Accounting Chapter 14

Solaris, Inc. has 2,000 shares of 5%, $10 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020. What is the annual dividend on the preferred stock? a) $.05 per share b)$10,000 in total c) $1,000 in total d) $5 per share

c) $1,000 in total

A small stock dividend is defined as a) less than 30% but greater than 25% of the corporation's issued stock. b) between 50% and 100% of the corporation's issued stock. c) less than 20-25% of the corporation's issued stock. d) more than 30% of the corporation's issued stock

c) less than 20-25% of the corporation's issued stock.

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

b) declaration date.

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

b) may occur in the absence of retained earnings.

On the dividend record date, a) Dividends Payable is debited. b) a dividend becomes a current obligation. c) no entry is required. d) an entry may be required if it is a stock dividend

c) no entry is required.

A prior period adjustment that corrects income of a prior period requires that an entry be made to a) an asset account. b) a current year revenue or expense account. c) the retained earnings account. d) an income statement account.

c) the retained earnings account.

Outstanding stock of the Larson Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 5%, $10 par noncumulative preferred stock. In 2019, Larson declared and paid dividends of $4,000. In 2020, Larson declared and paid dividends of $12,000. How much of the 2020 dividend was distributed to preferred shareholders? a) $5,000 b) $7,000 c) $6,000 d) $12,000

a) $5,000

The declaration of a stock dividend will a) increase paid-in capital. b) change the total of stockholders' equity. c) increase total assets. d) increase total liabilities.

a) increase paid-in capital.

Which one of the following events would not require a formal journal entry on a corporation's books? a) $1 per share cash dividend b) 2 for 1 stock split c) 2% stock dividend d) 100% stock dividend

b) 2 for 1 stock split

Dividends Payable is classified as a a) stockholders' equity account. b) current liability. c) long-term liability. d) contra stockholders' equity account to Retained Earnings.

b) current liability.

Which one of the following is not necessary in order for a corporation to pay a cash dividend? a) Adequate cash b) Retained earnings c) Declaration of dividends by the board of directors d) Approval of stockholders

d) Approval of stockholders

Identify the effect the declaration and distribution of a stock dividend has on the par value per share. a) Increase or decrease b) Decrease c) Increase d) No effect

d) No effect

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

d) decrease stockholders' equity and total assets.

A net loss a) is not closed to Retained Earnings if it would result in a debit balance. b) occurs if operating expenses exceed cost of goods sold. c) is closed to Retained Earnings even if it would result in a debit balance. d) is closed to the paid-in capital account of the stockholders' equity section of the balance sheet.

d) is closed to the paid-in capital account of the

Common Stock Dividends Distributable is classified as a(n) a) expense account. b) liability account. c) asset account. d) stockholders' equity account.

d) stockholders' equity account.