Chapter 10 Concept Videos (LO10-1; LO10-2; LO10-3; LO10-4)

Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a: a) debit to Common Stock for $10,000 b) debit to Common Stock for $100,000 c) debit to Treasury Stock for $10,000 d) debit to Treasury Stock for $100,000

d) debit to Treasury Stock for $100,000

When a corporation issues stock to the general public for the first time, it is known as a(n): a) integrated primary offering b) initial public offering c) seasoned equity offering d) secondary public offering

b) initial public offering

Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction: a) increases assets and increases liabilities b) increases assets and decreases liabilities c) increases assets and increases stockholders' equity d) increases assets and decreases stockholders' equity

c) increases assets and increases stockholders' equity

Earnings not distributed as dividends to stockholders is known as: a) common stock b) paid-in capital c) retained earnings d) treasury stock

c) retained earnings

On January 1, Year 3, Boxwood, Inc. issues 1,000 shares of $1 par value common stock for $30 per share. Later that year, the company issues 1,000 shares of $10 par value preferred stock for $80 per share. The company's balance sheet as of December 31, Year 3, will show total paid-in capital of: a) $11,000 b) $30,000 c) $99,000 d) $110,000

d) $110,000

Marine Corporation issued common stock in Year 1. It issued 10,000 shares of 10%, $100 par value noncumulative preferred stock for $110 per share at the beginning of Year 3. It did not pay any dividends in Year 3 or Year 4. In December of Year 5, it declares total dividends of $250,000. How much will the common stockholders of Marine Corporation receive as dividends in Year 5? a) $150,000 b) $250,000 c) $50,000 d) $100,000

a) $150,000

There is a direct relationship between the par value and market value of common stock: stocks with a low par value have a low market value, while stocks with a high par value have a high market value. a) True b) False

b) False

On January 1, Year 1, Davidson Corporation issues 1,000 shares of $1 par value common stock for $20 per share. Complete the necessary journal entry for the issuance of common stock by indicating the relevant account names and dollar amounts below. If more than one account title is debited or credited, enter the account titles in their alphabetical order.

Debit Cash for 20,000 Credit Common Stock for 1,000 Credit Additional Paid-in Capital for 19,000

1) authorized stock 2) outstanding stock 3) issued stock Shares actually sold, which includes treasury stock Total number of shares available to sell Shares held by investors

Shares actually sold, which includes treasury stock - 3 Total number of shares available to sell - 1 Shares held by investors - 2

The general public is entitled to invest in a privately held corporation. a) True b) False

b) False

Marina, Inc., acquires 1 million shares of its own $1 par value common stock at $70 per share. It later resells the 1 million shares of treasury stock for $75. We record the $5 difference per share as a: a) gain in the income statement b) revenue in the income statement c) credit to Additional Paid-In Capital d) credit to Common Stock

c) credit to Additional Paid-In Capital

When a corporation acquires shares of its own common stock, it records a: a) debit to Common Stock for par value b) debit to Common Stock for cost c) debit to Treasury Stock for par value d) debit to Treasury Stock for cost

d) debit to Treasury Stock for cost

All of the following are components of stockholders' equity, except ____________. a) notes payable b) paid-in-capital c) retained earnings d) treasury stock

a) notes payable

Innovative Media issues 1,000 shares of 8%, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue? a) A credit to Additional Paid-In Capital for $10,000 b) A debit to Cash for $50,000 c) A credit to Preferred Stock for $10,000 d) A credit to Preferred Stock for $60,000

a) A credit to Additional Paid-In Capital for $10,000

The shares of preferred stock issued by Saturn Corporation can be exchanged for common stock. However, any dividends in arrears are lost. Which of the following features are present in the preferred stock issued by Saturn? Select all answers that apply to this question. a) Convertible b) Redeemable c) Cumulative d) Noncumulative

a) Convertible d) Noncumulative

Dividends paid are allocated according to the percentage of shares owned by each stockholder. a) True b) False

a) True

Preferred stock is "preferred" to common stock two ways: (1) preferred stockholders have first rights to dividends, and (2) in the event the company is dissolved, preferred stockholders receive preference over common stockholders in the distribution of assets. a) True b) False

a) True

When comparing the typical sole proprietorship and corporation, the form of business having higher assets and earnings is the corporation. a) True b) False

a) True

A corporation's officers are appointed by the: a) board of directors b) company president c) primary stockholder d) state in which the corporation operates

a) board of directors

Identify the primary advantages of the corporate form of business compared to a sole proprietorship or partnership. a) limited liability b) ability to raise capital c) lower taxes d) less paperwork e) ease of incorporation

a) limited liability b) ability to raise capital

Lego, Inc., issued common stock in Year 1. It issued 10,000 shares of 8%, $100 par value cumulative preferred stock for $110 per share at the beginning of Year 4. It did not pay any dividends during Year 4. In December of Year 5, it declares total dividends of $200,000. How much will the preferred stockholders of Lego receive as dividends in Year 5? a) $200,000 b) $160,000 c) $80,000 d) $40,000

b) $160,000

All privately held corporations are regulated by the Securities and Exchange Commission. a) True b) False

b) False

Companies usually rely on angel investors and venture capital firms following an initial public offering. a) True b) False

b) False

The Common Stock account increases when treasury stock is resold for more than its original cost. a) True b) False

b) False

EyeCare Corporation issued 10,000 shares of 7%, $100 par value preferred stock at the beginning of Year 1. The company did not pay dividends in Year 1. However, preferred stockholders received dividends for Year 1 and Year 2, when the company declared dividends in Year 2. Preferred stockholders also have the option, under specified conditions, to return their shares for a predetermined price. Which of the following features are in present the preferred stock issued by EyeCare? Select all answers that apply to this question. a) Convertible b) Redeemable c) Cumulative d) Noncumulative

b) Redeemable c) Cumulative

Delta Corporation acquires 10,000 shares of its own $0.01 par value common stock at $10 per share. It later resells the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve a: a) debit to Cash for $100,000 b) credit to Additional Paid-In Capital for $20,000 c) credit to Common Stock for $100 d) credit to Treasury Stock for $120,000

b) credit to Additional Paid-In Capital for $20,000

Identify the primary disadvantages of the corporate form of business compared to a sole proprietorship or partnership. a) ownership limitations b) double taxation c) personal liability d) more paperwork

b) double taxation d) more paperwork