DeRoy- ACC 212- Multiple Choice
A debit in retained earnings is a ..... A credit in retained earnings is a .....
- loss - increase
A 3-for-1 common stock split does what?
-Increase the number of shares -decrease par value
What makes up the stockholder's equity section on a balance sheet?
-Retained earnings -paid in capital -capital stock
what are the disadvantages of a corporation
-government regulations -additional taxes
what are the advantages of a corporation
-separate legal existence -limited liability of stockholders -transferable ownership rights -ability to acquire capital -continuous life -corporate management
Under the equity method, the stock investments account is increased when the A. investee company reports net income B. investee company reports a loss C. investee company pays a dividend D. stock investment is sold at a gain
A. Investee company reports net income
Trading securities are classified as A. current or short-term investments only B. either short-term or long-term investments C. long-term investments only D. current assets only
A. current or short-term investments only
If 10% of the common stock of an investee company is purchased, the appropriate method of accounting is A. the cost method B. the preparation of consolidated financial statements C. the equity method D. determined by agreement with owners of the remaining stock
A. the cost method
If no-par stock is issued without a stated value, then A. the par value is automatically $1 B. The entire proceeds are considered legal capital C. There is no legal capital D. The corporation is automatically in violation of the state charter
B. The entire proceeds are considered to be legal capital
In accounting for debt investments, entries are made for each of the following except the A. acquisition B. amortization of any discount or premium C. interest revenue D. sale
B. amortization of any discount or premium
Which one of the following is not necessary in order for a corporation to pay a cash dividend A. adequate cash B. approval of stockholders C. declaration of dividends by the board D. retained earnings
B. approval of stockholders
Available for sale securities are classified as A. short-term investments only B. either short-term or long-term investments C. long-term investments only D. current assets only
B. either short-term or long-term investments
The two ways that a corporation can be classified by purpose are A. general and limited B. profit and not-for-profit C. state and federal D. publicly held and privately held
B. profit and not-for-profit
2000 shares of 5%, $10 par value, cumulative preferred stock. What is the annual dividend that needs to be paid to the preferred stockholders A. $5 per share B. $10,000 in total C. $1,000 in total D. $0.05 per share
C. $1000 in total
At the time of the acquisition of a debt investment A. no journal entry is required B. The stock investment account is debited when bonds are purchased C. the historical cost principle applies D. the investment account is Credited for its cost+brokerage fees
C. the historical cost principle applies
When you sell a debt investment you..
Credit: debt investment Debit: cash
the two ways a corporation can be classified by ownership are A. general and limited B. state and federal C. profit and not-for-profit D. publicly held and privately held
D. publicly held and privately held
The dividends are closed, so what are they closed to? Regular dividends are declared out of what? A. Paid in capital of excess B. Treasury stock C. common stock D. retained earnings
D. retained earnings
Under the equity method, the investor records dividends received by crediting A. dividend revenue B. revenue from investment C. investment income D. stock investment
D. stock investments
Corporation invest in other companies for all of the following reasons except.. A. to house excess cash B. to generate earnings C. to meet strategic goals D. to increase trading of the other companies stock
D. to increase the trading of the other companies stock
T/F A 3-for-1 common stock split will increase total stockholder's equity but reduce the par or stated value per share of common stock
False
T/F A corporation incurs income tax expense only if it pays dividends to stockholders
False
T/F A corporation is not an entity which is separate and distinct from its owners
False
T/F If a corporation pays taxes on income, then Shareholder's will not have to pay taxes on the dividends received
False
T/F The stockholder's equity section of a corporation's balance sheet consists of paid-in capital, Retained earnings, and drawings
False
T/F When debt investments are sold, the gain or loss is the difference between the net proceeds and the fair value
False
T/F dividends received on stock investment of less than 20% should be credited to the stock investments account
False
T/F each stockholder has a separate capital account in the stockholder's equity section of the balance sheet
False
T/F in accounting for stock investments of less than 20%, the equity method is used
False
Treasury stock reduces what?
Stockholder's equity
T/F A 10% stock dividend will increase the number of shares outstanding, but the par value will stay the same
True
T/F Dividends are declared out of retained earnings
True
T/F Dividends may be declared and paid in cash or stock
True
T/F Preferred stockholders generally do not have the right to vote for the board of directors
True
T/F Treasury stock is a contra stockholders' equity account
True
T/F When debt investments are sold, the gain or loss is the difference between the net proceeds and the cost
True
T/F a debit balance in the Retained Earnings account is identified as a deficit
True
T/F a major difference among corporations, proprietors, and partnerships is income tax expense
True
T/F according to historical cost principle, brokerage fees should be added to cost of investment
True
T/F cash dividends are not a liability of the corporation until declared by the board of directors
True
T/F the number of common shares outstanding can never be greater than the number of shares issued
True
Stockholders of a corporation directly elect
board of directors
with the cost method when you receive dividends you credit....
dividend revenue
T/F an accounting journal entry should be made to record the total value of shares authorized
false
