for the business on June 10 but does not remember if he paid cash for the full price or still owes a balance to the vendor. Where is the easiest place to find this information?

a. Trial balance prepared at the end of June

b. General journal

c. Balance sheet prepared at the end of June

d. Ledger account for equipment

Q17. Which term below describes the price of goods sold and services rendered during a given accounting period?

a. Net income

b. Profit

c. Revenue

d. Equity

Q18. The agreement of the debit and credit totals of the trial balance gives assurance that

a. all transactions were posted correctly

b. no transactions were omitted

c. the number of accounts with debit balances equal the number of accounts with credit balances

d. the total debits equal the total credits

Q19. How are transactions recorded in the journal?

a. Numerical order

b. Chronological order

c. Account number order

d. Financial statement order

Q20. Which of the following accounting procedures requires the greatest knowledge of generally accepted accounting principles?

a. Journalizing business transactions

b. Posting journal entries to ledger accounts

c. Preparing a trial balance

d. Locating errors in a trial balance

Q21. What is involved in the process of posting?

a. Transferring debit and credit entries in the journal into the appropriate ledger accounts

b. Determining that the dollar amount of debit entries recorded in the ledger equals the dollar amount of credit entries

c. Entering information into a computerized database

d. Preparing journal entries to describe each business transaction

Q22. The sequence of accounting procedures used to record classify and summarize accounting information is called the

a. accounting cycle

b. bookkeeping period

c. accrual interval

d. double entry process

Q23. Which of the following statement best describes the term revenue?

a. The selling price of goods and services rendered to customers during a given accounting period

b. The cash received from selling goods and serving customers during a given accounting period

c. The net increase in owners' equity during a given statement period

d. The "bottom line" in the company's income statement

Q24. What is the reason that revenue is recorded by a credit entry to a revenue account?

a. Because of the matching principle

b. Because of the realization principle

c. Because revenue always involves a debit to the Cash account

d. Because revenue increases owners' equity

Q25. If the trial balance has a higher debit balance than credit balance, it indicates

a. that assets are greater than liabilities

b. that an error has been made

c. a profit

d. a loss

Q26. Green Systems sold and delivered modems to Blue Computers for $660,000 to be paid by Blue in three equal installments over the next three months. The journal entry made by Blue to record the last of the three installment payments should include a debit of $220,000 to

a. Modem Expense

b. Accounts Receivable

c. Cash

d. Accounts Payable

Q27. Collection of an accounts receivable

a. increases the total assets of a company

b. decreases the total assets of a company

c. does not change the total assets of a company

d. decreases the total liabilities of a company

Q28. Which of the following is true during the closing process?

a. All income statement accounts are credited to income summary.

b. All income statement accounts are debited to income summary.

c. All revenue accounts are credited and expense accounts are debited.

d. All revenue accounts are debited and expense accounts are credited.

Q29. What is the purpose of making closing entries?

a. To prepare revenue and expense accounts for the recording of the next period 's revenue and expenses

b. To enable the accountant to prepare financial statements at the end of the accounting period

c. To establish new balances in the balance sheet accounts

d. To reduce the number of outstanding expense accounts

Q30. Rose Corp. has a note receivable from Jewel Co. for $80,000. The note matures in 5 years and bears interest of 6%. Rose is preparing financial statements for the month of June. Rose's adjusting entry should

a. debit Interest Revenue for $400 and credit Interest Receivable for $400

b. debit Interest Receivable for $400 and credit Interest Revenue for $400

c. debit Interest Revenue for $4,800 and credit Interest Receivable for $4,800

d. credit Interest Payable for $400 and debit Interest Expense for $400

Q31. What is accumulated depreciation?

a. An asset account

b. A revenue account

c. A contra-asset account

d. An expense account

Q32. Ace Corp. has 3 employees. Each earns $400 per week for a 5 day work week ending on Friday. This month the last day of the month falls on a Wednesday. How should Ace make its adjusting entry?

a. Debiting Wage Expense for $720 and crediting Wages Payable for $720

b. Debiting Wage Expense for $240 and crediting Wages Payable for $240

c. Crediting Wage Expense for $720 and debiting Wages Payable for S720

d. Crediting Wage Expense for $240 and debiting Wages Payable for $240

Q33. In which of the following situations would Daystar Company record unearned revenue in May?

a. Daystar receives payment in April for work that will be performed in May.

b. Daystar completes a job in May and will receive payment in June.

c. Daystar is paid on May 25 for work done in the first two weeks of May.

d. Daystar receives payment in May for work that will be performed in July or July.

Q34. Which of the following adjusting entries is required for interest that has accrued during the accounting period on a note payable?

a. A debit to Interest Expense and a credit to Cash

b. A debit to Notes Payable and a credit to Interest Payable

c. A debit to an asset and a credit to a liability

d. A debit to Interest Expense and a credit to Interest Payable

Q35. The concept of materiality

a. involves only tangible assets, not intangible assets

b. relates only to the income statement and not the balance sheet

c. is always an exact percentage of a financial account

d. is measured by an item's influence on the decisions of users of financial statements

Q36. Adjusting entries help achieve the goals of accrual accounting by applying what two accounting principles?

a. Business entity principle and realization principle

b. Cost principle and accounting principle

c. Realization principle and matching principle

d. Matching principle and safety principle

Q37. The way in which financial statements relate to each other is known as

a. solvency

b. objectivity

c. articulation

d. entity

Q38. An adjusting entry should NOT include a debit to a(n)

a. expense and a credit to an asset

b. expense and a credit to revenue

c. expense and a credit to a liability

d. liability and a credit to revenue

Q39. Which of the following best demonstrates the matching principle?

a. Using debits to record decreases in owners' equity and credits to record increases

b. The equation A = L + OE

c. Allocating the cost of an asset to expense over the periods during which benefits are derived from ownership of the asset

d. Offsetting the cash receipts of the period with the cash payments made during the period

Q40. On the adjusted trial balance, retained earnings is

a. stated at the period-end amount

b. stated at the period-beginning amount

c. adjusted for all revenues and expenses for the period

d. adjusted for the period's dividends

Q41. Income taxes to a partnership are

a. an obligation of the partnership

b. an obligation to each partner only when cash is received

c. an obligation to each partner based on their share of profits

d. not an obligation to each partner since a partnership does not pay tax

Q42. Which of the following is true regarding salary allowances to partners when dividing net income?

a. They are not expenses of the business.

b. They do not get recorded.

c. They are expenses of the business and appear on the income statement.

d. They are not expenses of the business and do not get recorded.

Q43. In a sole proprietorship the balance in the Income Summary account is closed to

a. retained earnings

b. capital

c. drawing

d. net income

Q44. How would assets contributed to a partnership by a partner be recorded?

a. At historical cost

b. At fair market value

c. At cost less depreciation

d. At potential value

Q45. The entry to allocate net income among partners requires a credit to each partner's

a. invested equity

b. capital account

c. income summary

d. retained earnings

Q46. Which of the following is true in a perpetual inventory system?

a. No effort is made to record the cost of goods sold until year-end.

b. Entries are made in the Cost of Goods Sold account whenever merchandise is purchased or sold.

c. The need for taking physical inventory is eliminated.

d. Merchandising transactions are recorded as they occur.

Q47. When the LIFO costing method is in use, the seller

a. must sell the most recently acquired units first

b. must sell the oldest unit in inventory first

c. assumes that the most recently acquired units are sold first

d. assumes that the oldest units in inventory are sold first

Q48. Orange Kola Inc. uses a perpetual inventory system. Its beginning inventory of a particular product and its purchases during the month of January are listed below. On January 14 Orange Kola sells 24 units of this product. The other 28 units remain in inventory at January 31. If Orange Kola uses the FIFO flow assumption, what is the cost of goods sold to be recorded at January 14?

Beginning inventory (Jan. 1)	18	$10	$180
Purchase (Jan. 11)	13	12	156
Purchase (Jan. 20)	21	15	315
Total	52		$651

a. $39

b. $240

c. $252

d. $351

Q49. The write-down of inventory affects

a. the balance sheet but not the income statement

b. the income statement but not the balance sheet

c. both the income statement and the balance sheet

d. neither the income statement nor the balance sheet

Q50. The inventory turnover rate provides an indication of how quickly the average quantity of inventory on hand

a. becomes obsolete

b. sells

c. increases

d. converts into cash

Q51. When preparing a bank reconciliation, deposits in transit will

a. increase the balance per depositor's records

b. decrease the balance per depositor's records

c. increase the balance per the bank statement

d. decrease the balance per the bank statement

Q52. After preparing a bank reconciliation, which of the following would require a journal entry?

a. A deposit in transit

b. A check given to a supplier but not yet recorded by the company's bank

c. Interest earned on the company's checking account

d. Deposits made by a company with a similar name that were credited in error to the company's account

Q53. Uncollectible accounts expense

a. should not occur if the credit department investigates prospective credit customers

b. is the amount of cash a business must pay each time a credit customer fails to pay his or her acc

c. is the amount a business must pay to a collection agency to recover amounts on overdue accoun receivable

d. represents the loss in value of accounts receivable that eventually turn out to be uncollectible

Q54. Baldwin had accounts receivable of $250,000 and an allowance for doubtful accounts of $9,700 just before writing off a $1,500 account receivable from Basinger as worthless. After writing off this receivable, what would Baldwin's Allowance for Doubtful Accounts balance be?

a. $8,200 credit balance

b. $9,700 credit balance

c. $10,900 credit balance

d. $8,200 debit balance

Q55. A 15%, 60-day note receivable is acquired from a customer in settlement of an existing account receivable of $5,000. The accounting entry for acquisition of the note will include a

a. debit to Notes Receivable for $5,750

b. debit to Notes Receivable for $5,062.50

c. credit to Interest Revenue for $62.50

d. debit to Notes Receivable for $5,000 and no entry for interest

Q56. Why do companies with periodic inventory systems often use techniques such as the gross profit method and the retail method?

a. To prepare financial statements without taking a complete physical inventory

b. To increase gross profit

c. To value inventory at its sales price instead of its cost

d. To reduce taxable income during a period of rising prices

Q57. Merchandising companies that are small and do NOT use a perpetual inventory system may elect to use a(n)

a. physical inventory system

b. periodic inventory system

c. inventory shrinkage system

d. inventory subsidiary ledger system

Q58. In a perpetual inventory system, what is the flow of inventory cost?

a. First through the income statement, then through the balance sheet

b. First through the balance sheet, then through the income statement

c. Only through the balance sheet, not through the income statement

d. Only through the income statement, not through the balance sheet

Q59. Which of the following results in the inventory being stated at the most current acquisition cos:s

a. LIFO

b. FIFO

c. Specific identification

d. Average cost

Q60. Sales revenue is recognized in the period in which

a. the customer orders the merchandise

b. merchandise is delivered to the customer

c. cash payment is received by the seller

d. purchases are made to replace the merchandise sold

Q61. On April 30, 2012, Sphinx Products purchased machinery for $77,000. The useful life of this machinery is estimated at 7 years, with a $7,000 residual value. Assume that in its financial statements, Sphinx uses straight-line depreciation and the half-year convention. What will depreciation expense recognized on this machinery in 2012 and 2013 be?

a. $5,000 in 2012 and $10,000 in 2013

b. $5,500 in 2012 and $11,000 in 2013

c. $6,000 in 2012 and $12,000 in 2013

d. $7,500 in 2012 and $11,000 in 2013

Q62. A building with an appraisal value of $137,000 is made available at an offer price of $142,000. The purchaser acquires the property for $30,000 in cash, a 90-day note payable for $40,000, and a mortgage of $60,000. What is the cost basis recorded in the buyer's accounting records to recognize this purchase?

a. $100,000

b. $130,000

c. $137,000

d. $142,000

Q63. Which of the following is included in the cost of constructing a building?

a. The cost of insurance during construction

b. The cost of paving the parking lots

c. The cost of repairing vandalism damage during construction

d. The cost of removing the demolished building existing on the land when it was purchased

Q64. How would the cost of a new windshield wiper on a delivery vehicle be classified?

a. Capital expenditure

b. Revenue expenditure

c. Part of the cost of the goods sold

d. Unusual and infrequent expense

Q65. On April 2, 2012, Porter, Inc. acquired a new piece of filtering equipment. The cost of the equipment was $160,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 4 years. Assume that in its financial statements, Porter uses straight-line depreciation and the half-year convention. What will depreciation recognized be on this equipment in 2012 and 2013?

a. $17,500 in 2012 and $35,000 in 2013

b. $20,000 in 2012 and $35,000 in 2013

c. $23,333 in 2012 and $30,000 in 2013

d. $40,000 in 2012 and $30,000 in 2013

Q66. Metro Instrumentation sold a depreciable asset for cash of $200,000. The original cost of the asset was $800,000. Metro recognized a gain of $30,000 on the sale. What was the amount of accumulated depreciation on the asset at the time of its sale?

a. $170,000

b. $630,000

c. $660,000

d. $770,000

Q67. When is the gain on the disposal of equipment recognized?

a. When the book value of the equipment is greater than the value received

b. When the book value of the equipment is less than the value received

c. When a salvage value exists

d. When a gain should not be recognized on the disposal of an asset

Q68. Current liabilities are due

a. and receivable within one year

b. but not receivable for more than one year

c. and payable within one year

d. but not payable for more than one year

Q69. When does interest payable on a loan become a liability?

a. When the note payable is issued

b. When the borrowed money is received

c. At the maturity date

d. As it accrues

Q70. The amounts that a business withholds as taxes from an employee's earnings

a. represent payroll taxes expense to the employer

b. are deposited in an interest-bearing account until the employee is terminated

c. represent miscellaneous revenue to the employer

d. represent current liabilities to the employer

Q71. In preparing an amortization table, it is necessary to include the

a. original amount of the liability, the amount of periodic payments, and the interest rate

b. original amount of the liability, the amount of periodic payments, and the amount of past payments

c. monthly payment, the total amount of past payments, and the original amount of the liability

d. total amount of past payments, the interest rate, and the amount of periodic payments

Q72. What is one advantage of issuing bonds instead of stock?

a. The interest is tax deductible whereas dividends are not.

b. Bonds have a longer maturity date.

c. Interest rates are lower than dividend rates.

d. The issuance of bonds does not affect earnings per share.

Q73. After bonds-have been issued, their market value can be expected to

a. rise as any premium is amortized

b. fall if interest rates rise

c. fall as any discount is amortized

d. rise if interest rates rise

Q74. A company issues $60 million of bonds at par on January 1, 20XX. The bonds pay 10% interest semi-annually on 6/30 and 12/31 and mature in 20 years. What is the journal entry when the bonds are sold?

A)	Cash	60,000,000
	Bonds Payable		60,000,000
B)	Cash	60,000,000
	Interest Expense	3,000,000
	Bonds Payable		60,000,000
	Interest Payable		3,000,000
C)	Cash	60,000,000
	Interest Expense	6,000,000
	Bonds Payable		60,000,000
	Interest Payable		6,000,000
D)	Cash	60,000,000
	Interest Expense	600,000
	Bonds Payable		60,000,000
	Interest Payable		600,000

a. A above

b. B above

c. C above

d. D above

Q75. A $1,000 bond that sells for 103 has a cost of

a. $1,000

b. $1,003

c. $1,030

d. $1,300

Q76 If the preferred stock of a corporation is cumulative,

a. dividends on preferred stock are guaranteed

b. dividends cannot be declared in an amount less than that stated on the stock certificate

c. preferred stockholders participate in dividends paid in excess of a stated amount on the common shares

d. dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock

Q77. Where are extraordinary items found on the income statement?

a. Before discontinued operations

b. After discontinued operations

c. Before income from continuing operations

d. After prior period adjustments

Q78. To qualify as an extraordinary item, a gain or loss must

a. affect the income of a prior period

b. be larger in amount than any other item in the income statement

c. be material in amount, unusual in nature, and not expected to recur

d. be associated with a segment of the business that has been discontinued during the current period

Q79. When do dividends become a liability of a corporation?

a. On the date the board of directors declares the dividend

b. On the date of record

c. On the date payment is to be made

d. When cumulative preferred stock dividends are in arrears

Q80. A prior period adjustment is a correction made to

a. retained earnings at the beginning of the period

b. retained earnings at the end of the period

c. net income of the current year

d. net income of the previous year

Q81. Where does a prior period adjustment appear?

a. In the income statement following the subtotal "Income before Prior Period Adjustments"

b. In the statement of retained earnings as an adjustment to the ending balance of retained earnings

c. In the footnotes to the financial statements

d. In the statement of retained earnings as an adjustment to the beginning balance of retained earning:

Q82. Shares that have been sold and are in the hands of stockholders are called

a. outstanding shares

b. issued shares

c. Treasury shares

d. underwritten shares

Q83. How is book value per share of common stock derived?

a. Stockholders equity divided by the number of shares authorized

b. Stockholders equity divided by the number of shares outstanding

c. Net income divided by the number of shares outstanding

d. Net income divided by the number of shares authorized

Q84. What does retained earnings represent?

a. Cash available for dividends payable to the preferred and common stockholders

b. The amount initially invested in the business by stockholders

c. Cash available for expansion and growth

d. Income that has been reinvested in the business rather than distributed as dividends to stockholders

Q85. Cooper and Carroll each own 10,000 shares of C&C Corp. $10 par value stock, which they purchased f $37 per share directly from the corporation. If Cooper sells stocks to Carroll for $475,000,

a. stockholders' equity of C&C Corp. increases

b. assets of C&C Corp. increase

c. stockholders' equity of C&C Corp. decreases

d. C&C Corp. accounts are not affected

Q86. Which of the following individuals has the most power to influence corporate policy on a long-term basis

a. A shareholder who owns 60% of the outstanding common stock

b. A shareholder who owns 80% of the outstanding preferred stock

c. The treasurer of the corporation

d. The controller of the corporation

Q87. On September 1, 20XX, Miami Corporation's common stock sold at a market price of $300 per share. On that date, Miami announced a 2-for-1 stock split. At what price would the stock be expected to trade immediately after the split goes into effect?

a. $100 per share

b. $150 per share

c. $200 per share

d. $600 per share

Q88. Haverly Co. reports net income of $480,000 for 20XX and declares a cash dividend of $1 per share on each of its 100,000 shares of common stock outstanding. What are its 20XX earnings per share?

a. $0.90

b. $1.00

c. $3.80

d. $4.80

Q89. Which of the following best describes the relationship between revenue and retained earnings?

a. Revenue increases net income, which in turn increases retained earnings.

b. Revenue represents a cash receipt; retained earnings is an element of stockholders' equity.

c. Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends.

d. Retained earnings is equal to assets minus expenses.

Q90. Which of the following terms is used to describe the investors in a corporation?

a. Board of Directors

b. Corporate owners

c. Stockholders

d. Management

Q91. The net assets of a corporation are equal to

a. total assets - total liabilities

b. total assets - retained earnings

c. total assets + total liabilities

d. total assets + retained earnings

Q92. When shares of stock are sold from one investor to another, they will trade at

a. par value

b. book value

c. market value

d. stated value

Q93. Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7%, $100 par preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per share dividend this year, what is the total amount they must pay their shareholders?

a. $117,000

b. $177,000

c. $327,000

d. $341,000

Q94. What is a primary DISADVANTAGE of the corporate form of organization?

a. There is unlimited personal liability for business debts.

b. Ownership is difficult to transfer.

c. Corporate earnings are subject to double taxation.

d. Management is separated from ownership.

Q95. The directors of a corporation

a. are hired by the officers to run the business on a day-to-day basis

b. may not own stock in the same corporation or be officers of the same corporation

c. are responsible for formulating corporate policy and for hiring corporate officers

d. are elected by the shareholders to run day-to -day operations

Q96. Which of the following would NOT affect Retained Earnings?

a. Declaration of a cash dividend

b. Declaration of a stock dividend

c. Declaration of a stock split

d. A prior period adjustment

Q97. A 2-for-1 stock split

a. is accounted for in the same way as a 100% stock dividend

b. increases the number of outstanding shares of common stock, but par value per share remains the same as before the split

c. is recorded by transferring the par value of additional shares from retained earnings to the common stock account

d. should logically cause the market price per share to drop approximately 50%

Q98. Which of the following statistics is generally computed for both common and preferred stock?

a. Earnings per share

b. Price-earnings ratio (p/e ratio)

c. Annual dividend per share

d. Retained earnings per share

Q99. In computing EPS, the number of shares used is the

a. year-end number

b. beginning of the year number

c. average of the beginning and the year-end numbers

d. weighted average for the year

Q100. Declaration and distribution of a stock dividend will cause all of the following to occur EXCEPT a(n)

a. increase in the number of shares of stock outstanding

b. decrease in retained earnings

c. decrease in total assets of the issuing corporation

d. increase in legal capital of the issuing corporation