accounting 212 ch 10 smartbook

When a business incorporates, it must file its Blank______ with the state in which it incorporates. a.) federal tax return b.) proxy statement c.) articles of incorporation d.) initial public offering

articles of incorporation

A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document? (Select all that apply.) a.) Corporate tax return b.) Corporate charter c.) Articles of incorporation d.) Corporate proxy

articles of incorporation corporate charter

How is treasury stock reported in the financial statements? a.) as a contra equity account. b.) as a direct reduction to retained earnings. c.) as a contra asset account. d.) as an expense for other comprehensive income.

as a contra equity account

Justin Corp. issues 10,000 shares of $1 par value common stock for $5 per share. For Justin, this results in: a.) an increase in net income of $5,000 b.) no change in net income. c.) a decrease in net income of $5,000 d.) a decrease in net income of $50,000 e.) an increase in net income of $50,000

no change in net income.

or most companies that issue par-value common stock, which account balance is typically the highest? a.) common stock b.) additional paid-in capital c.) both are approximately equal

additional paid-in capital

The amount of money paid into a company by its owners is referred to as: a.) contributed capital b.) investment in common stock c.) owners' surplus d.) retained earnings

contributed capital

A distribution of assets to stockholders is referred to as a(n) ______

dividends

Retained earnings represent: a.) invested capital b.) earned capital c.) contributed capital

earned capital

Canton, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. Mr. Smart, the bookkeeper, recorded this transaction with a $100,000 debit to Cash and a $100,000 credit to Common stock. As a result of this entry: (Select all that apply.) a.) total stockholders' equity will be overstated. b.) total assets will be overstated. c.) common stock will be overstated. d.) total stockholders' equity will be understated. e.) additional paid-in capital will be understated.

common stock will be overstated. additional paid-in capital will be understated.

Which of the following shares are eligible to receive dividends? a.) Treasury shares b.) Issued shares c.) Outstanding shares d.) Authorized shares

outstanding shares

True or false: The board of directors is responsible for establishing corporate policies.

true The board of directors establishes company policies and appoints officers.

How should cash dividends be reported on the statement of stockholders' equity? a.) As a reduction of retained earnings. b.) As a reduction of common stock. c.) As a reduction of treasury stock.

As a reduction of retained earnings.

If a corporation repurchases its own common stock, the stock is referred to as: a.) treasury stock b.) preferred stock c.) common stock d.) investment in common stock

treasury stock

Wyanot Company issued 1,000 shares of its $100 par value preferred stock for $110 cash per share. The journal entry to record this transaction includes: (multiple) a.) $10,000 credit to additional paid-in capital. b.) $100,000 debit to cash. c.) $5,000 credit to preferred stock. d.) $100,000 credit to preferred stock. e.) $110,000 debit to cash.

$10,000 credit to additional paid-in capital. $100,000 credit to preferred stock. $110,000 debit to cash.

Just In Thyme, Inc. has the following end of year equity balances: Common stock of $20,000; Additional paid-in capital of $30,000; and Retained earnings of $50,000. If Just In Thyme repurchases $10,000 of its stock, the total stockholders' equity balance would equal ______. a.) $110,000 b.) $40,000 c.) $90,000 d.) $60,000

$90,000 $20,000 + $30,000 + $50,000 - $10,000

Stockit, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. Stockit has repurchased 10,000 of its own shares. The number of authorized shares equals _______ shares. a.) 910,000 b.) 90,000 c.) 1,000,000 d.) 100,000 e.) 10,000

1,000,000 The number of authorized shares equals 1,000,000 which is the maximum shares the company is allowed to sell. Of the 1,000,000 shares, the company has sold 100,000 and bought back 10,000 leaving 90,000 shares outstanding.

When a cash dividend is declared and paid in the same year, the total effects on the balance sheet include which of the following? (Select all that apply.) a.) Decrease net income. b.) Decrease assets. c.) Decrease stockholders' equity. d.) Increase liabilities.

Decrease assets. Decrease stockholders' equity.

When does a dividend become a liability to a corporation? a.) On the ex-dividend date b.) When it is declared by the board of directors c.) On the last day of the

When it is declared by the board of directors

When treasury stock is purchased, the cost of treasury stock is reported as a.) a reduction of common stock b.) a reduction to retained earnings c.) a contra-asset account d.) a reduction in stockholders' equity

a reduction in stockholders' equity

Shareholders' equity consists of which of the following items? (multiple) a.) amounts earned by the corporation b.) amounts of assets purchased by the corporation c.) amounts invested by shareholders d.) amounts borrowed by the corporation

amounts earned by the corporation amounts invested by shareholders

Dividends ______ paid on treasury shares. a.) are b.) are not

are not

The stockholders' equity section of the balance sheet presents the: a.) change in each revenue and expense account over time. b.) balance of each revenue and expense account at a point in time. c.) balance of each equity account at a point in time.

balance of each equity account at a point in time.

Gosling Corp. has 100,000 shares of common stock authorized and 60,000 shares outstanding. Gosling declares a dividend of $0.10 per share on August 1, with payment to occur on October 1. For Gosling, the dividend payment on October 1 results in a: (Select all that apply.) a.) decrease dividends payable of $10,000 b.) decrease in cash of $10,000 c.) decrease in common stock of $10,000 d.) decrease in common stock of $6,000 e.) decrease in cash of $6,000 f.) decrease in dividends payable of $6,000

decrease in cash of $6,000 decrease in dividends payable of $6,000

A corporate charter: a.) describes the business activities. b.) specifies the shares of stock to be issued. c.) names the board of directors. d.) is required only for publicly-traded corporations. e.) specifies the number of shares

describes the business activities. specifies the shares of stock to be issued. names the board of directors.

Preferred stock is advantageous in that it: (Select all that apply.) a.) has priority over creditors at liquidation. b.) receives dividends before creditors are to receive any interest payments. c.) has priority over common stock when dividends are declared. d.) has priority over common stock at liquidation.

has priority over common stock when dividends are declared has priority over common stock at liquidation.

Investors who acquire preferred stock: (Select all that apply.) a.) will receive more dividends than common stockholders. b.) have preference as to dividends. c.) do not have voting rights. d.) have preference over creditors.

have preference as to dividends. do not have voting rights.

Preferred stockholders: a.) have the right to receive dividends only if there are enough dividends to pay the common stockholders too. b.) must receive more dividends per share than the common stockholders. c.) must receive dividends every year. d.) have the right to receive dividends only in the years the board of directors declares dividends.

have the right to receive dividends only in the years the board of directors declares dividends.

Retained earnings are: (Select all that apply.) a.) increased by net income. b.) decreased by purchases of land. c.) equal to cash. d.) decreased by dividends. e.) all of the company's earnings not distributed to stockholders.

increased by net income. decreased by dividends. all of the company's earnings not distributed to stockholders.

Issuing 1,000 shares of $100 par value preferred stock for $110 in cash per share affects the accounting equation by: (Select all that apply.) a.) increasing additional paid-in capital by $100,000 b.) increasing cash by $110,000 c.) increasing additional paid-in capital by $10,000 d.) increasing cash by $100,000 e.) increasing preferred stock by $10,000 f.) increasing preferred stock by $100,000

increasing cash by $110,000 increasing additional paid-in capital by $10,000 increasing preferred stock by $100,000

A positive balance in retained earnings indicates that: a.) net income has exceeded the dividends distributed to shareholders. b.) liabilities are less than shareholders' equity. c.) treasury stock was not purchased. d.) dividends were not declared during that year.

net income has exceeded the dividends distributed to shareholders.

The purpose of the statement of stockholders' equity is to: a.) report the additional expenses of the company that were not accrued during the year. b.) reconcile the balance sheet with the statement of cash flows. c.) reconcile net income with taxable income and retained earnings. d.) report the changes and the sources of the changes in stockholder equity accounts.

report the changes and the sources of the changes in stockholder equity accounts.

Amounts earned by the corporation and not paid out in dividends are referred to as a.) common stock. b.) paid-in capital. c.) retained earnings. d.) shareholders' equity

retained earnings

the total net income earned by a corporation on behalf of its shareholders and not paid out as dividends is called ________

retained earnings

Which of the following are sources of shareholders' equity? a.) retained earnings b.) liabilities c.) assets d.) paid-in capital

retained earnings paid-in capital

Who owns and controls a corporation? a.) board of directors b.) managers c.) stockholders d.) creditors

stockholders

Historically, par value was considered to be a.) the maximum amount of money the company could borrow. b.) the value of the company's shares of stock. c.) the amount of cash that must be maintained in the corporation for contingencies. d.) the amount of retained earnings that must be appropriated for future dividends.

the value of the company's shares of stock.

Mars Inc. issues 5,000 shares of no-par stock for $100,000. For Mars, the balance sheet effects of the issuance include a(n): (Select all that apply.) a.) increase in total stockholders' equity b.) decrease in total liabilities c.) decrease in total stockholders' equity d.) increase in total assets e.) decrease in total assets f.) increase in total liabilities

increase in total stockholders' equity increase in total assets