Reference no: EM132490760

Question 1: Katie Company had 41,600 shares of $2 par value common stock outstanding prior to a 40% common stock dividend declaration and distribution. The market value of the common stock on the declaration date was $10. Which of the following statements incorrectly describes the effect of recording the common stock dividend?

Multiple Choice

Option 1: Total stockholders' equity remained the same.

Option 2: Additional paid-in capital remained the same.

Option 3: Additional Paid-in capital increased $133,120.

Option 4: Retained earnings decreased $33,280.

Question 2:  Lab Industries, Inc., issued $59,000 of bonds, paid cash dividends of $8,900, sold long-term investments for $12,900, received $5,900 of dividend revenue, purchased treasury stock for $15,900, and purchased new equipment for $19,900. What is the net cash flow from financing activities?

Multiple Choice

Option 1: $34,200 inflow.

Option 2: $68,900 inflow.

Option 3: $33,100 outflow.

Option 4: $19,900 inflow.

Question 3: KAJ Incorporated purchased a machine costing $256,600 by paying $37,200 and signing a $219,400 note payable. How would this transaction be reported within the cash flow from investing activities section of the cash flow statement?

Multiple Choice

Option 1: An outflow of $256,600.

Option 2: An outflow of $37,200.

Option 3: It would not be reported in the investing activities section of the cash flow statement.

Option 4: An outflow of $219,400