Ch. 12
Which of the following statements is false regarding cash dividends? A. On the payment date, liabilities decrease and assets decrease B. On the declaration date a liability is created for the payment of cash dividends C. A journal entry is required on the date of record where liabilities are increased and stockholders' equity decreases D. The Cash Dividends account is closed to Retained Earnings at the end of the accounting period
A journal entry is required on the date of record where liabilities are increased and stockholders' equity decreases
Which of the following is considered an advantage of a partnership over a corporation? (check all that apply) A. There is no double taxation with a partnership .B. A partnership is less expensive to organize than a corporation .C. A partnership has the ability to raise more capital than a corporation D. All of the above are advantages
A partnership has the ability to raise more capital than a corporation There is no double taxation with a partnership
When a new partner is admitted by purchasing an existing partner's interest, which of the following is true? A. A journal entry is made to record the transfer of cash from the new partner to the existing partner B. Total assets of the partnership increases because cash is being added to the partnership C. Any existing partners must agree to admitting a new partner D. Total equity of the partnership increases because a new partner is admitted
Any existing partners must agree to admitting a new partner
When a partner has a debit balance in his/her capital account, this is called a(n) A. Contra asset account B. Equity subtraction C. Capital deficiency D. Partner withdrawal
Capital deficiency
When issuing no-par common stock, the entire amount received upon the issuance of the stock is credited to "Paid-In Capital in Excess of Par". True False
False
Assume Sheena Bright contributes to the partnership office furniture with an original cost of $10,000, accumulated depreciation of $4,000, and a current market value of $3,000. The office furniture would be recorded at a value of $6,000 for this owner contribution. True False
False *Must be market value
The portion of stockholders' equity that cannont be used for dividends is called A. Treasury Stock B. Preferred Stock C. Retained Earnings D. Legal Capital
Legal Capital
Which characteristic identifies a limited liability company? A. An LLC must have less than 100 members B. Members have limited personal liability C. The LLC must pay business income tax D. Members must elect separate managers to participate in the day-to-day management of the LLC
Members have limited personal liability
A corporation's own stock that it has previously issued and later reacquired is called _______ stock. A. Treasury B. Preferred C. Reacquired D. Cancelled
Treasury
A partnership balance sheet reports a separate capital account for each partner. True False
True
A small stock dividend increases Paid-In Capital but decreases Retained Earnings. True False
True
Any time a new partner is admitted into a partnership, the existing partnership dissolves and a new partnership is created. True False
True
Because preferred stock gives it owners some advantages over common stockholders, preferred stock is listed before common stock in the Paid-In Capital section of stockholders' equity on the balance sheet. True False
True
Which characteristic identifies a general partnership? A. The issuance of shares of stock to its owners B. Limited personal liability C. No business income tax D. Unlimited life
Unlimited life
A corporation with 100 or fewer stockholders that can elect to be taxed in the same way as a partnership is called a(n) A. S Corporation .B. Limited Liability Corporation C. Private Corporation D. C Corporation
S Corporation
The payment of cash dividends (check all that apply) A. Decreases assets .B. Increases Paid-In Capital C. Decreases Retained Earnings D. Decreases Paid-In Capital
Decreases assets Decreases Retained Earnings
A preferred stock dividend that has not been paid for the year and the preferred stock is cumulative is called a A. Deferred Dividend B. Noncumulative Dividend C. Dividend Payable D. Dividend in Arrears
Dividend in Arrears
A corporation can pay dividends to its shareholders in cash, stock, or other property. True Your answer is correct. False
False
Any remaining cash paid to the partners after all liabilities have been paid is based on the profit-and-loss-sharing ratio. True False
False
Articles of incorporation must be created by the state in which the partnership has its headquarters in order for a partnership to be a legal entity. True False
False
Generally Accepted Accounting Principles requires any large stock dividends to be accounted for based on the stock's market value at the time of distribution. True False
False
If a new partner is admitted to the partnership by contributing assets to the partnership, then the new partner's capital account will always equal the value of the assets he/she contributed. True False
False
If the assets of the partnership are sold at a gain, then the gain is allocated to each partner's capital account based on the balance of each partner's capital account. True False
False
Preferred stock where owners do not receive passed dividends from prior years is called cumulative preferred stock. True False
False
Which of the following statements are true regarding the issuance of a small stock dividend to common stockholders? (check all that apply) A. The Common Stock Dividend Distributable account is credited for the par value of the stock .B. The Stock Dividends account is debited on the distribution date based on the market value of the stock .C. The Paid-In Capital in Excess of Par account is credited for the issuance amount above the par value of the stock .D. The Stock Dividends account is debited on the distribution date based on the par value of the stock
The Common Stock Dividend Distributable account is credited for the par value of the stock The Stock Dividends account is debited on the distribution date based on the market value of the stock
Under what circumstance is it most likely for a new partner to offer a bonus to the existing partners when being admitted by directly contributing to the partnership? A. The existing partnership is considered an extremely successful business .B. The existing partners share the profits and losses equally C. The new partner is only able to contribute assets other than cash D. None of the above
The existing partnership is considered an extremely successful business
When a company announces a 2-for-1 stock split (check all that apply) A. There is no effect on assets, liabilities, or total stockholders' equity B. A journal entry is recorded where paid-in capital is increased and Retained Earnings is decreased. C. The par value of the stock is cut in half D. The market price of the stock is typically cut in half
There is no effect on assets, liabilities, or total stockholders' equity The par value of the stock is cut in half
On the declaration date of a stock dividend, the Stock Dividends Payable account is increased with a credit. True False
false
Which of the following lists the steps of liquidating a partnership in the correct order? A. 1) Pay cash to the partners based on their capital balances, 2) Pay all the liabilities of the partnership, 3) Sell the assets of the partnership B. 1) Sell the assets of the partnership, 2) Pay all partnership liabilities, 3) Pay the remaining cash to the partners .C. 1) Pay all the liabilities of the partnership, 2) Sell the assets of the partnership, 3) Pay the remaining cash to the partners D. 1) Pay cash to the partners based on their capital balances, 2) Sell the assets of the partnership, 3) Pay all the liabilities of the partnership
1) Sell the assets of the partnership, 2) Pay all partnership liabilities, 3) Pay the remaining cash to the partners
Treasury stock is considered a A. Contra asset account with a normal credit balance B. A paid-in capital account with a normal credit balance C. A contra equity account with a normal debit balance .D. Liability account with a normal credit balance
A contra equity account with a normal debit balance
Paid-in capital for a corporation includes Retained Earnings. True False
False
Which of the following describes a characteristic of a partnership? (check all that apply) A. Partnerships have an unlimited life B. Partners have unlimited personal liability .C. The partnership is taxed both at the partnership level and on each partner's individual tax return D. Every partner can bind the business to a contract within the scope of the partnership's regular business operations
Partners have unlimited personal liability Every partner can bind the business to a contract within the scope of the partnership's regular business operations
Which of the following financial statements is unique to a partnership that a sole proprietorship does not have? A. Statement of Partner Contributions B. Income Statement C. Statement of Retained Earnings D. Statement of Partners' Equity
Statement of Partners' Equity
Which of the following is true regarding the payment of stock dividends to common stockholders? Stock dividends have no effect on total stockholders' equity .B. Stock dividends can only be issued for preferred stock C. Stock dividends increase the amount of shares authorized for a company D. Stock dividends decrease assets and stockholders' equity
Stock dividends have no effect on total stockholders' equity
When a corporation issues stock for assets other than cash A. The transaction is recorded at either the market value of the stock issued or the market value of the assets received Your answer is correct.B. Total stockholders' equity remains unaffected C. The transaction is recorded at the par value of the stock issued because the market value of the assets received is usually undeterminable D. Retained Earnings is increased rather than Paid-In Capital
The transaction is recorded at either the market value of the stock issued or the market value of the assets received
When treasury stock is resold for less than its cost A. The Treasury Stock account is decreased with a debit B. Cash is decreased with a credit C. The Paid-In Capital from Treasury Stock Transactions account is decreased with a debit up to the amount of its credit balance D. Retained Earnings is always decreased with a debit
The Paid-In Capital from Treasury Stock Transactions account is decreased with a debit up to the amount of its credit balance
When treasury stock is resold for more than its cost A. Total stockholders' equity remains unaffected B. The Paid-In Capital from Treasury Stock Transactions account is increased with a credit C. Retained Earnings is increased D. The Common Stock account is increased with a credit
The Paid-In Capital from Treasury Stock Transactions account is increased with a credit
When a corporation issues common stock at a premium, the amount received above the par value of the stock is credited to A. A gain account B. The Retained Earnings account C. A revenue account D. The Paid-In Capital in Excess of Par account
The Paid-In Capital in Excess of Par account
Any new assets purchased by the partnership belong to the partnership and are jointly owned by each partner. True False
True
Companies may issue stock dividends rather than cash dividends because the company may want to reduce the market price of the stock to make it more attractive to investors by making it less expensive. True False
True
If a company has previously issued 1,000,000 shares of common stock and has 100,000 shares of common stock in its treasury, then the total outstanding common stock for the company is 900,000. True False
True
In a limited partnership the general partner has unlimited personal liability, but normally receives all excess profits after all the limited partners have received their share of income. True False
True
Preferred stockholders typically have the right to receive cash dividends before common stockholders. True False
True
Treasury Stock is located below Retained Earnings in the stockholders' equity section of the balance sheet, and is a reduction to stockholders' equity True False
True
When a partner has a capital deficiency upon liquidation, the partner must contribute cash to the partnership in the amount of the deficiency. True False
True
Whenever a company issues stock, assets increase and stockholders' equity increases. True False
True
if a new partner is considered so valuable to the partnership by the existing partners, then the existing partners may agree to give the new partner a bonus when being admitted to the partnership. True False
True