Accounting Chapter 10

When is a liability for cash dividends created? A. at the end of each fiscal year B. at the date of decleration C. at the date of record D. at the date of payment

B

A distribution of profits to owners is called __________

dividend

The number of shares issued less the number of shares of treasury stock is the __________.

outstanding shares

An arbitrary monetary amount that determines an entity's legal capital is the __________.

par value

__________ is the name of the account credited when a corporation issues common stock for a price greater than par

additional paid in capital

If the stated cash dividend on cumulative preferred stock has been unpaid for a period of one year or more its referred to as a dividend __________

in arrears

The __________ is a preferred stock having a feature that provides from the current year dividends only to be paid to preferred stock holders before paid to common stockholders

non cumulative preferred stock

A corporation issues 1,500 shares of common stock for $32,000. The stock has a par value of $10 per share. The journal entry to record the stock issuance would include a credit to common stock for: A. 15,000 B. 32,000 C. 17,000 D. 2,000

A

When a corporation declares a stock dividend, which of the following is true? A. cash decreases B. equity remains the same C. equity decreases D. R/E decreases

B

Prady Inc. began operations on Oct 1 2011 with 3,000 shares of $2 par common stock authorized. Prady issues all of its common stock durinng 2011 and 2012. On Dec 31 2012 Prady repurchased 1,000 shares of its outstanding shares then reissued 500 of these shares on March 1 2013. On June 1 2013 Prady declared a 2 for 1 stock split. As a result of this stock split, which of the following is true? A. assets decreased B. S/E decreased C. S/E increase D. total S/E equity remained the same

D

The ability of a corporation to obtain capital is: A. less than a partnership B. about the same as a partnership C. restricted because of the limited life of the corporation D. enhanced because of the limited liability and the ease of share transferability

D

The stockholders equity section of the Dec 31 2011 balance sheet for Dennys Deli appeared as follows: C/S $20 par 40,000 shares...800,000 APIC....320,000 R/E...600,000 Total S/E...1,720,000 Assume that all of the 40,000 shares of dennys stock that was issued as of dec 31 2011, was issued for $35 per share. On March 1 2012 Denny reacquired 5,000 shares of its common stock for $43 per share. How much should be reported on Denny's March 31 2012 balance sheet for treasury stock A. 42,000 B. 126,000 C. 162,000 D. 215,000

D

Stock Split: 1. _________ market value 2. __________ total number of shares 3. __________par value 4. ________ APIC 5. _________ R/E 6. S/E

Reduces increase decrease No effect No effect No effect

__________ shares are the maximum number of shares a corporation can legally issue

authorized

The __________ is a preferred stock having a feature that provides for the current stated dividiends plusy dividends in arrears before any dividends are paid to common stock holders

cumulative preferred stock

When stockholders exchange their shares of stock for additional shares and there is a corresponding reduction in the par value of the stock a __________ has occured.

stock split

The journal entry to issue 1,000,000 shares of $6 par common stock for $8 per share on January 2nd would be: A. Cash 8,000,000 C/S 6,000,000 APIC 2,000,000 B. Cash 6,000,000 C/S 6,000,000 C. Cash 6,000,000 APIC 2,000,000 C/S 8,000,000 D. Cash 1,000,000 C/S 1,000,000

A

Cash dividends paid on common stock would be reported in teh statement of cash flows in: A. the cash flows from financing activities section B. the cash flows from investing activities section C. a seperate schedyle D. the cash flows form operating activities section

A

Which of the following statements is true with regard to equity capital? A. the number of shares actually in the hands of stockholders are called outstanding shares B. its unusual for corporation to have more than one class of stock outstanding at any point in time C. preferred stock represents that shares of stock that have been permanently retired D. issued shares represent the maximum number of shares that can be issued by a corporation

A

Which one of the following would not be considered an advantage of the corporate form of organization? A. goverment regulation B. seperate legal existence C. continous life D. limited liability of stocholders

A

All of the following are reasons that a corporation may purchase treasury stock except: A. if it needs the stock for its employee stock bonus program B. if it desires to make an investment in its own stock and is reported as an asset C. to buy out the ownership of stockholders D. to increase the reeported amount of earnings per share

B

A disadvantage of the corporate from a business entity is: A. mutal agency for stockholders B. unlimited liability for stockholders C. corporations are subject to more govermental regulations D. the ease of transfer of ownership

C

Ebberle Corporation reported the following in the stockholders equity section of its balance sheet at Dec 31 2012 C/S, $ 1 par vale ... $10,000 PIC P/S ...$40,000 Total Capital Stock... $50,000 R/E...$25,000 Less: Treasury Stock ($20 per share)... $2,000 Total S/E...$73,000 How many shares of stock are issued? A. 9,000 shares B. 9,900 shares C. 10,000 shares D. 10,100 shares

C

If a corporation declares a 2 for 1 stock split which of the following is true? A. A journal entry is required to show the effect on the stockholders equity accounts B. the stockholders will have a higher proportionate ownership share after the split C. the par value will be reduced to half of the pre split par value D. the market price of the stock is expected to inncrease after the split

C

Many stockholders choose to invest in preferred stock because: A. preferred stock can always be converted into common stock at the stockholders option B. the preferred dividend distrbitions are generally increase each year C. dividends are distributed to preferred stockholders before common stockholders D. preferred stockholders includes the right to participate in management decisions thorugh voting privelags

C

Outstanding shares represent the: A. number of previously issued shares that have been repurchased by the corporation B. number of shares that the corporation has sold C. number of shares that are currently held by stockholders D. maximum number of shares that can be sold by the corporation

C

Patch Inc. plans to distribute $134,000 dividends. It has outstanding 200,000 shares of 7% $10 par preferred stock and 60,000 shares of $2 par common stock. How much will be distributed per share on preferred and common stock? P/S C/S A. 3.35 1.12 B. .70 2.00 C. .67 0 D. 1.68 1.68

C

The stockholders equity section of the Dec. 31 2011 balance sheet for Bravo Bistro appeared as follows: C/S $20 oar 40,000 shares... 800,000 APIC...320,000 R/E...600,000 Total S/E...1,720,000 Assume that all of the 2,000 shares of Bravo stock that was issued as of Dec 31 2011 was issued for $3.50 per share. On March 1 2012 Bravo reaquired 1,000 shares of its common tock for $4.50 per share The journal entry to record the transaction on March 1 includes a credit to what account and for what amount? A. 3,000 to APIC T/S B. 4,500 to T/S C. 3,000 to C/S D. 4,500 to cash

D

Which of the following is not characteristic of a corporation? A. Corporations are organized as a seperate legal taxiable entity B. Ownership is divided into shares of stock C. Corporations expirence an ease in obtaining large amounts of resources by issuing stock D. A corporations resources are limited to their individual stockholders resources

D

The number of shares sold to stockholders are ___________.

issued shares

When a corporation declares a small stock dividend, which of the following is false? A. cash decreases B. total S/E remains the same C. the capital stock accounts increase D. R/E decreases

A

What types of accounts are Treasury stock and APIC TS transactions? T/S APIC TS A. Contra equity S/E B. Contra equity Contra Equity C. S/E S/E D. R/E R/E

A

Coral Cleaners reported the following information in the S/E seciton of its Dec 31 2011 balance sheet 7% Cumulative, non participating preferred stock $100 par, 500 shares authorized, issued and outstanding callable at par value... 50,000 C/S $12 par, 100,000 shares authorized... 600,000 APIC... 25,000 R/E... 825,000 What is the number of shares of common stock issued and outstanding? A. 50,000 shares B. 100,000 shares C. 6,000 shares D. 5,000 shares

A

Murton Industries reported the following on balance sheet. C/S $10 par, 100,000 shares authorized 75,000 issued and outstanding What is the effect for a 2 for 1 split if the market value of the common stock is $20 per share at the time the stock split is declared A. a stock split has no impact on any of the S/E accounts balances B. total S/E increases 750,000 C. cash increases 750,000 D. 1,500,000 of R/E is transferred into the capital stock accounts

A

On Jan 1 2010 Framm Corporation issued 10,000 shares of its 10%, $20 par value cumulative preferred stock. No dividends were declared by Framm in 2010 or 2011. In 2012 Framm had a profitable year and was in a strong cash postion so it declared a dividend of $200,000. How mych of this dividend was paid to Framms common stock holders? A. $140,000 B. $160,000 C. $180,000 D. $200,000

A

On June 1 2011, Donner technologies declared a $50,000 cash dividend to be distributed to its commmon stockholders of record on June 15 2011. The dividend will be paid on July 1 2011. The required jounal entry on June 1 includes a: A. $50,000 debit to R/E B. $50,000 debit to dividends payable C. $50,000 credit to cash D. $50,000 credit to C/S

A

Par value represents the: A. arbitarty amount that estabilished a minimum price for the stock when its first issued B. current market price of the stock C. amount for which any treasury shares have been aquired by the corporation D. amounnt for which trasury shares may be reissued

A

Parnell Inc has 5,000 shares of $5 par, 3% cumulative preferred stock outstanding and 25,000 shares of $2 par common stock outstanding. No dividends have been paid for the past two years. If the company wishes to distribute $2 per share to the common stockholders, what is the total ammount of dividends that must be paid in the current year? A. $52,250 B. $50,750 C. $50,000 D. $2,250

A

Porter Hardware Inc issues $2 par common stock. Which of the following is true? A. $2 per share is presented on the balance sheet in the common stock account B. $2 per share is the maxium selling price for these shares of stock C. Liabiliteis will increase as a result of this transaction D. $2 in dividends will be paid to the stockholders as a result of this transaction

A

The stockholders equity section of the Dec 31 2011 balance sheet for Dennys Deli appeared as follows: C/S $20 par 40,000 shares...800,000 APIC....320,000 R/E...600,000 Total S/E...1,720,000 Assume that all of the 40,000 shares of dennys stock that was issued as of dec 31 2011, was issued for $35 per share. On March 1 2012 Denny reacquired 5,000 shares of its common stock for $43 per share. What is the total amount of stockholders equity that will be presented on Dennys March 31 2012 balance sheet? A. 1,505,000 B. 1,432,000 C. 1,600,000 D. 1,530,000

A

Treasury shares represent the: A. number of previously issued shares that have been repurchased by the corporation B. number of shares the corporation has sold C. numer of shares that are currently held by stockholders D. maximum nmber of shares that can be sold by the corporation

A

Under the corporate form of business organization A. ownership rights are easily transferred B. a stockholder is persobally liable for the debys of the corporation C. stockholhers acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation D. stockholders wishing to sell their corporation shares must get the approvcal of other stockholders

A

Which of following statements is true regarding a corporations purchase of trasury stock? A. the cost of treasury stock is a reduction in stockholders equity B. dividends must still be paid on treasury stock because it is still issued C. treasury stock is reported as an asset because it is considered an investment in the corporations own stock D. treasury stock is no longer considered issued once it is back in the hands of the issuer

A

Which of the following statements is false regarding the issuance of stock vs. the bonds to raise capital for corportation? A. the decleration of dividends reduces the amount of the corporations taxable income B. interest accrues, dividends do no accrue C. the payment of bond interest is a contractual requirement D. the decleation of dividends is at the discretion of the board of directors

A

When a corporation pays a previously declared cash dividend, which of the following is true? A. cash decreases B. liabilities decrease C. equity decreases D. no entry is necessary

B

Alma Corporation issues 1,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, a credit or credits are made to A. C/S $16,000 B. C/S $10,000 and APIC $6,000 C. C/S $6,000 and APIC $10,000 D. C/S $10,000 and R/E $6,000

B

Broomfield Inc issued 7,000 shares of $1 par common stock for $20 per share. In addition to the increase in cash, what effect does this transaction have on Brumfields accounting equation? A. C/S increases 7,000 and R/E 133,000 B. C/s increase 7,000 and APIC increases 133,000 C. C/S increase 140,000 D. R/E increase 7,000 and APIC increases 133,000

B

Cash paid for preferred stock dividends should be shown on the statement of cash flows under: A. investing activities B. financial activities C. both investing and financin activties D. operating activities

B

Coral Cleaners reported the following information in the S/E seciton of its Dec 31 2011 balance sheet 7% Cumulative, non participating preferred stock $100 par, 500 shares authorized, issued and outstanding callable at par value... 50,000 C/S $12 par, 100,000 shares authorized... 600,000 APIC... 25,000 R/E... 825,000 Coral's total capital stock is: A. 650,000 B. 675,000 C. 625,000 D. 1,500,000

B

Earning per share is an indication of how much: A. the company has in cash for each share of outstanding commn stock B. the company earned for each shre of outstanding common stock C. the company paid as diviends for each share of common stock held by stockholders D. the company earned for each share of outstanding common and preferred stock

B

If a corporation issues cumulative, participating preferred stock, which of the folllowing is true regarding the right of the preferred stockholders? A. the must forgo dividends for any period when no dividends are declared B. they have the right to recieve current year dividends and all unpaid dividends from prior years C. they will receive a fixed dividentd each year regardless of the amount of dividends declared D. they will have an option to convery their shares to common stock at a specified date

B

In which of the following organization forms are the owners legal responsibiluty for the debt of the business limited to the amount they invested in the business? A. sole propreitorship B. corporation C. partnership D. cooperative

B

Issued shares represent the: A. number of previously issued shares that have been repurchased by the corporation B. number of shares that the corporation has distributed to oweners to date C. number of shares that are currently held by stockholders D. maximum number of shares that can be sold by corporation

B

Murton Industries reported the following on balance sheet. C/S $10 par, 100,000 shares authorized 75,000 issued and outstanding What it the effect on Murtons accounting equation of issung 1,000 additonal shares of common stock at $15 per share? A. assets increse 15,000, liabilites increase 5,000, equity increases 10,000 B. assets increases 15,000 liabilites remain uneffected, and equity increases 15,000 C. assets decrease 10,000 liabilites remain unaffects and equity inccreases 10,000 D. assets decrease 15,000, liabilities decrease 5,000 and equity decreases 10,000

B

On January 15, 2011 Rockney Systems Inc. paid a cash dividend that had been declared prior to the end of its 2010 fiscal year. The entry to pay the dividends includes a debit to A. cash and a credit to Dividends payable B. dividends payable and credit to cash C. R/E and credit to Dividends payable D. dividends payable and credit to R/E

B

One of the main disadvantages of the corporate form is the A. professional management B. double taxiation of dividends C. charter D. corporation must issue stock

B

Select the type of business that is most likely to obtain large amounts of resources by issuing stock. A. partnership B. corporation C. sole propreitorhsip D. None

B

The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for cash at $70 per share. The entry to record the transaction will consits of a debit to cash for $700,000 and a credit or credits to A. P/S 700,000 B. P/S 500,000 APIC 200,000 C. P/S 500,000 R/E 200,000 D. APIC P/S 700,000

B

The stockholders equity accounts of Jamison Corporation include 37,500 of common stock with a par value of $.50 and 5,000 shares of treasury stock with a total cost of 25,000. The total number of shares outstanding for Jamison Corporation are: A. 32,500 shares B. 70,000 shares C. 75,000 shares D. 80,000 shares

B

The stockholders equity section of the Dec 31 2011 balance sheet for Dennys Deli appeared as follows: C/S $20 par 40,000 shares...800,000 APIC....320,000 R/E...600,000 Total S/E...1,720,000 Assume that all of the 40,000 shares of dennys stock that was issued as of dec 31 2011, was issued for $35 per share. On March 1 2012 Denny reacquired 5,000 shares of its common stock for $43 per share. Suppose that Denny reissued 1,500 shares of its trasury stock on June 1 2012 for $50 each. Which of the following is true regarding the entry required to record this transaction? A. a debit to T/S for 75,000 B. a credit to T/S for 64,500 C. a credit to R/E for 10,500 D. a debit to APIC T/S for 10,500

B

What is the primary reason for a stock split? A. to distribute cash to the investor B. to decrease the market value of the stock C. to decrease the number of shares outstanding D. to increase the capital stock of the corporation

B

Which of the following is not characteristic of a corporation? A. The financial loss that a stockholder may suffer from owning stock in a public company is limited B. Cash dividends paid by a corporation are dedcutible as expenses by the coproration C. A corporation can own property in its name D. Corporations are required to file federal tax income

B

If a corporation declares a 2 for 1 stock split, which of the following is true? A. a new class of stock must be authorized with thwice the number of issued shares B. the number of outstanding shares is half the number that was outstanding before the split C. the number of outstanding shares is twice the number that was outstanding before the split D. the number of authorized shares is doubled, while the par value is reduced to half the pre split par value

C

Perry Corporation isses 20,000 shares of $.50 par common stock for $6 per share. The account for APIC in excess of par will increse by: A. $130,000 B. $120,000 C. $110,00 D. $10,000

C

S/E Melish Inc C/S $7 par, 100,000 shares authorized... 700,000 APIC... 160,000 R/E... ?? T/S 2,000 shares at cost (160,000) Total S/E... 974,000 How many shares of C/S are outstanding A. 68,000 shares B. 78,000 shares C. 98,000 shares D. 100,000 shares

C

S/E Melish Inc C/S $7 par, 100,000 shares authorized... 700,000 APIC... 160,000 R/E... ?? T/S 2,000 shares at cost (160,000) Total S/E... 974,000 What is the amount of R/E A. 98,000 B. 114,000 C. 130,000 D. 860,000

C

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 sares were orginally issued and 10,000 were subsequently reacquires. What is the number of shares outstanding? A. 40,000 shares B. 70,000 shares C. 50,000 shares D. 60,000 shares

C

The excess of sales price of treasury over its cost should be credited to A. T/S receivable B. premium on capital stock C. APIC D. income from sale of T/S

C

The stockholders equity section of the Dec 31 2011 balance sheet for Dennys Deli appeared as follows: C/S $20 par 40,000 shares...800,000 APIC....320,000 R/E...600,000 Total S/E...1,720,000 Assume that all of the 40,000 shares of dennys stock that was issued as of dec 31 2011, was issued for $35 per share. On March 1 2012 Denny reacquired 5,000 shares of its common stock for $43 per share. Suppose that Denny reissued 1,500 shares of its T/S June 1 2012 for $50 each. Which of the following is true regarding the entry required to record this transaction? A. a debit to T/S for 64,500 B. a credit to T/S for 49,000 C. a debit to cash is required for 75,000 D. a debit to APIC T/S for 10,500

C

When a corporation decided whether to pay a cash dividend, which of the following is true? A. cash decreases B. liabilities decrease C. equity decreases D. no entry is necessary

C

After a corporation declares a cash dividend, what takes place on the date of record? A. cash decreases B. liabilities decrease C. equity decreases D. no entry is necessary

D

Authorized shares represent the: A. number of previously issued shares that have been repurchased by the corporation B. number of shares that the corporation has sold C. number of shares that are currently held by stockholders D. maximum number of shares of stock that a company can legally issue

D

Characteristics of a corporation include: A. shareholders who are mutal agents B. direct managment by the shareholders C. its inability to own property D. shareholders who have limited liability

D

Coral Cleaners reported the following information in the S/E seciton of its Dec 31 2011 balance sheet 7% Cumulative, non participating preferred stock $100 par, 500 shares authorized, issued and outstanding callable at par value... 50,000 C/S $12 par, 100,000 shares authorized... 600,000 APIC... 25,000 R/E... 825,000 If coral repurchases 500 shares of its common stock for $20 per shares, what is the amount of total S/E after this transaction? A. 1,510,000 B. 1,500,000 C. 1,494,000 D. 1,490,000

D

Dividends in arrears are required to be reported in A. a liability account B. a contra equity account C. the stockholders equity section of the balance sheet D. the notes to the financial statemetn

D

Magnum corporation has 60,000 shares of its $3 par common stock issued before its recent 3 for 1 stock split. The market price of the stock wasa $30 per share before the split. Which of the following is true as a result of the split? A. there were 20,000 shares of common stock issued after the split B. the balance in the common stock account increased to 180,000 C. the market price of the stock was not affected D. the par value of the stock decreased to $1 per share

D

Murton Industries reported the following on balance sheet. C/S $10 par, 100,000 shares authorized 75,000 issued and outstanding What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the stock dividend is declared? A. a stock dividned has no impact on any of the S/E account B. total S/E increase 75,000 C. cash increases 300,000 D. R/E decreases by 255,000

D

On the statement of cash flows from financing activities section would include: A. receipts from the sale of investments B. payments for the acquisition of investments C. receipts from a note receivable D. receipts from the issuance of capital stock

D

The stockholders equity section of the Dec 31 2011 balance sheet for Inglenook Interiors Inc. before its recent stock dividend: C/S $5 par, 100,000 issued and outstanding.... $500,000 APIC... $100,000 R/E... $725,000 Total S/E 1,325,000 Inglenook declared a 10% stock dividend where the market price per share was $8. After the stock divided the components of Inglenooks S/E were Common Stock Paid in Capital R/E A. 580,000 100,000 645,000 B. 550,000 100,000 805,000 C. 580,000 130,000 805,000 D. 550,000 130,000 645,000

D

The stockholders equity section of the Dec. 31 2011 balance sheet for Bravo Bistro appeared as follows: C/S $20 oar 40,000 shares... 800,000 APIC...320,000 R/E...600,000 Total S/E...1,720,000 Assume that all of the 2,000 shares of Bravo stock that was issued as of Dec 31 2011 was issued for $3.50 per share. On March 1 2012 Bravo reaquired 1,000 shares of its common tock for $4.50 per share If all of the 1,000 shares that Bravo Bistro repurchased on March 1 were later reissued for $5 per share, the journal entry to record this transaction includes a debit to what account and for what amount? A. 4,000 to APIC T/S B. 2,000 to T/S C. 500 R/E D. 5,000 to cash

D

Which of the following is the appropriate general journal entry to record the decleration of a cash dividneds? A. Retained Earnings Cash B. Dividends payable Cash C. APIC Dividends payable D. R/E Dividends payable

D

Wolfgang 2012 2011 Net income 150,000 120,000 Cash dividends C/S 42,000 38,000 Maret price p.s C/S 15 14 Purchases of T/S 100,000 0 C/SH Equity 1,780,000 1,637,000 Avg. number common 104,000 95,000 shares outstanding WOlfgangs 2012 Earnings per share is preorpted as A. 1.08 per share B. 1.20 per share C. 1.30 per share D. 1.44 per share

D

Issued stock that is repurchased by the corporation but not retired is __________

treasury stock