Accounting 3 Exam 1

Total stockholders' equity represents: a claim against a portion of the total assets of a company. only the amount of earnings that have been retained in the business. a claim to specific assets contributed by the owners. the maximum amount that can be borrowed by a company.

A claim against a portion of the total assets of a company.

The residual interest in a corporation belongs to the: creditors. common stockholders. preferred stockholders. management.

Common Stock Holders

Treasury shares are shares: held as an investment of the corporation. issued but not outstanding. held as an investment by the treasurer of the corporation. issued and outstanding.

Issued but not outstanding.

A "Secret Reserve" will be created if: stockholders' equity is overstated. inadequate depreciation is charged to income. a capital expenditure is charged to expense. liabilities are understated.

A capital expenditure is charged to expense.

Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders: can negotiate individual contracts on behalf of the enterprise. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership are entitled to a dividend every year in which the business earns a profit. have the rights to specific assets of the business.

Bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

In January 2014, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2014, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares: increased total stockholders' equity. decreased total stockholders' equity. did not change total stockholders' equity. decreased the number of issued shares.

Decreased total stockholders' equity

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is: the incremental method. either the proportional method or the incremental method. the pro forma method. the proportional method.

Either the proportional method or the incremental method.

When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the: market value of the services received. par value of the shares issued. market value of the shares issued. any of these provides an appropriate basis for recording the transaction.

Par value of the shares issued

In a corporate form of business organization, legal capital is best defined as: the amount of capital the federal government allows a corporation to generate. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission. the amount of capital the state of incorporation allows the company to accumulate over its existence. the par value of all capital stock issued.

The Par value of all capital stock issued

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?: Treasury stock for the purchase price. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value. Paid-in capital in excess of par for the purchase price.

Treasury stock for the purchase price.