Accounting 15-16-23

With regards to dividends, an entry is not made on the a. date of declaration. b. date of record. c. date of payment. d. An entry is made on all of these dates.

b. date of record.

The primary purpose of the statement of cash flows is to provide information a. about the operating, investing, and financing activities of an entity during a period. b. that is useful in assessing cash flow prospects. c. about the cash receipts and cash payments of an entity during a period. d. about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.

c. about the cash receipts and cash payments of an entity during a period.

Berry Corporation has 50,000 shares of $10 par common stock authorized. The following transactions took place during 2010, the first year of the corporation's existence: Sold 5,000 shares of common stock for $18 per share. Issued 5,000 shares of common stock in exchange for a patent valued at $100,000. At the end of the Berry's first year, total paid-in capital amounted to a. $40,000. b. $90,000. c. $100,000. d. $190,000.

d. $190,000.

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

d. earned capital and contributed capital.

Which dividends do not reduce stockholders' equity? a. Cash dividends b. Stock dividends c. Property dividends d. Liquidating dividends

b. Stock dividends

) When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to a. additional paid-in capital from stock warrants. b. retained earnings. c. a liability account. d. premium on bonds payable.

d. premium on bonds payable.

A statement of cash flows typically would not disclose the effects of a. capital stock issued at an amount greater than par value. b. stock dividends declared. c. cash dividends paid. d. a purchase and immediate retirement of treasury stock.

b. stock dividends declared.

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 No effect d. Decrease Decrease

c. Decrease No effect

At the beginning of 2011, Hamilton Company had retained earnings of $150,000. During the year Hamilton reported net income of $75,000, sold treasury stock at a "gain" of $27,000, declared a cash dividend of $45,000, and declared and issued a small stock dividend of 1,500 shares ($10 par value) when the market value of the stock was $30 per share. The amount of retained earnings available for dividends at the end of 2011 was: a. $184,500. b. $162,000. c. $157,500. d. $135,000.

d. $135,000.

) How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the market value of the shares exceeds the par value of the stock? Additional Common Stock Paid-in Capital a. No effect No effect b. No effect Increase c. Increase No effect d. Increase Increase

d. Increase Increase

Treasury shares are a. shares held as an investment by the treasurer of the corporation. b. shares held as an investment of the corporation. c. issued and outstanding shares. d. issued but not outstanding shares.

d. issued but not outstanding shares.

The date on which total compensation expense is computed in a stock option plan is the date a. of grant. b. of exercise. c. that the market price coincides with the option price. c. that the market price exceeds the option price.

a. of grant.

When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities? a. A change in interest payable b. A change in dividends payable c. A change in income taxes payable d. All of these are adjustments.

b. A change in dividends payable

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

c. outstanding.

When computing diluted earnings per share, convertible bonds are a. ignored. b. assumed converted whether they are dilutive or antidilutive. c. assumed converted only if they are antidilutive. d. assumed converted only if they are dilutive.

d. assumed converted only if they are dilutive.

A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferably a. zero. b. calculated by the excess of the proceeds over the face amount of the bonds. c. equal to the market value of the warrants. d. based on the relative market values of the two securities involved.

d. based on the relative market values of the two securities involved.

Morgan Corporation had two issues of securities outstanding: common stock and an 8% convertible bond issue in the face amount of $16,000,000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive forty shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2010, the holders of $2,400,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $1,000,000. In applying the book value method, what amount should Morgan credit to the account "paid-in capital in excess of par," as a result of this conversion? a. $330,000. b. $160,000. c. $1,440,000. d. $720,000.

a. $330,000.

The stockholders' equity section of Gunkel Corporation as of December 31, 2010, was as follows: Common stock, par value $2; authorized 20,000 shares; issued and outstanding 10,000 shares $ 20,000 Paid-in capital in excess of par 30,000 Retained earnings 75,000 $125,000 On March 1, 2011, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2011, the fair market value of the stock was $6 per share. For the two months ended February 28, 2011, Gunkel sustained a net loss of $10,000. What amount should Gunkel report as retained earnings as of March 1, 2011? a. $56,000. b. $62,000. c. $66,000. d. $72,000.

a. $56,000.

Presented below is information related to Hale Corporation: Common Stock, $1 par $4,300,000 Paid-in Capital in Excess of Par—Common Stock 550,000 Preferred 8 1/2% Stock, $50 par 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock 400,000 Retained Earnings 1,500,000 Treasury Common Stock (at cost) 150,000 The total stockholders' equity of Hale Corporation is a. $8,600,000. b. $8,750,000. c. $7,100,000. d. $7,250,000.

a. $8,600,000.

How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position? a. Note disclosure b. Increase in stockholders' equity c. Increase in current liabilities d. 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

a. Note disclosure

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. authorized shares

In reporting extraordinary transactions on a statement of cash flows (indirect method), the a. gross amount of an extraordinary gain should be deducted from net income. b. net of tax amount of an extraordinary gain should be added to net income. c. net of tax amount of an extraordinary gain should be deducted from net income. d. gross amount of an extraordinary gain should be added to net income.

a. gross amount of an extraordinary gain should be deducted from net income.

On July 1, 2010, Ellison Company granted Sam Wine, an employee, an option to buy 400 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $1,800. Wine exercised his option on October 1, 2010 and sold his 400 shares on December 1, 2010. Quoted market prices of Ellison Co. stock in 2010 were: July 1 $30 per share October 1 $36 per share December 1 $40 per share The service period is for three years beginning January 1, 2010. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense in 2010 in the amount of a. $1,800. b. $600. c. $450. d. $0.

b. $600.

When applying the treasury stock method for diluted earnings per share, the market price of the common stock used for the repurchase is the a. price at the end of the year. b. average market price. c. price at the beginning of the year. d. none of these.

b. average market price.

The major difference between convertible debt and stock warrants is that upon exercise of the warrants a. the stock is held by the company for a defined period of time before they are issued to the warrant holder. b. the holder has to pay a certain amount of cash to obtain the shares. c. the stock involved is restricted and can only be sold by the recipient after a set period of time. d. no paid-in capital in excess of par can be a part of the transaction.

b. the holder has to pay a certain amount of cash to obtain the shares.

Luther Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2011, and December 31, 2010. The board of directors declared and paid $5,000 in total dividends in 2010. In 2011, $24,000 of total dividends are declared and paid across preferred and common shareholders. What are the dividends received by the preferred stockholders in 2011? a. $17,000 b. $12,000 c. $ 7,000 d. $ 6,000

c. $ 7,000

During 2010, Gordon Company issued at 104 three hundred, $1,000 bonds due in ten years. One detachable stock warrant entitling the holder to purchase 15 shares of Gordon's common stock was attached to each bond. At the date of issuance, the market value of the bonds, without the stock warrants, was quoted at 96. The market value of each detachable warrant was quoted at $40. What amount, if any, of the proceeds from the issuance should be accounted for as part of Gordon's stockholders' equity? a. $0 b. $12,000 c. $12,480 d. $11,856

c. $12,480

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities? a. Increase in accounts receivable. b. Gain on sale of land. c. Amortization of patent. d. All of the above are added to net income to arrive at cash flow from operating activities.

c. Amortization of patent.

At its date of incorporation, Sauder, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, Sauder acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on the following accounts? Retained Earnings Additional Paid-in Capital a. Decrease Decrease b. No effect Decrease c. Decrease No effect d. No effect No effect

c. Decrease No effect

Xanthe Corporation had the following transactions occur in the current year: 1. Cash sale of merchandise inventory. 2. Sale of delivery truck at book value. 3. Sale of Xanthe common stock for cash. 4. Issuance of a note payable to a bank for cash. 5. Sale of a security held as an available-for-sale investment. 6. Collection of loan receivable. How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? a. Five items b. Four items c. Three items d. Two items

c. Three items

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

c. a claim against a portion of the total assets of an enterprise.

Corporations issue convertible debt for two main reasons. One is the desire to raise equity capital that, assuming conversion, will arise when the original debt is converted. The other is a. the ease with which convertible debt is sold even if the company has a poor credit rating. b. the fact that equity capital has issue costs that convertible debt does not. c. that many corporations can obtain financing at lower rates. d. that convertible bonds will always sell at a premium

c. that many corporations can obtain financing at lower rates.

Pember Corporation started business in 2005 by issuing 200,000 shares of $20 par common stock for $36 each. In 2010, 20,000 of these shares were purchased for $52 per share by Pember Corporation and held as treasury stock. On June 15, 2011, these 20,000 shares were exchanged for a piece of property that had an assessed value of $810,000. Perber's stock is actively traded and had a market price of $60 on June 15, 2011. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events would be a. $800,000. b. $480,000. c. $390,000. d. $160,000.

d. $160,000.

Melvern's Corporation has an investment in 5,000 shares of Wallace Company common stock with a cost of $218,000. These shares are used in a property dividend to stockholders of Melvern's. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to stockholders of record on June 15. The market value per share of Wallace stock is $63 on May 25, $66 on June 15, and $68 on July 31. The net effect of this property dividend on retained earnings is a reduction of a. $340,000. b. $330,000. c. $315,000. d. $218,000.

d. $218,000.

Hanson Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2011. The preferred stock is convertible into 40,000 shares of common stock. During 2011, Hanson paid dividends of $1.20 per share on the common stock and $4 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2011 was $800,000 and the income tax rate was 30%. Basic earnings per share for 2011 is (rounded to the nearest penny) a. $2.94. b. $3.22. c. $3.35. d. $3.60. Diluted earnings per share for 2011 is (rounded to the nearest penny) a. $2.77. b. $2.81. c. $3.05. d. $3.33.

d. $3.60. c. $3.05.