ACCT 302 Stockholder's Equity

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? a. Authorized shares b. Issued shares c. Unissued shares d. Outstanding shares

a

A dividend which is a return to stockholders of a portion of their original investments is a a. property dividend. b. liability dividend. c. participating dividend. d. liquidating dividend.

d

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as a. an increase in current liabilities. b. an increase in stockholders' equity. c. an increase in current liabilities for the current portion and long-term liabilities for the longterm portion. d. a footnote.

d

According to the FASB, redeemable preferred stock should be a. included as a contra item in stockholders' equity. b. included with common stock. c. included as a liability. d. included in stockholders' equity.

c

Additional paid-in capital is not affected by the issuance of: a. no par with a stated value stock. b. preferred stock. c. no-par stock. d. par value stock.

c

Common stock dividends distributable is reported on the balance sheet as: a. a reduction of total stockholders' equity. b. an addition to additional paid-in capital. c. an addition to common stock. d. a current liability.

c

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

c

Dividends are not paid on a. noncumulative preferred stock. b. nonparticipating preferred stock. c. treasury common stock. d. cumulative preferred stock.

c

How should cumulative preferred dividends in arrears be shown in a corporation's balance sheet? a. Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in long-term liabilities for the balance b. Increase in stockholders' equity c. Note disclosure d. Increase in current liabilities

c

Stock issued in non-cash transactions should be recorded at the: a. Fair market value of the property received. b. Par value of the stock issued. c. Fair market value of the stock issued or the property received, whichever is more readily determinable. d. Fair market value of the stock issued.

c

Which of the following statements related to dividends is incorrect? a. Dividends must be declared by the Board of Directors. b. Distributions to owners must be in compliance with the state laws. c. Dividends must be paid in the period declared. d. Before declaring a dividend, management must consider availability of funds to pay the dividend.

c

A corporation declared a dividend, a portion of which was liquidating. How would this distribution affect each of the following? Additional Paid-in Capital / Retained Earnings a. Decrease Decrease b. No effect Decrease c. No effect No effect d. Decrease No effect

a

The residual interest in a corporation belongs to the a. preferred stockholders. b. creditors. c. common stockholders. d. management.

c

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

c

A primary source of stockholders' equity is a. contributions by stockholders. b. income retained by the corporation. c. appropriated retained earnings. d. both income retained by the corporation and contributions by stockholders.

d

The cumulative feature of preferred stock a. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock. b. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends. c. limits the amount of cumulative dividends to the par value of the preferred stock. d. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

d

What effect does the issuance of a 2-for-1 stock split have on each of the following? Par Value per Share / Retained Earnings a. No effect No effect b. Increase No effect c. Decrease Decrease d. Decrease No effect

d

Which of the following features of preferred stock makes it more like a debt than an equity instrument? a. Redeemable b. Noncumulative c. Participating d. Voting

a

Cash dividends are paid on the basis of the number of shares a. issued. b. outstanding. c. outstanding less the number of treasury shares. d. authorized.

b

Noncumulative preferred dividends in arrears a. are disclosed as a liability until paid. b. are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend. c. are not paid or disclosed. d. must be paid before any other cash dividends can be distributed.

c

Stockholders' equity is generally classified into two major categories: a. appropriated capital and retained earnings. b. retained earnings and unappropriated capital. c. earned capital and contributed capital. d. contributed capital and appropriated capital.

c

The balance in Common Stock Dividend Distributable should be reported as a(n) a. contra current asset. b. deduction from common stock issued. c. addition to capital stock. d. current liability.

c

The preemptive right of a common stockholder is the right to a. share proportionately in corporate assets upon liquidation. b. receive cash dividends before they are distributed to preferred stockholders. c. share proportionately in any new issues of stock of the same class. d. exclude preferred stockholders from voting rights.

c

All of the following statements are true regarding preferred stock except: a. a preference as to dividends assures the payment of dividends. b. companies usually issue preferred stock with a par value. c. the dividend preference for preferred stock is expressed as a percentage of the par value. d. a company often issues preferred stock instead of debt, because of a high debt-to-equity ratio.

a

Direct costs incurred to sell stock such as underwriting costs should be accounted for as 1. a reduction of additional paid-in capital. 2. an expense of the period in which the stock is issued. 3. an intangible asset. a. 1 b. 2 c. 3 d. 1 or 3

a

Which of the following is not a legal restriction related to profit distributions by a corporation? a. The amount distributed in any one year can never exceed the net income reported for that year. b. Profit distributions must be formally approved by the board of directors. c. Dividends must be in full agreement with the capital stock contracts as to preferences and participation. d. The amount distributed to owners must be in compliance with the state laws governing corporations.

a

Which one of the following is not a right of common stockholders? a. To share proportionately in all management decisions. b. To share proportionately in corporate assets upon liquidation. c. To share proportionately in any new issues of stock of the same class. d. To share proportionately in profits and losses.

a

A corporation was organized in January 2018 with authorized capital of $10 par value common stock. On February 1, 2018, shares were issued at par for cash. On March 1, 2018, the corporation's attorney accepted 7200 shares of common stock in settlement for legal services with a fair value of $93000. Additional paid-in capital would increase on February 1, 2018 / March 1, 2018 a. No No b. No Yes c. Yes Yes d. Yes No

b

At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the a. declaration of a stock split. b. purchase of treasury stock. c. payment in full of subscribed stock. d. declaration of a stock dividend.

b

Characteristics of the corporate form of organization include all of the following except: a. facility for attracting and accumulating large amounts of capital. b. unlimited liability of stockholders. c. variety of ownership interests. d. capital stock or share system.

b

All of the following decrease Retained Earnings, except: a. Stock dividends. b. Property dividends. c. Cash dividends. d. Stock splits.

d

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

d