Accounting 14 part 2

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

a

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

a

47. A corporation is committed to a legal obligation when it declares a. a cash dividend. b. either a cash dividend or a stock dividend. c. a stock dividend. d. a stock split.

a

50. Which of the following statements regarding the date of a cash dividend declaration is not accurate? a. The dividend can be rescinded once it has been declared. b. The corporation is committed to a legal, binding obligation. c. The board of directors formally authorizes the cash dividend. d. A liability account must be increased.

a

64. When stock dividends are distributed, a. Common Stock Dividends Distributable is decreased. b. Retained Earnings is decreased. c. Paid-in Capital in Excess of Par Value is debited if it is a small stock dividend. d. no entry is necessary if it is a large stock dividend.

a

67. The per share amount normally assigned by the board of directors to a small stock dividend is a. the market value of the stock on the date of declaration. b. the average price paid by stockholders on outstanding shares. c. the par or stated value of the stock. d. zero.

a

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

a

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

a

81. Cuther Inc., has 1,000 shares of 8%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2007, and December 31, 2008. The board of directors declared and paid a $3,000 dividend in 2007. In 2008, $12,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2008? a. $7,000 b. $6,000 c. $5,000 d. $4,000

a

84. On January 1, Sandford Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 10% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The entry to record the transaction of June 17 would include a a. debit to Retained Earnings for $120,000. b. credit to Cash for $120,000. c. credit to Common Stock Dividends Distributable for $120,000. d. credit to Common Stock Dividends Distributable for $40,000.

a

85. On January 1, Sanford Corporation had 80,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 10% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The stock was distributed on June 30. The entry to record the transaction of June 30 would include a a. credit to Common Stock for $80,000. b. debit to Common Stock Dividends Distributable for $120,000. c. credit to Paid-in Capital in Excess of Par Value for $40,000. d. debit to Retained Earnings for $40,000.

a

87. Turquoise and Topaz Sisters had retained earnings of $10,000 on the balance sheet but disclosed in the footnotes that $2,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends? a. $7,000 b. $8,000 c. $10,000 d. $5,000

a

97. A prior period adjustment for understatement of net income will a. be credited to the Retained Earnings account. b. be debited to the Retained Earnings account. c. show as a gain on the current year's Income Statement. d. show as an asset on the current year's Balance Sheet.

a

`80. Anders, Inc., has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2009. There were no dividends declared in 2007. The board of directors declares and pays a $50,000 dividend in 2008 and in 2009. What is the amount of dividends received by the common stockholders in 2009? a. $10,000 b. $30,000 c. $50,000 d. $0

a

31. Each of the following decreases retained earnings except a a. cash dividend. b. liquidating dividend. c. stock dividend. d. All of these decrease retained earnings

b

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

b

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

b

39. The effect of a stock dividend is to a. decrease total assets and stockholders' equity. b. change the composition of stockholders' equity. c. decrease total assets and total liabilities. d. increase the book value per share of common stock.

b

42. Stock dividends and stock splits have the following effects on retained earnings: Stock Splits Stock Dividends a. Increase No change b. No change Decrease c. Decrease Decrease d. No change No change

b

48. Which of the following is not a significant date with respect to dividends? a. The declaration date b. The incorporation date c. The record date d. The payment date

b

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

b

52. Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections: Total Assets Total Liabilities Total Stockholders' Equity a. Increase Decrease No change b. No change Increase Decrease c. Decrease Increase Decrease d. Decrease No change Increase

b

56. ABC, Inc. has 1,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2008. What is the annual dividend on the preferred stock? a. $40 per share b. $4,000 in total c. $400 in total d. $.40 per share

b

57. Agler, Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2008. If the board of directors declares a $50,000 dividend, the a. preferred shareholders will receive 1/10th of what the common shareholders will receive. b. preferred shareholders will receive the entire $50,000. c. $50,000 will be held as restricted retained earnings and paid out at some future date. d. preferred shareholders will receive $25,000 and the common shareholders will receive $25,000.

b

60. Norton, Inc. has 10,000 shares of 6%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2008, and December 31, 2009. The board of directors declared and paid a $50,000 dividend in 2008. In 2009, $100,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2009? Preferred Common a. $0 $100,000 b. $60,000 $40,000 c. $50,000 $50,000 d. $100,000 $0

b

63. A stockholder who receives a stock dividend would a. expect the market price per share to increase. b. own more shares of stock. c. expect retained earnings to increase. d. expect the par value of the stock to change.

b

76. Sun Inc. has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2008. What is the annual dividend on the preferred stock? a. $60 per share b. $30,000 in total c. $3,000 in total d. $0.60 per share

b

83. On January 1, Brunner Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17, the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The stock was distributed on March 30. The entry to record the transaction of March 30 would include a a. credit to Cash for $60,000. b. debit to Common Stock Dividends Distributable for $60,000. c. credit to Paid-in Capital in Excess of Par Value for $18,000. d. debit to Retained Earnings for $18,000.

b

89. Restricting retained earnings for the cost of treasury stock purchased is a a. contractual restriction. b. legal restriction. c. stock restriction. d. voluntary restriction.

b

98. The retained earnings statement a. is the owners' equity statement for a corporation. b. will show an addition to the beginning retained earnings balance for an understatement of net income in a prior year. c. will not reflect net losses. d. will, in some cases, fail to reconcile the beginning and ending retained earnings balances.

b

32. Each of the following decreases total stockholders' equity except a a. cash dividend. b. liquidating dividend. c. stock dividend. d. All of these decrease total stockholders' equity.

c

36. The effect of the declaration of a cash dividend by the board of directors is to Increase Decrease a. Stockholders' equity Assets b. Assets Liabilities c. Liabilities Stockholders' equity d. Liabilities Assets

c

43. Dividends are predominantly paid in a. scrip. b. property. c. cash. d. stock.

c

45. Of the four dividends types, the two most common types in practice are a. cash and scrip. b. cash and property. c. cash and stock. d. property and stock.

c

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

c

53. Which of the following statements about dividends is not accurate? a. Many companies declare and pay cash quarterly dividends. b. Low dividends may mean high stock returns. c. The board of directors is obligated to declare dividends. d. A legal dividend may not be a feasible one.

c

59. Lopez, Inc. has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2007, and December 31, 2008. The board of directors declared and paid a $4,000 dividend in 2007. In 2008, $20,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2008? Preferred Common a. $12,000 $8,000 b. $10,000 $10,000 c. $8,000 $12,000 d. $6,000 $14,000

c

62. Corporations generally issue stock dividends in order to a. increase the market price per share. b. exceed stockholders' dividend expectations. c. increase the marketability of the stock. d. decrease the amount of capital in the corporation.

c

66. The per share amount normally assigned by the board of directors to a large stock dividend is a. the market value of the stock on the date of declaration. b. the average price paid by stockholders on outstanding shares. c. the par or stated value of the stock. d. zero.

c

72. Outstanding stock of the Apex Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 6%, $10 par noncumulative preferred stock. In 2007, Apex declared and paid dividends of $2,000. In 2008, Apex declared and paid dividends of $6,000. How much of the 2008 dividend was distributed to preferred shareholders? a. $4,000 b. $7,000 c. $3,000 d. None of the above

c

73. Outstanding stock of the Bell Corporation included 20,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par noncumulative preferred stock. In 2007, Bell declared and paid dividends of $4,000. In 2008, Bell declared and paid dividends of $12,000. How much of the 2008 dividend was distributed to preferred shareholders? a. $8,000 b. $14,000 c. $6,000 d. None of the above

c

79. Luther Inc., has 2,000 shares of 8%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2008, and December 31, 2007. The board of directors declared and paid a $6,000 dividend in 2007. In 2008, $24,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2008? a. $14,000 b. $12,000 c. $10,000 d. $8,000

c

82. On January 1, Brunner Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17, the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The entry to record the transaction of March 17 would include a a. credit to Retained Earnings for $18,000. b. credit to Cash for $78,000. c. credit to Common Stock Dividends Distributable for $60,000. d. debit to Common Stock Dividends Distributable for $60,000.

c

86. The following selected amounts are available for Sanders Company. Retained earnings (beginning) $1,000 Net loss 100 Cash dividends declared 100 Stock dividends declared 50 What is its ending retained earnings balance? a. $850 b. $900 c. $750 d. $800

c

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

c

92. A credit balance in retained earnings represents a. the amount of cash retained in the business. b. a claim on specific assets of the corporation. c. a claim on the aggregate assets of the corporation. d. the amount of stockholders' equity exempted from the stockholders' claim on total assets.

c

93. A net loss a. occurs if operating expenses exceed cost of goods sold. b. is not closed to Retained Earnings if it would result in a debit balance. 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.

c

95. Retained earnings are occasionally restricted a. to set aside cash for dividends. b. to keep the legal capital associated with paid-in capital intact. c. due to contractual loan restrictions. d. if preferred dividends are in arrears.

c

96. Retained earnings is increased by each of the following except a. net income. b. prior period adjustments. c. some disposals of treasury stock. d. All of these increase retained earnings.

c

99. In the stockholders' equity section of the balance sheet, a. Common Stock Dividends Distributable will be classified as part of additional paid-in capital. b. Common Stock Dividends Distributable will appear in its own subsection of the stockholders' equity. c. Additional Paid-in Capital appears under the subsection Paid-in Capital. d. Dividends in arrears will appear as a restriction of Retained Earnings.

c

100. The return on common stockholders' equity is computed by dividing net income available to common stockholders by a. ending total stockholders' equity. b. ending common stockholders' equity. c. average total stockholders' equity. d. average common stockholders' equity.

d

34. If a corporation declares a dividend based upon paid-in capital, it is known as a a. scrip dividend. b. property dividend. c. paid dividend. d. liquidating dividend.

d

37. The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to a. decrease total liabilities and stockholders' equity. b. increase total expenses and total liabilities. c. increase total assets and stockholders' equity. d. decrease total assets and stockholders' equity.

d

40. If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is a. Common Stock Dividends Distributable. b. Common Stock. c. Paid-in Capital in Excess of Par. d. Retained Earnings.

d

44. If a stockholder receives a dividend consisting of a promissory note, the stockholder has received a a. stock dividend. b. cash dividend. c. contingent dividend. d. scrip dividend.

d

46. Regular dividends are declared out of a. Paid-in Capital in Excess of Par Value. b. Treasury Stock. c. Common Stock. d. Retained Earnings.

d

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

d

55. The declaration and distribution of a stock dividend will a. increase total stockholders' equity. b. increase total assets. c. decrease total assets. d. have no effect on total assets.

d

58. Manner, Inc. has 5,000 shares of 6%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2008. There were no dividends declared in 2007. The board of directors declares and pays a $55,000 dividend in 2008. What is the amount of dividends received by the common stockholders in 2008? a. $0 b. $30,000 c. $55,000 d. $25,000

d

61. The board of directors must assign a per share value to a stock dividend declared that is a. greater than the par or stated value. b. less than the par or stated value. c. equal to the par or stated value. d. at least equal to the par or stated value.

d

65. 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. more than 30% of the corporation's issued stock. d. less than 20-25% of the corporation's issued stock.

d

68. Identify the effect the declaration of a stock dividend has on the par value per share and book value per share. Par Value per Share Book Value per Share a. Increase Decrease b. No effect Increase c. Decrease Decrease d. No effect Decrease

d

70. Which of the following show the proper effect of a stock split and a stock dividend? Item Stock Split Stock Dividend a. Total paid-in capital Increase Increase b. Total retained earnings Decrease Decrease c. Total par value (common) Decrease Increase d. Par value per share Decrease No change

d

74. On January 1, Bluefield Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event, a. Bluefield's Paid-in Capital in Excess of Par Value account increased $400,000. b. Bluefield's total stockholders' equity was unaffected. c. Bluefield's Retained Earnings account decreased $1,200,000. d. All of the above.

d

75. On January 1, Garrison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event, a. Garrison's Paid-in Capital in Excess of Par Value account increased $500,000. b. Garrison's total stockholders' equity was unaffected. c. Garrison's Retained Earnings account decreased $1,500,000. d All of the above.

d

77. Allstate, Inc., has 20,000 shares of 6%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2008. If the board of directors declares a $200,000 dividend, the a. preferred stockholders will receive 2/10th of what the common stockholders will receive. b. preferred stockholders will receive the entire $200,000. c. $120,000 will be held as restricted retained earnings and paid out at some future date. d. preferred stockholders will receive $120,000 and the common stockholders will receive $80,000.

d

78. Archer, Inc., has 10,000 shares of 8%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2008. There were no dividends declared in 2007. The board of directors declares and pays a $120,000 dividend in 2008. What is the amount of dividends received by the common stockholders in 2008? a. $0 b. $80,000 c. $120,000 d. $40,000

d

88. Irwin, Inc. had 300,000 shares of common stock outstanding before a stock split occurred, and 600,000 shares outstanding after the stock split. The stock split was a. 3 for 6. b. 6 for 1. c. 1 for 6. d. 2 for 1.

d

91. If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to a. decrease total assets and total stockholders' equity. b. increase stockholders' equity and decrease total liabilities. c. decrease total retained earnings and increase total liabilities. d. reduce the amount of retained earnings available for dividend declarations.91. If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to a. decrease total assets and total stockholders' equity. b. increase stockholders' equity and decrease total liabilities. c. decrease total retained earnings and increase total liabilities. d. reduce the amount of retained earnings available for dividend declarations.

d

94. Prior period adjustments are reported a. in the footnotes of the current year's financial statements. b. on the current year's balance sheet. c. on the current year's income statement. d. on the current year's retained earnings statement.

d