Intermediate Chapter 15
Which of the following parties will always sacrifice inherent rights in return for special preferences? A Common stock B Bondholders C Both preferred and common stock D Preferred stock
D
Fuller Enterprises reports a credit balance in retained earnings. Because of this, if they have sufficient cash, they may decide to A sell common stock above par value. B distribute the assets to the stockholders. C distribute the assets to creditors. D sell treasury stock at an amount in excess of par value.
B
The value of a single owner's investment in a corporation depends on the corporation's A profitability. B payout ratio. C par value. D goodwill.
A
What is meant by the capital of a corporate organization? A Amounts paid-in and earned that represents stockholders' equity in the corporation. B The assets of a business organization that are durable and last a long period of time. C The cash held by the organization at the point in time when the reference to capital is made. D Money borrowed to finance the operations of the organization.
A
Which of the following are primary considerations management must make before declaring a cash dividend? 1. The tax impact on stockholders of the receipt of the dividends 2. The legal permissibility of the dividend 3. The availability of funds to pay the dividend A 2 and 3 only B 1, 2, and 3 C 3 only D 1 and 2 only
A
On January 1, 2020, Hanson Incorporated had an initial public offering of 10,000 shares of $10 par value common stock. The shares sold for $15 each. Six months later, Hanson reacquired 1,000 shares of its stock for $12 per share. The acquisition of these treasury shares A decreased the number of issued shares. B decreased total stockholders' equity. C did not change total stockholders' equity. D increased total stockholders' equity.
B
After a stock split, a company's par value per share will __________ and the number of shares outstanding will __________. A decrease; remain the same B remain the same; remain the same C decrease; increase D increase; increase
C
When journalizing the sale of common stock, a debit to cash that is greater than the credit to the common stock account means that A the common stock was sold at a discount. B a gain on the sale of stock is a part of the transaction. C the stated value of the common stock is less than the per share price investors were willing to pay. D the common stock is worth more than its current market value.
C
On June 30, 2020, Dean & Associates paid a cash dividend to stockholders that was declared on June 10, 2020. On which date will the company make a journal entry crediting cash? A Cash will not be credited on either June 10 or June 30, 2020 B June 10, 2020 only C Both June 10 and June 30, 2020 D June 30, 2020 only
D
How should a company record a property dividend? A Record the dividend by debiting retained earnings for an amount equal to the fair value of the property to be distributed. B Record the dividend at the carrying value of the property distributed and inform stockholders as to the fair value of the property so they may individually recognize a gain or loss. C Record the dividend by debiting retained earnings for an amount equal to the book value of the property to be distributed. D Record the dividend by crediting retained earnings for an amount equal to the fair value of the property to be distributed.
A
If investors want to determine if a company is profitable for its owners, which ratio should they calculate? A return on common stockholders' equity B payout ratio C book value per share D equity trading ratio
A
Which of the following demonstrates the share system of corporate stocks? A Jeffrey can sell his shares of stock in Gilbert Enterprises to anyone he wants without the knowledge or permission of Gilbert Enterprises. B Jeffrey can only sell his shares of stock in Gilbert Enterprises to other Gilbert Enterprises shareholders. C Jeffrey can only sell his shares of stock in Gilbert Enterprises back to Gilbert Enterprises. D Jeffrey can sell his shares of stock in Gilbert Enterprises to anyone he wants as long as he notifies Gilbert Enterprises before the sale.
A
Legal capital for a corporation is defined as A the amount of capital the state of incorporation allows the company to accumulate over its existence. B the par value of all capital stock issued. C the total capital raised by a corporation within the limits set by the Securities and Exchange Commission. D the amount of capital the federal government allows a corporation to generate.
B
Under which of the following circumstances will total stockholders' equity increase? A After a stock dividend but not a stock split. B After neither a stock dividend nor a stock split. C After either a stock dividend or a stock split. D After a stock split but not a stock dividend.
B
Why does a stock dividend require a formal journal entry in the financial accounting records when a stock split does not? A Stock dividends increase the relative book value of an individual's stock holdings. B Stock dividends represent a transfer from retained earnings to capital stock. C Stock dividends are payable on the date they are declared. D Stock splits increase the relative book value of an individual's stock holdings.
B
Because shareholders are residual owners, they A can negotiate individual contracts on behalf of the enterprise. B have the rights to specific assets of the business. C bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. D are entitled to a dividend every year in which the business earns a profit.
C
O'Brien Industries paid above par value to acquire treasury stock. They held the treasury stock for three months and then sold it again for a price higher than the acquisition price. If O'Brien uses the cost method to account for treasury stock transactions, what effect would the resale of the treasury stock have on additional paid-in capital, retained earnings, and total stockholders' equity? A It would increase additional paid-in capital, total stockholders' equity, and retained earnings. B It would decrease both additional paid-in capital and total stockholders' equity and have no effect on retained earnings. C It would have no effect on additional paid-in capital, total stockholders' equity, and retained earnings. D It would increase both additional paid-in capital and total stockholders' equity and have no effect on retained earnings
D
