ACCT 314 SB Ch 17B

If preferred shares must be redeemed by a certain date, they should be classified as Multiple choice question. 1. equity. 2. debt.

2

When a corporation issues shares of common stock for an amount above par, which of the following entries occur? (Select all that apply.) Multiple select question. 1. credit to revenue 2. credit to common stock 3. credit to retained earnings 4. credit to additional paid-in capital

2,4

Historically, par value was considered to be Multiple choice question. 1. the amount of net assets that were not available for distribution to shareholders. 2. the amount of cash that must be maintained in the corporation for contingencies. 3. the amount of retained earnings that must be appropriated for future dividends. 4. the maximum amount of money the company could borrow.

1

When common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded? Multiple choice question. 1. Credit common stock for the par amount. 2. Credit common stock for the amount in excess of par. 3. Credit common stock for the proceeds.

1

Preferred stock that has contractual rights in which the company is obligated to repurchase the stock at a specified future date is called Multiple choice question. 1. preferred liability stock. 2. mandatorily redeemable preferred stock. 3. convertible preferred stock. 4. preemptive preferred stock.

2

True or false: A corporation is owned by debt and equity holders. True false question. 1. True 2.False

2

Preferred stock is similar to a bond when it has which of the following features? Multiple select question. 1. a dividend rate 2. a participating feature 3. a mandatory redeemable feature 4. a noncumulative feature

1,3

Match the preferred shareholder right with the correct description. Conversion Redemption 1. Right to return preferred stock 2. Right to exchange preferred stock for common stock

Conversion 1 Redemption 2

A corporation is owned by its _____

Shareholders

The right of a shareholder to exchange their preferred stock for another class of stock is referred to as a right of ____ , whereas the right of the preferred shareholder to have their stock repurchased by the corporation for cash is referred to as a ______ privilege.

conversion, redemption

If more than one class of shares is authorized, what type of information must be specified? (Select all that apply) Multiple select question. 1. annual dividends per share issued to each class 2. specific rights for each class 3. designation to distinguish each class

2,3

True or false: A corporation is owned by debt and equity holders. True false question. 1. True 2. False

False

Preferred stockholders usually have preference over common stockholders with respect to which items? (Select all that apply.) Multiple select question. 1. distribution of assets in liquidation 2. issuance of additional debt 3. issuance of additional shares 4. dividends

1,4

For U.S. GAAP reporting purposes, mandatorily redeemable preferred stock is classified as Multiple choice question. 1. common stock. 2. debt. 3. preferred stock. 4. other comprehensive income.

2

Historically, par value was considered to be Multiple choice question. 1. the amount of retained earnings that must be appropriated for future dividends. 2. the amount of net assets that were not available for distribution to shareholders. 3. the amount of cash that must be maintained in the corporation for contingencies. 4. the maximum amount of money the company could borrow.

2

When a company issues different classes of shares, it must Multiple choice question. 1. reduce the additional paid-in capital account for the new class of stock. 2. distinguish the rights for each class of stock. 3. designate which classes have preference over debt in liquidation. 4. charge more for higher classes of stock.

2

Which type of stock usually has a high par value and a percentage of par value dividend rate? Multiple choice question. 1. Common stock 2. Preferred stock 3. Both preferred and common stock

2

When a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction? (Select all that apply.) Multiple select question. 1. the net book value of the asset 2. the quoted market price for the shares 3. the book value of the existing shares 4. the amount of cash that would be paid to purchase the asset

2,4

The effect of share issue costs is to Multiple choice question. 1. reduce retained earnings when the stock is issued. 2. reduce net income for the period. 3. reduce paid-in capital in excess of par. 4. increase the common stock account.

3

When a corporation issues two securities for a single price, how is the issue price usually allocated? Multiple choice question. 1. The cash received is allocated based on the par value of each security. 2. The cash received is allocated equally to each security. 3. The cash received is allocated based on the relative market value of each security. 4. The cash received is allocated to the security with the highest classification.

3