quiz 7

A stock split will a. have no effect on retained earnings. b. increase total paid-in capital. c. increase the total par value of the stock. d. have no effect on the par value per share of stock

a. have no effect on retained earnings.

Which of the following is not a right or preference associated with preferred stock? a. The right to vote. b. First claim to dividends. c. Preference to corporate assets in case of liquidation. d. To receive dividends in arrears before common stockholders receive dividends.

a. The right to vote.

The amount of stock that may be issued according to the corporation's charter is referred to as the a. authorized stock. b. issued stock. c. unissued stock. d. outstanding stock.

a. authorized stock.

The date on which a cash dividend becomes a binding legal obligation is on the a. declaration date. b. date of record. c. payment date. d. last day of the fiscal year end.

a. declaration date.

With an interest-bearing note, the amount of assets received upon issuance of the note is generally a. equal to the note's face value. b. greater than the note's face value. c. less than the note's face value. d. equal to the note's maturity value.

a. equal to the note's face value.

Johnson Company issued 900 shares of no-par common stock for $15,300. Which of the following journal entries would be made if the stock has no stated value? A) DR Cash 15,300 ; CR Common Stock - No-Par Value 15,300 B) DR Cash 15,300 ; CR Common Stock - No-Par Value 900, Paid-in Capital in Excess of Par 14,400 C) DR Cash 15,300 ; CR Common Stock - No-Par Value 900, Paid-in Capital in Excess of Stated Value 14,400 D) DR Common Stock - No-Par Value 15,300, CR Cash 15,300

A) DR Cash 15,300 ; CR Common Stock - No-Par Value 15,300

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30? A) DR Interest Expense 9,000 ; CR Interest Payable 9,000 B) DR Interest Expense 9,000 ; CR Cash 9,000 C) DR Interest Payable 9,000 ; CR Cash 9,000 D) DR Interest Payable 9,000 ; CR Interest Expense 9,000

A) DR Interest Expense 9,000 ; Cr Interest Payable 9,000

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is A) DR Interest Expense 6,000, Cash 194,000 ; CR Notes Payable 200,000 B) DR Cash 200,000 ; CR Notes Payable 200,000 C) DR Cash 200,000, Interest Expense 6,000 ; CR Notes Payable 206,000 D) DR Cash 200,000, Interest Expense 6,000 ; CR Notes Payable 200,000, Interest Payable 6,000

B) DR Cash 200,000 ; Cr Notes Payable 200,000

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is A) DR Interest Expense 13,500, Cash 286,500 ; CR Notes Payable 300,000 B) DR Cash 300,000 ; CR Notes Payable 300,000 C) DR Cash 300,000, Interest Expense 13,500 ; CR Notes Payable 313,500 D) DR Cash 300,000, Interest Expense 13,500 ; CR Notes Payable 300,000, Interest Payable 13,500

B) DR Cash 300,000 ; Cr Notes Payable 300,000

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. What entry will Drake Builders Co make to pay off the note and interest at maturity assuming that interest has been accrued to June 30? A) DR Notes Payable 206,000 ; CR Cash 206,000 B) DR Notes Payable 200,000, Interest Payable 6,000 ; CR Cash 206,000 C) DR Interest Expense 6,000, Notes Payable 200,000 ; CR Cash 206,000 D) DR Interest Payable 3,000, Notes Payable 200,000, Interest Expense 3,000 ; CR Cash 206,000

B) DR Notes Payable 200,000, Interest Payable 6,000 ; CR Cash 206,000

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What entry will Sadowski Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30? A) DR Notes Payable 313,500 ; CR Cash 313,500 B) DR Notes Payable 300,000, Interest Payable 13,500 ; CR Cash 313,500 C) DR Interest Expense 13,500, Notes Payable 300,000 ; CR Cash 313,500 D) DR Interest Payable 9,000, Notes Payable 300,000, Interest Expense 4,500 ; CR Cash 313,500

B) DR Notes Payable 300,000, Interest Payable 13,500 ; Cr Cash 313,500

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30? A) DR Interest Expense 6,000 ; CR Interest Payable 6,000 B) DR Interest Expense 6,000 ; CR Cash 6,000 C) DR Interest Expense 3,000 ; CR Interest Payable 3,000 D) DR Interest Payable 3,000 ; CR Interest Expense 3,000

C) DR Interest Expense 3,000 ; Cr Interest Payable 3,000

Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 5,000 shares of common stock to pay its recent attorney's bill of $25,000 for legal services on a land access dispute, which of the following would be the best journal entry for Retro to record? A) DR Legal Expense 5,000 ; CR Common Stock 5,000 B) DR Legal Expense 25,000 ; CR Common Stock 25,000 C_ DR Legal Expense 25,000 ; CR Common Stock 5,000, Paid-in Capital in Excess of Stated Value - Common 20,000 D) DR Legal Expense 25,000 ; CR Common Stock 5,000, Paid-in Capital in Excess of Par value - Common 20,000

C_ DR Legal Expense 25,000 ; CR Common Stock 5,000, Paid-in Capital in Excess of Stated Value - Common 20,000

S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $15,000 by issuing 8,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $1.80 per share. Given this information, the best journal entry for E. Corp. to record for this transaction is A) DR Legal Expense 14,400 ; CR Common Stock 14,400 B) DR Legal Expense 15,000 ; CR Common Stock 15,000 C) DR Legal Expense 15,000 ; CR Common Stock 8,000, Paid-in Capital in Excess of Par - Common 7,000 D) DR Legal Expense 14,400 ; CR Common Stock 8,000, Paid-in Capital in Excess of Par - Common 6,400

D) DR Legal Expense 14,400 ; CR Common Stock 8,000, Paid-in Capital in Excess of Par - Common 6,400

Most companies pay current liabilities a. out of current assets. b. by issuing interest-bearing notes payable. c. by issuing stock. d. by creating long-term liabilities.

a. out of current assets.

Failure to record a liability will probably a. result in an overstated net income. b. result in overstated total liabilities and owner's equity. c. have no effect on net income. d. result in understated total assets.

a. result in an overstated net income.

A current liability is a debt that can reasonably be expected to be paid a. within one year, or the operating cycle, whichever is longer. b. between 6 months and 18 months. c. out of currently recognized revenues. d. out of cash currently on hand.

a. within one year, or the operating cycle, whichever is longer.

Which of the following statements reflects the transferability of ownership rights in a corporation? a. If a stockholder decides to transfer ownership, he must transfer all of his shares. b. A stockholder may dispose of part or all of his shares. c. A stockholder must obtain permission of the board of directors before selling shares. d. A stockholder must obtain permission from at least three other stockholders before selling shares.

b. A stockholder may dispose of part or all of his shares.

Tomlinson Packaging Corporation began business in 2018 by issuing 30,000 shares of $5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2019 balance sheet, Tomlinson Packaging would report a. Common Stock of $300,000. b. Common Stock of $150,000. c. Common Stock of $240,000. d. Paid-in Capital of $200,000.

b. Common Stock of $150,000.

Holden Packaging Corporation began business in 2018 by issuing 80,000 shares of $5 par common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2019 balance sheet, Holden Packaging would report a. Common Stock of $800,000. b. Common Stock of $400,000. c. Common Stock of $640,000. d. Paid-In Capital of $600,000.

b. Common Stock of $400,000.

Stock dividends and stock splits have the following effects on retained earnings: Stock Dividends a. Increase Stock Splits, No change Stock Dividends b. No change Stock Splits, Decrease Stock Dividends c. Decrease Stock Splits, Decrease Stock Dividends d. No change Stock Splits, No change Stock Dividends

b. No change Stock Splits, Decrease Stock Dividends

Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will consist of a debit to Cash for $3,000,000 and a credit or credits to a. Preferred Stock for $3,000,000. b. Preferred Stock for $2,500,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $500,000. c. Preferred Stock for $2,500,000 and Retained Earnings for $500,000. d. Paid-in Capital from Preferred Stock for $3,000,000.

b. Preferred Stock for $2,500,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $500,000.

Which one of the following is not an ownership right of a stockholder in a corporation? a. To vote in the election of directors. b. To declare dividends on the common stock. c. To share in assets upon liquidation. d. To share in corporate earnings.

b. To declare dividends on the common stock.

The amount of sales tax collected by a retail store when making sales is a. a. miscellaneous revenue for the store. b. a current liability. c. not recorded because it is a tax paid by the customer. d. recorded as an operating expense.

b. a current liability.

Interest expense on an interest-bearing note is a. always equal to zero. b. accrued over the life of the note. c. only recorded at the time the note is issued. d. only recorded at maturity when the note is paid.

b. accrued over the life of the note.

A company would not acquire treasury stock a. in order to reissue shares to officers. b. as an asset investment. c. in order to increase trading of the company's stock. d. to have additional shares available to use in acquisitions of other companies.

b. as an asset investment.

The effect of a stock dividend is to a. decrease total assets and stockholders' equity. b. change the composition of stockholders' equity. c. decrease total assets and total liabilities. d. increase the book value per share of common stock.

b. change the composition of stockholders' equity.

A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a a. debit to Sales Taxes Expense for $16. b. credit to Sales Taxes Payable for $16. c. debit to Sales Revenue for $176. d. debit to Cash for $160.

b. credit to Sales Taxes Payable for $16.

The acquisition of treasury stock by a corporation a. increases its total assets and total stockholders' equity. b. decreases its total assets and total stockholders' equity. c. has no effect on total assets and total stockholders' equity. d. requires that a gain or loss be recognized on the income statement.

b. decreases its total assets and total stockholders' equity.

Treasury shares plus outstanding shares equal a. authorized stock. b. issued stock. c. unissued stock. d. distributable stock

b. issued stock.

A corporation has the following account balances: Common Stock, $1 par value, $80,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the a. legal capital is $2,780,000. b. number of shares issued is 80,000. c. number of shares outstanding is 2,780,000. d. average price per share issued is $3.48.

b. number of shares issued is 80,000.

Sizemore, Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2019. If the board of directors declares a $30,000 dividend, the a. preferred stockholders will receive 1/10th of what the common stockholders will receive. b. preferred stockholders will receive the entire $30,000. c. $30,000 will be held as restricted retained earnings and paid out at some future date. d. preferred stockholders will receive $15,000 and the common stockholders will receive $15,000.

b. preferred stockholders will receive the entire $30,000.

If a stockholder cannot attend a stockholders' meeting, he may delegate his voting rights by means of a(n) a. absentee ballot. b. proxy. c. certified letter. d. telegram.

b. proxy.

The term residual claim refers to a stockholders' right to a. receive dividends. b. share in assets upon liquidation. c. acquire additional shares when offered. d. exercise a proxy vote.

b. share in assets upon liquidation.

A disadvantage of the corporate form of organization is a. professional management. b. tax treatment. c. ease of transfer of ownership. d. lack of mutual agency.

b. tax treatment.

Stockholders of a corporation directly elect a. the president of the corporation. b. the board of directors. c. the treasurer of the corporation. d. all of the employees of the corporation.

b. the board of directors.

If no-par stock is issued without a stated value, then a. the par value is automatically $1 per share. b. the entire proceeds are considered to be legal ("paid in") capital. c. there is no legal capital. d. the corporation is automatically in violation of its state charter

b. the entire proceeds are considered to be legal ("paid in") capital.

When stock is issued in exchange for a noncash asset, the value recorded for the shares issued is best determined by a. the book value of the noncash asset. b. the market value of the shares. c. the par value of the shares. d. the contributed capital of the shares

b. the market value of the shares.

Brewer Inc. has 5,000 shares of 8%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2019, and December 31, 2018. The board of directors declared and paid a $15,000 dividend in 2018. In 2019, $60,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2019? a. $35,000. b. $30,000. c. $25,000. d. $20,000

c. $25,000.

Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2018, West declared and paid dividends of $4,000. In 2019, West declared and paid dividends of $12,000. How much of the 2019 dividend was distributed to preferred shareholders? a. $8,000. b. $14,000. c. $6,000. d. None of these answer choices are correct.

c. $6,000.

Alt Corp. issues 3,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to: a. Common Stock $30,000 and Paid-in Capital in Excess of Stated Value $12,000. b. Common Stock $28,000. c. Common Stock $30,000 and Paid-in Capital in Excess of Par Value $12,000. d. Common Stock $30,000 and Retained Earnings $12,000.

c. Common Stock $30,000 and Paid-in Capital in Excess of Par Value $12,000.

The effect of the declaration of a cash dividend by the board of directors is to a. Increase stockholders' equity, Decrease assets b. Increase assets, Decrease liabilities c. Increase liabilities, Decrease stockholders' equity d. Increase liabilities, Decrease assets

c. Increase liabilities, Decrease stockholders' equity

If Norben Company issues 4,000 shares of $5 par value common stock for $140,000, the account a. Common Stock will be credited for $140,000. b. Paid-in Capital in Excess of Par Value will be credited for $20,000. c. Paid-in Capital in Excess of Par Value will be credited for $120,000. d. Cash will be debited for $120,000.

c. Paid-in Capital in Excess of Par Value will be credited for $120,000.

If common stock is issued for an amount greater than par value, the excess should be credited to a. Cash. b. Retained Earnings. c. Paid-in Capital in Excess of Par Value. d. Legal Capital.

c. Paid-in Capital in Excess of Par Value.

Which of the following statements about dividends is not accurate? a. Dividends are generally reported quarterly as a dollar amount per share. b. Low dividends may mean high stock returns. c. The board of directors is obligated to declare dividends. d. Payment of dividends from legal capital is illegal in many states.

c. The board of directors is obligated to declare dividends.

Sales taxes collected by a retailer are recorded by a. crediting Sales Tax Revenue. b. debiting Sales Tax Expense. c. crediting Sales Taxes Payable. d. debiting Sales Taxes Payable

c. crediting Sales Taxes Payable.

As interest is recorded on an interest-bearing note, the Interest Expense account is a. increased; the Notes Payable account is increased. b. increased; the Notes Payable account is decreased. c. increased; the Interest Payable account is increased. d. decreased; the Interest Payable account is increased.

c. increased; the Interest Payable account is increased.

Liabilities are classified on the balance sheet as current or a. deferred. b. unearned. c. long-term. d. accrued.

c. long-term.

Unearned Rent Revenue is a. a contra account to Rent Revenue. b. a revenue account. c. reported as a current liability. d. debited when rent is received in advance

c. reported as a current liability.

Under the corporate form of business organization a. a stockholder is personally liable for the debts of the corporation. b. stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. c. the corporation's life is stipulated in its charter. d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.

c. the corporation's life is stipulated in its charter.

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $252,000, what is the amount of the sales taxes owed to the taxing agency? a. $240,000 b. $252,000 c. $12,600 d. $12,000

d. $12,000

The interest charged on a $250,000 note payable, at the rate of 6%, on a 60-day note would be a. $15,000. b. $7,500. c. $3,750. d. $2,500.

d. $2,500.

Denson, Inc. has 10,000 shares of 7%, $100 par value, non-cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2019. There were no dividends declared in 2018. The board of directors declares and pays a $120,000 dividend in 2019. What is the amount of dividends received by the common stockholders in 201? a. $0. b. $70,000. c. $120,000. d. $50,000

d. $50,000

The following data is available for BOX Corporation at December 31, 2019: Common stock, par $10 (authorized 30,000 shares) $250,000 Treasury stock (at cost $15 per share) $ 1,200 Based on the data, how many shares of common stock are outstanding? a. 30,000. b. 25,000. c. 29,920. d. 24,920.

d. 24,920.

On January 1, Edmiston Corporation had 1,600,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event, a. Edmiston's Paid-in Capital in Excess of Par Value account increased $800,000. b. Edmiston's total stockholders' equity was unaffected. c. Edmiston's Stock Dividends account increased $2,400,000. d. All of these answer choices are correct.

d. All of these answer choices are correct.

Which of the following is the appropriate general journal entry to record the declaration of cash dividends? a. DR Cash Dividends ; CR Cash b. DR Dividends Payable ; CR Cash c. DR Paid-in Capital ; CR Dividends Payable d. DR Cash Dividends ; CR Dividends Payable

d. DR Cash Dividends ; CR Dividends Payable

Identify the effect the declaration of a stock dividend has on the par value per share and book value per share. Par Value per Share Book Value per Share a. Increase, Decrease b. No effect, Increase c. Decrease, Decrease d. No effect, Decrease

d. No effect, Decrease

Which of the following show the proper effect of a stock split and a stock dividend? Item, Stock Split, Stock Dividend a. Total paid-in capital, Increase, Increase b. Total retained earnings, Decrease, Decrease c. Total par value (common), Decrease, Increase d. Par value per share, Decrease, No change

d. Par value per share, Decrease, No change

Treasury stock is a. stock issued by the U.S. Treasury Department. b. stock purchased by a corporation and held as an investment in its treasury. c. corporate stock issued by the treasurer of a company. d. a corporation's own stock, which has been reacquired and held for future use.

d. a corporation's own stock, which has been reacquired and held for future use.

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to a. decrease total liabilities and stockholders' equity. b. increase total expenses and total liabilities. c. increase total assets and stockholders' equity. d. decrease total assets and stockholders' equity

d. decrease total assets and stockholders' equity

Treasury stock should be reported in the financial statements of a corporation as a(n) a. investment. b. liability. c. deduction from total paid-in capital. d. deduction from total paid-in capital and retained earnings.

d. deduction from total paid-in capital and retained earnings.

Very often, failure to record a liability means failure to record a(n) a. revenue. b. asset conversion. c. footnote. d. expense.

d. expense.