Accounting for Decision Making Test 3
decrease the market value of the stock
The primary reason for a stock split is to:
cumulative
The right to dividends in arrears before the current-year dividend is distributed
a credit to APIC - common stock of $5,000
A new company issues 2,000 shares of $5 par common stock in exchange for the services of a lawyer during its first month of business. The lawyer's normal fee is $15,000 for similar work. Which of the following would be recorded if the stock is not currently trading?
convertible
Allows preferred stock to be exchanged for common stock
participating
Allows preferred stockholders to share on a percentage basis in the distribution of an abnormally large dividend
redeemable
Allows stockholders to sell stock back to the company
callable
Allows the firm to eliminate a class of stock by paying the stockholders a specified amount
future/present value of $1
Amount accumulated at a future/present time that is from a single payment or investment
future/present value of an annuity
Amount accumulated in the future/ at a present time equal to a series of payments that are invested and accrue interest
income taxes payable
An example of a current liability that must be accrued is:
maximum number of shares that can be issued
Authorized stock represents the:
retained earnings: increase; common stock: decrease
Basic Solution Company reported net earnings of $60,000, declared and paid cash dividends on its common stock in the amount of $40,000 during the year, and sold 3,000 shares of $2 par value common stock for $15 per share during the year. What effects would these transactions have on the stockholders' equity accounts?
a loss contingency that should be disclosed in the notes of Boston's financial statements
Boston Trombley Company is a defendant in a lawsuit alleging damages of $3 billion. The litigation is anticipated to continue for several years, but no reasonable estimate can be made at this time regarding ultimate financial responsibility. This situation is an example of:
date of record
Dividends are assigned to certain stockholders (no JE)
net assets, less the redemption value of the preferred stock, must be divided by the number of common stock outstanding
If a company has both common and preferred shares outstanding and wishes to calculate book value per share, it must:
no. the interest rate is actually higher than 8%
If your bank gives you a $2,000 loan at 8% per year, but deducts the interest in advance, is 8% the "real" rate of interest you will pay?
accruals
Include any amount that has been incurred but has not yet been paid
common stock: $500; preferred stock: $1,600
Montana City Company began business on January 1, 2016. The corporate charter authorized issuance of 500 shares of $1 par value common stock and 400 shares of $4 par value preferred stock. What is the maximum amount that can be reported on the balance sheet for Common Stock and Preferred Stock, respectively, if all of the stock is issued?
outstanding shares
Number of shares issued less the number of shares held as treasury stock
contributed capital
One of the two sections of stockholders' equity that accounts for common stock and preferred stock
decrease cash dividend payable and increase cash
Port, Inc. paid a cash dividend on January 2 that had been declared prior to the end of the fiscal year. The entry to pay the dividend will:
common stock
Stock that carries voting rights and the right to elect the corporation's officers and establish its bylaws and governing rules
preferred stock
Stock that is flexible and tailored to a company's needs; also gets preference in dividends
based on the excess of total assets over total liabilities over outstanding shares
The book value per share for a corporation is:
authorized shares
The maximum number of shares a corporation may issue as indicated in the corporate charter
issued shares
The number of shares sold or distributed to the stockholders
in the stockholders' equity section of the balance sheet
Venture Enterprises accountant determined the following: common stock, $0.01 par value $50,000 Where would this item be reported on the financial statements?
as a percentage of the stock's par value or the per share amount
What are the two ways a dividend rate may be stated?
the cash available and the retained earnings balance
What is considered when a company decides to declare a cash dividend on common stock?
a contra liability
What is the correct classification of the account: Discount on Notes Payable?
the cost of treasury stock decreases stockholders' equity
When a company purchases treasury stock, what happens?
date of declaratoin
When cash dividends are declared
payment date
When cash dividends are paid
sale of preferred stock
Which of the following is reported as a financing activity?
a decrease in a current liability from the beginning to the end of the year is accompanied by a decrease of cash
Which of the following is true regarding the inclusion of liabilities on the statement of cash flows?
as a result of the stock dividend, retained earnings is reduced by the par value of the stock issued
Which of the following statements with regard to large stock dividends is true?
an arbitrary amount that exists to fulfill legal requirements
With regard to a corporation's stock, par value is:
