Accounting review questions for Ch. 10

The Golden Inc. issues 1,000 shares of 3%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. Golden was not able to pay dividends in 2017, but plans to pay dividends of $10,000 in 2018. Assuming the preferred stock is noncumulative, how much of the $10,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018? -$10,000 to preferred stockholders and $0 to common stockholders -$6,000 to preferred stockholders and $4,000 to common stockholders. -$3,000 to preferred stockholders and $7,000 to common stockholders. -None to preferred stockholders and $10,000 to common stockholders

$3,000 to preferred stockholders and $7,000 to common stockholders

Charring Cross Inc. issued 5,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance? -Credit Cash $25,000 -Credit common stocks $25,000 -Credit additional paid-in capital $20,000 -Credit common stock $25,000

-Credit Additional paid-in Capital $20,000.

Outstanding common stock refers to the total number of shares -Authorized -Issued plus treasury stock -Issued -Issued less treasury stock

-Issued less treasury stock

When a company purchases treasury shares of $10,000 and then sells the shares at $8,000, the difference of $2,000 -Is recorded as a loss on the income statement -Reduces stockholders' equity -Increases stockholders' equity -Is recorded as a gain on the income statement

-Reduces stockholders' equity

Which of the following is ordered from the largest to number of shares to the smallest number of shares? -Shares issued, shares outstanding, shares authorized. -Shares outstanding, shares issued, shares authorized -Shares authorized, shares issued, shares outstanding -Shares in treasury, shares outstanding, shares issued

-Shares authorized, shares issued, shares outstanding

San Bruno Corp. stockholders' equity section shows the par value of its common stock at $0.25 and the balance in the common stock account of $50,000. Also, the equity section reflects 15,000 shares of treasury stock. What is the number of shares outstanding? -215,000 -200,000 -50,000 -185,000

185,000

Bampton Corporation issued 15,000 shares of $1 par value stock for $20 per share. What is true about the journal entry to record the issuance? -Credit common stock $300,000 -Credit common stock $15,000 -Credit cash $300,000 -Debit additional paid-in capital $285,000

Credit common stock $15,000

Kensal Green Corporation issued 500 shares of $100 par value preferred stock for $500 per share. What is true about the journal entry to record the issuance? a. Credit Preferred Stock $50,000 b. Credit Cash $250,000 c. Credit Preferred Stock $250,000 d. Debit Additional Paid‐In Capital $200,000

Credit preferred stock $50,000

The issuer of a 100% common stock dividend (large stock dividend) to common stockholders should debit stock dividends for an amount equal to the -Par value of the shares issued -Book value of the shares issued -Market value of the shares issued -Minimum legal requirements

Par value of the shares issued

At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the -Declaration of a stock split -Purchase of treasury stock -Declaration of a small stock dividend -Declaration of a large stock dividend

Purchase of treasury stock

The balance of the $0.50 par value common stock account for Castle Corp was $200,000 before its recent 2 for 1 stock split. The market price of the stock was $40 per share before the stock split. What occurred as a result of the stock split? -The balance in the retained earnings account decreased. -The market price of the stock dropped to approximately $20 per share -The balance in the common stock account was increased to $400,000 -The market price of the stock was not affected

The market price of the stock dropped to approximately $20 per share

Preferred stock is least likely to have which of the following characteristics? -Preference as to dividends -The right of the holder to vote at stockholders' meetings -Preference as to assets upon liquidation of the corporation -The right of the holder to convert to common stock

The right of the holder to vote at stockholders' meetings.

What is the effect of a stock dividend on stockholders' equity? -Assets are decreased -Assets are increased -Total stockholders' equity stays the same -Liabilities are increased

Total stockholders' equity stays the same

According to generally accepted accounting principles, treasury stock usually should be recorded at -Market Value -Par value -cost -net realizable value

cost

Which of the following transaction affects total retained earnings? -Purchase of treasury stock -Payment of previously declared cash dividend -Declaration of a stock dividend -Declaration of a stock split

declaration of a stock dividend

Which of the following events decreases a company's stockholders' equity? -A payment of a previously declared cash dividend -A declaration of a $0.10 cash dividend per share on preferred stock. -A 5 for 4 stock split -A declaration of a two percent stock dividend

A declaration of a $0.10 cash dividend per share on preferred stock

The purchase of treasury stock will result in -No net changes in assets, liabilities, or stockholders' equity -A decrease in assets and a decrease in stockholders' equity -An increase in assets and an increase in liabilities -An increase in assets and an increase in stockholders' equity

A decrease in assets and a decrease in stockholders' equity.

Hillsborough Inc. sold treasury stock at a price above cost; -A loss is reported -A revenue account is credited -Additional Paid-In-Capital is increased -A gain account is credited

Additional Paid-In-Capital is increased

The par value of shares is normally recorded in the -Additional Paid-in Capital account -Retained Earnings account -Common Stock Account -Asset account Common Stock

Common Stock Account

On March 1, Cambridge Corp. acquired 1,000 shares of its $1 par value common stock for $20 each. On Dec. 1, Cambridge reissued 500 shares for $18 each. Which of the following is correct regarding the journal entry for the reissued shares? -Credit Cash $9,000 -Debit Treasury Stock $9,000 -Debit Additional Paid-In-Capital $10,000 -Credit Treasury Stock $10,000

Credit Treasury Stock $10,000

Funston Corp board of directors declared a cash dividend of $1.00 per share on 50,000 shares of common stock on April 1, 2016. The dividend is to be paid on April 30,2016, to shareholders of record on April 15, 2016. The effects of the entry to record the declaration of the dividend on April 1, 2016, are to -Decrease stockholders' equity and increase liabilities -Decrease stockholders' equity and decrease assets -Increase stockholders' equity and decrease assets -Increase stockholders' equity and increase liabilities

Decrease stockholders' equity and increase liabilities

The issuer of a 3% common stock dividend to common stockholders should debit stock dividends for an amount equal to the -Fair or market value of the shares issued. -Book value of the shares issued. -Par or stated value of the shares issued. -Minimum legal requirements.

Fair or market value of the shares issued

T/F: Dividends in arrears pertain to noncumulative preferred stock

False

T/F: Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity

False

T/F: The word preferred in the phrase preferred stock means that an owner of preferred stock has some advantages over a bondholder.

False

Meadows Racetrack, Inc. issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting equation? -Increase assets and increase stockholders' equity -Increase assets and increase liabilities -Increase assets and increase revenue -Increase assets and decrease stockholders' equity

Increase assets and increase stockholders' equity

Treasury shares plus outstanding shares equal -Unissued shares -Available shares -Authorized shares -Issued shares

Issued shares

When Allegheny Corp. declares a cash dividend which of the following is true? -Allegheny's assets are decreased -Stockholders' equity is increased -Allegheny's assets are increased -Liabilities are increased

Liabilities are increased.

Large stock dividends and stock splits are issued primarily to -Lower the trading price of the stock per share -Increase the number of authorized shares -Increase legal capital -Increase the number of outstanding shares

Lower the trading price of the stock per share

Unlike a stock split, a stock dividend requires a formal journal entry in the financial accounting records because stock dividends - represent a transfer from Retained Earnings to Capital Stock. -increase the stockholders' equity in the issuing firm. -are payable on the date they are declared. -increase the relative book value of an individual's stock holdings.

Represent a transfer from Retained Earnings to Capital Stock.

A feature common to both stock splits and stock dividends is -A transfer to earned capital of a corporation -An increase in total liabilities of a corporation -A reduction in the contributed capital of a corporation -That there is no effect on total stockholders' equity

That there is no effect on total stockholders' equity

T/F: Contributed capital is the amount stockholders have invested in the company

True

T/F: The cumulative preferred stock feature is the right to dividends in arrears before the current dividends are distributed

True