Ch 10 Smart Book ACCT 201-A

Stockit, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. Stockit has repurchased 10,000 of its own shares. The number of shares authorized equals ______ shares. 10,000 100,000 1,000,000 910,000 90,000

1,000,000 Reason: 10,000 Reason: This is the number of shares in treasury and are called treasury stock. 100,000 Reason: This is the number of shares issued which must be less than the 1,000,000 shares authorized. 910,000 Reason: The number of shares authorized equals 1,000,000 which is the maximum shares the company is allowed to sell. Of the 1,000,000 shares, the company has sold 100,000 and bought back 10,000 leaving 90,000 shares outstanding. 90,000 Reason: This is the number of shares outstanding which equals the number issued, 100,000, less the number of shares repurchased, 10,000.

Select all that apply A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document? Corporate proxy Corporate tax return Corporate charter Articles of incorporation

Corporate charter Articles of incorporation

A corporation may repurchase its shares of stock because management believes the market price of the stock is undervalued. want to manipulate the price of the stock and record gains on the income statement. needs additional current assets on the balance sheet. want to increase its investments in trading securities.

believes the market price of the stock is undervalued.

Select all that apply An IPO: stands for initial public offering. is when a private company goes public. stands for independent public obligations. stands for issued private options.

stands for initial public offering. is when a private company goes public.

Select all that apply Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by: (Select all that apply.) increasing total stockholders' equity. increasing total assets. increasing retained earnings. increasing total liabilities. increasing additional paid-in capital. decreasing total stockholders' equity.

increasing total stockholders' equity. increasing total assets.

Match the level of risk exposure for investors with the respective type of investment. Preferred stock

middle

Select all that apply Disadvantages of the corporate form of business are ease of raising capital. more paperwork additional taxation. less paperwork.

more paperwork additional taxation.

The term treasury stock refers to stock that is repurchased by the issuing corporation. a security that is held as a long-term investment. government securities that are held for sale. a class of stock that is subordinate to common stock.

stock that is repurchased by the issuing corporation.

Select all that apply Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes: $5,000 credit to Preferred stock. $100,000 debit to Cash. $100,000 credit to Preferred stock. $10,000 credit to Additional paid-in capital - preferred. $110,000 debit to Cash

$100,000 credit to Preferred stock. $10,000 credit to Additional paid-in capital - preferred. $110,000 debit to Cash.

Allison Company's board of directors assigns a $2 stated value to its no-par common stock. If Allison sells 10,000 shares for $10 per share, the Common Stock account should be credited for: $80,000 $20,000 $100,000

$20,000 Reason: $2 x 10,000 shares

Just In Thyme, Inc. has the following end of year equity balances: Common stock of $20,000; Additional paid-in capital of $30,000; and Retained earnings of $50,000. If Just In Thyme repurchases $10,000 of its stock, the total stockholders' equity balance would equal ______. $90,000 $60,000 $40,000 $110,000

$90,000 Reason: $20,000 + 30,000 + 50,000 - 10,000

Match stock splits and stock dividends with their characteristics. Stock splits

Cause the par value per share to change

Match stock splits and stock dividends with their characteristics. Instructions Stock splits

Cause the par value per share to change

Match stock splits and stock dividends with their characteristics. Stock splits and stock dividends

Cause total stockholders' equity to remain the same

Select all that apply What are the effects of a stock split accounted for as a 100% stock dividend? Par value per share stays the same. Par value per share increases. Par value per share decreases. The number of shares outstanding increases. The number of shares outstanding decreases.

Par value per share stays the same. The number of shares outstanding increases.

Which type of corporation is regulated by the Securities and Exchange Commission? Private Public Both public and private

Public

Match the magnitude of the stock dividend with the correct measurement. Small stock dividend

Recognized at market value

Select all that apply Special contractually granted features can make preferred stock: cumulative extraordinary redeemable convertible

cumulative redeemable convertible

Before common dividends can be paid, the ______ preferred stock must be paid ______. common; dividends cumulative; dividends in arrears current; interest owed cumulative; interest owed

cumulative; dividends in arrears

Select all that apply The market value of equity is equal to the product of these two factors: number of shares issued current stock price number of shares outstanding par value of stock

current stock price number of shares outstanding

Stock splits have the following effects on stockholders' equity decrease in total stockholders' equity increase in total stockholders' equity decrease in retained earnings increase in retained earnings no change to total stockholders' equity increase in common stock

no change to total stockholders' equity

A business that is organized, owned, and managed by one person and has unlimited liability is called a partnership. corporation. proprietorship.

proprietorship.

Xavier Inc. has $10 million par value, 6% cumulative preferred stock outstanding. During the current year, the board of directors declares $2 million in dividends. No dividends were declared for the previous year. Dividends payable to preferred stockholders during the current year will be: . $600,000 $1.2 million $1 million $2 million

$1.2 million Reason: $10 million x 0.06 x 2 years

Reynolds Corp. has 100,000 shares of $1 par value common stock issued and outstanding. Reynolds declares a 20% stock dividend when the fair value of the stock is $8 per share. The debit to stock dividends is $10,000. $160,000. $140,000. $20,000.

$160,000. Reason: 100,000 x 20% = 20,000 shares x $8 = $160,000

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares. 910,000 10,000 100,000 1,000,000 90,000

100,000

A small stock dividend is usually less than ______% of the number of shares of stock outstanding. 5 50 25 10

25

_________________ capital is the amount of money paid into a company by its owners.

Blank 1: Invested, Contributed, or Paid-in

The legal capital per share of stock that is assigned when the corporation is first established is referred to as _______________ _________________________.

Blank 1: par Blank 2: value

Select all that apply LLCs and LLPs share which of the following characteristics? Double taxation avoidance Limited number of owners LImited liability Unlimited number of owners Double taxation

Double taxation avoidance LImited liability Unlimited number of owners

True or false: A 100% stock dividend requires the same record keeping as a stock split.

False

The acronym "IPO" stands for Initial property outcome Initial public offering Internal public operations Internal process management

Initial public offering

Select all that apply The rights of common stockholders typically include which of the following? Right to vote for corporate directors. Right to distribution of assets in liquidation. Right to receive a percentage of net income each year. Right to dividends when declared.

Right to vote for corporate directors. Right to distribution of assets in liquidation. Right to dividends when declared.

Who owns and controls a corporation? Creditors Managers Board of directors Shareholders

Shareholders

Match each term with its definition. Authorized shares

Total number of shares available to sell as indicated in the company's articles of incorporation

___________________ investors are wealthy individuals in the business community willing to risk investment funds on a promising business venture.

angel

A business that is organized as a separate legal entity with limited liability for its owners is a . proprietorship. partnership. corporation.

corporation.

A stock dividend causes a stockholder's percentage ownership in a company to ______. remain the same decrease increase

remain the same

Green Company declares and issues a 20% stock dividend. The stock dividend will cause total stockholders' equity to increase decrease remain the same

remain the same

Green Company declares and issues a 20% stock dividend. The stock dividend will cause total assets to decrease. remain the same. increase.

remain the same.

Multiple Choice Question Green Company declares and issues a 20% stock dividend. The stock dividend will cause total assets to decrease. increase. remain the same.

remain the same.

Another common term for stockholders' equity is: investment equity undistributed equity retained equity shareholders' equity

shareholders' equity

A ______ stock dividend is less than 25% of the outstanding shares of stock. small intermediary large treasury

small

The statement of shareholders' equity reports the changes to assets over the period. the revenues and expenses for the period. assets, liabilities, and owners' equity for the period. the changes in each shareholder equity account.

the changes in each shareholder equity account.

Shares of stock previously sold by the corporation that are repurchased are called additional paid-in capital. treasury stock. investments in securities. available for sale securities.

treasury stock.

Shareholders influence a company by voting to establish corporate policies. appointing the top management of the company. voting for the officers who manage the company. voting for the board of directors.

voting for the board of directors.

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

Credit common stock for the par amount.

Ima Rich purchased 100 shares of Stockits, Inc.'s $1 par value common stock for $5 per share. Which statement is true regarding the effect of this transaction on Stockits' financial statements? A gain on sale of stock will be reported on the income statement. Stockholders' equity on the balance sheet decreases. The investing activities section of the statement of cash flows increases. Stockholders' equity on the balance sheet increases.

Stockholders' equity on the balance sheet increases.

For a specific corporation, the total number of shares available to sell are referred to as: authorized issued outstanding

authorized

The stockholders' equity section of the balance sheet presents the change in each equity account over time. balance of each equity account at a point in time. change in each revenue and expense account over time. balance of each revenue and expense account at a point in time.

balance of each equity account at a point in time.

A small stock dividend is valued at par value. net present value. book value. market value.

market value.

If a corporation repurchases its own common stock, the stock is referred to as: investment in common stock treasury stock preferred stock common stock

treasury stock

Match the source of capital with the account in which it is recognized. Invested capital

Common stock

Only ______________________ common shares are eligible to receive dividends.

Blank 1: outstanding

True or false: Some states allow corporations to issue no-par value common stock.

True Reason: Since par value is less meaningful today, some states no longer require a specified legal value per share.

Which of the following provides additional financing to a firm in exchange for a percentage ownership in the company before it issues stock through an initial public offering? S corporation Venture capital firm Limited liability company Limited liability partnership

Venture capital firm

No-par value stock is common stock that: has not been assigned a par value has no current value is not publicly traded

has not been assigned a par value

Select all that apply Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The journal entry to record this transaction includes: $10,000 credit to Treasury stock. $10,000 credit to Cash. $1,000 debit to Treasury stock. $1,000 credit to Treasury stock. $10,000 debit to Treasury stock. $1,000 debit to Cash.

$10,000 credit to Cash. $10,000 debit to Treasury stock.

Wok N Roll, Inc. began on January 1, 2018 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $100 par value, 5%, cumulative preferred stock. No dividends were declared in 2018 or 2019. In 2020, Wok N Roll declared and paid dividends to common and preferred stockholders. A $0.50 dividend was paid to common stockholders. Assuming all shares originally issued are outstanding, the total dividend declared and paid in 2020 equals: $65,000 $50,500 $55,000 $50,000

$65,000 Reason: Cumulative preferred stock receives 1,000 shares x $100 par x 5% x 3 years and common stock receives 100,000 shares x $0.50.

Which of the following companies typically are subject to double taxation? Sole proprietorships Corporations Partnerships

Corporations

An accumulated deficit in retained earnings indicates that the company has net losses. net income for the period. fewer assets than stockholders' equity. no liabilities.

net losses.

The term "dividends in arrears" refers to preferred stock dividends that are: declared and already paid declared but not yet paid not paid in a given year

not paid in a given year

A stock dividend typically causes the stock price to ______. remain the same increase decrease

decrease

Select all that apply A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document? Corporate charter Corporate proxy Corporate tax return Articles of incorporation

Corporate charter Articles of incorporation

Select all that apply Justin Corp. issues 10,000 shares of $1 par value common stock for $5 per share. The journal entry to record this transaction will include which of the following? Credit to common stock $10,000 Credit to additional paid-in capital $40,000 Credit to common stock $50,000 Credit to other comprehensive income $40,000

Credit to common stock $10,000 Credit to additional paid-in capital $40,000

Select all that apply Which of the following are sources of shareholders' equity? Assets Retained earnings Paid-in capital Liabilities

Retained earnings Paid-in capital

Select all that apply The rights of common stockholders typically include which of the following? Right to distribution of assets in liquidation. Right to vote for corporate directors. Right to dividends when declared. Right to receive a percentage of net income each year.

Right to distribution of assets in liquidation. Right to vote for corporate directors. Right to dividends when declared.

Which of the following is included in the rights of common stockholders? Right to restrict preferred stock. Right to dividend payment every year. Right to purchase assets of the corporation. Right to vote

Right to vote

Select all that apply The dividend payment date is when: retained earnings is increased. cash is decreased. dividends payable is increased. retained earnings is decreased. cash is increased. dividends payable is decreased.

cash is decreased. dividends payable is decreased.

The dividend payment date is when ______.

cash is paid to satisfy the dividend liability Reason: The date of record is when the list is finalized to determine who is to receive the dividend. The dividend payment date is when the dividend is paid and is recorded with a debit to Dividends Payable (-L) and a credit to Cash (-A).

Select all that apply The journal entry to record reissuing treasury stock at a price below the cost of the treasury stock includes: credit to Common Stock credit to Treasury Stock credit to Additional Paid-in Capital debit to Additional Paid-in Capital debit to Cash

credit to Treasury Stock debit to Additional Paid-in Capital debit to Cash

A stock dividend ______. increases each stockholder's ownership percentage has no effect on each stockholder's ownership percentage causes total stockholders' equity to increase causes total stockholders' equity to decrease

has no effect on each stockholder's ownership percentage Reason: A stock dividend reduces Retained Earnings (-SE) and increases Common Stock (+SE). The stockholders receive the same percentage so their percentage ownership remains the same. Reason: A stock dividend reduces Retained Earnings (-SE) and increases Common Stock (+SE) so that SE remains the same.

The most important advantage to the corporate form of business is regulation. double taxation. limited liability. ease of formation.

limited liability. Reason: Regulation is a disadvantage to the corporate form of business. Reason: Double taxation is a disadvantage for corporations.

Stockit, Inc. issued 100,000 shares of the 1,000,000 shares authorized. Stockit has repurchased 10,000 of its shares. The number of shares authorized represents the: number of shares that have been repurchased. number of shares sold. maximum number of shares Stockit is allowed to sell.

maximum number of shares Stockit is allowed to sell.

Stock splits have the following effects on stockholders' equity decrease in retained earnings increase in retained earnings decrease in total stockholders' equity increase in common stock no change to total stockholders' equity increase in total stockholders' equity

no change to total stockholders' equity

Stock splits have the following effects on stockholders' equity increase in retained earnings decrease in total stockholders' equity decrease in retained earnings increase in total stockholders' equity no change to total stockholders' equity increase in common stock

no change to total stockholders' equity

Green Company declares and issues a 20% stock dividend. The stock dividend will cause total stockholders' equity to increase remain the same decrease

remain the same

Preferred stock tends to have attributes of common stock only. treasury stock. both bonds and common stock. bonds only.

both bonds and common stock.

________________________ capital is the amount of money paid into a company by its owners.

Blank 1: Invested, Contributed, or Paid-in

Select all that apply Select those statements below that are true about cash dividends. On the date of record, retained earnings is decreased. On the payment date, current assets are decreased. On the payment date, retained earnings is decreased. On the declaration date, liabilities are increased.

On the payment date, current assets are decreased. On the declaration date, liabilities are increased.

Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of the balance sheet? The sequence is unimportant Common stock Preferred stock

Preferred stock

Which of the following shares are eligible to receive dividends? Issued shares Outstanding shares Authorized shares Treasury shares

Outstanding shares

Canton has 60,000 shares of $10 par stock issued and outstanding. Canton declares a 2-for-1 stock split but for convenience accounts for it as a 100% stock dividend. What is the par value per share and number of shares outstanding after the stock split? $10 par; 120,000 shares $5 par; 60,000 shares $10 par; 60,000 shares $5 par; 120,000 shares

$10 par; 120,000 shares

Refurbish, Inc. bought 1,000 shares of its own stock for $8,000. Later it resold the shares for $10,000. The effect of the sale of treasury stock on the accounting equation includes a(n) $10,000 decrease in stockholders' equity. $8,000 decrease in stockholders' equity. $8,000 increase in stockholders' equity. $10,000 increase in stockholders' equity.

$10,000 increase in stockholders' equity. Reason: Treasury stock decreases $8,000, which increases stockholders' equity; Additional paid-in capital increases by $2,000 ($10,000-8,000), which increases stockholders' equity.

Select all that apply Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes: $100,000 credit to Preferred stock. $5,000 credit to Preferred stock. $110,000 debit to Cash. $10,000 credit to Additional paid-in capital - preferred. $100,000 debit to Cash.

$100,000 credit to Preferred stock. $110,000 debit to Cash. $10,000 credit to Additional paid-in capital - preferred.

Select all that apply Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $5 per share. The effect of this transaction on the accounting equation includes a: $50,000 increase in total liabilities. $50,000 decrease in total stockholders' equity. $10,000 increase in total stockholders' equity. $50,000 increase in total stockholders' equity. $50,000 increase in total assets. $10,000 increase in total assets.

$50,000 increase in total stockholders' equity. $50,000 increase in total assets. Reason: The entry includes a $50,000 debit to Cash (+A) and a $10,000 credit to Common Stock (+SE) and $40,000 to Additional Paid-In Capital (+SE). Liabilities are not affected. Reason: The entry cause stockholders' equity to increase, not decrease, by $50,000 (=$10,000 Common Stock + $40,000 Additional Paid-in Capital.)

Select all that apply Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $5 per share. The effect of this transaction on the accounting equation includes a: $50,000 increase in total liabilities. $50,000 increase in total stockholders' equity. $10,000 increase in total stockholders' equity. $10,000 increase in total assets. $50,000 decrease in total stockholders' equity. $50,000 increase in total assets.

$50,000 increase in total stockholders' equity. $50,000 increase in total assets. Reason: The entry includes a $50,000 debit to Cash (+A) and a $10,000 credit to Common Stock (+SE) and $40,000 to Additional Paid-In Capital (+SE). Liabilities are not affected. Reason: The entry includes a $50,000, not $10,000, debit to Cash (+A). Reason: The entry cause stockholders' equity to increase, not decrease, by $50,000 (=$10,000 Common Stock + $40,000 Additional Paid-in Capital.)

Xavier Inc. has $10 million par value, 6% cumulative preferred stock outstanding. During the current year, the board of directors declares $2 million in dividends. No dividends were declared for the previous year. Dividends payable to common stockholders during the current year will be: $1 million $1.4 million $1.2 million $800,000

$800,000 Reason: $2 mill - ($10 million x 0.06 x 2 years)

Xavier Inc. has $10 million par value, 6% cumulative preferred stock outstanding. During the current year, the board of directors declares $2 million in dividends. No dividends were declared for the previous year. Dividends payable to common stockholders during the current year will be: $1.2 million $1.4 million $800,000 $1 million

$800,000 Reason: $2 mill - ($10 million x 0.06 x 2 years)

Select all that apply X-Co issued 1,000 shares of its 5%, $10 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this event includes: $100,000 credit to Preferred stock. $90,000 credit to Additional paid-in capital. $100,000 debit to Cash. $10,000 credit to Preferred stock. $90,000 debit to Cash.

$90,000 credit to Additional paid-in capital. $100,000 debit to Cash. $10,000 credit to Preferred stock.

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares. 910,000 100,000 1,000,000 90,000 10,000

100,000 Reason: The number of shares authorized equals 1,000,000 which is the maximum shares the company is allowed to sell. Of the 1,000,000 shares, the company has sold 100,000 and bought back 10,000 leaving 90,000 shares outstanding. The total issued shares is the full 100,000.

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares. 55,000 50,000 105,000 95,000 45,000

45,000 Reason: The 45,000 shares outstanding equals the number issued of 50,000 minus the 5,000 shares bought back by the company.

Bank, Rupp & Baroque, Inc. began on January 1, 2018 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $50 par value, 6% cumulative preferred stock. No dividends were declared in 2018. In 2019, Bank, Rupp & Baroque declared and paid a $1.00 dividend to its common stockholders. Which of the following is true? Dividends payable should be reported on the December 31, 2019 balance sheet. Dividends payable should be reported on the December 31, 2018 balance sheet. Dividends in arrears should be disclosed in the notes to the 2018 financial statements. Dividends expense should be reported on the income statement for the year ended December 31, 2018.

Dividends in arrears should be disclosed in the notes to the 2018 financial statements.

Match the preferred stock feature with the correct description. Cumulative

During the current year, Petra Inc. pays dividends that were not declared last year

True or false: A corporation is owned by debt and equity holders.

False

True or false: An asset's book value is usually equal to its market value.

False Reason: That is only true on the date of purchase; subsequent to purchase, book value and market value frequently are not identical.

Which of the following is typically presented first in the equity section of the balance sheet? Preferred stock Retained earnings Common stock Treasury stock

Preferred stock

Match the magnitude of the stock dividend with the correct measurement. Large stock dividend

Recognized at par value

Match stock splits and stock dividends with their characteristics. Stock dividends

Require a journal entry

Match stock splits and stock dividends with their characteristics. Instructions Stock dividends

Require a journal entry

Match the source of capital with the account in which it is recognized. Earned capital

Retained earnings

Which of the following has limited liability for its owners, but passes income through to its investors and avoids double taxation? partnership proprietorship C corporation S corporation

S corporation

Match the term with the preferred stock characteristic. Instructions Convertible

Shares can be converted for common stock

Select all that apply Shareholders' equity consists of which of the following items? Amounts earned by the corporation Amounts borrowed by the corporation Amounts invested by shareholders Amounts of assets purchased by the corporation

Amounts earned by the corporation Amounts invested by shareholders

Select all that apply Shareholders' equity consists of which of the following items? . Amounts borrowed by the corporation Amounts earned by the corporation Amounts of assets purchased by the corporation Amounts invested by shareholders

Amounts earned by the corporation Amounts invested by shareholders

Select all that apply Shareholders' equity consists of which of the following items? Amounts of assets purchased by the corporation Amounts invested by shareholders Amounts borrowed by the corporation Amounts earned by the corporation

Amounts invested by shareholders Amounts earned by the corporation

Select all that apply Which of the following are included in the duties of the board of directors? Appoint officers to manage the corporation. Manage the daily activities of the corporation. Establish corporate policies. Appoint the members of the board of directors.

Appoint officers to manage the corporation. Establish corporate policies.

Select all that apply Which of the following are included in the duties of the board of directors? Appoint the members of the board of directors. Manage the daily activities of the corporation. Appoint officers to manage the corporation. Establish corporate policies.

Appoint officers to manage the corporation. Establish corporate policies.

Select all that apply A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document? Articles of incorporation Corporate charter Corporate tax return Corporate proxy

Articles of incorporation Corporate charter

How is treasury stock reported in the financial statements? As an expense for other comprehensive income. As a direct reduction to retained earnings. As a contra-asset account. As a contra equity account.

As a contra equity account.

Multiple Choice Question How should cash dividends be reported on the statement of shareholders' equity? As a reduction of retained earnings. As a reduction of common stock. As a reduction of comprehensive income. As a reduction of treasury stock.

As a reduction of retained earnings.

______________________ _______________________ firms provide additional financing to start up corporations.

Blank 1: Venture Blank 2: Capital

Cumulative preferred stock is entitled to receive current dividends plus dividends in _____________________ before any future common dividends can be paid.

Blank 1: arrears

A(n) _________________balance in retained earnings represents an accumulated deficit.

Blank 1: debit or negative

Dilution Solutions, Inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. The journal entry to record this transaction includes a $5,000 _______________ to Treasury Stock.

Blank 1: debit, dr, or increase

Dilution Solutions, Inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. The journal entry to record this transaction includes a $5,000 _________________ to Treasury Stock.

Blank 1: debit, dr, or increase

Dilution Solutions, Inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. The journal entry to record this transaction includes a $5,000 ________________________ to Treasury Stock.

Blank 1: debit, dr, or increase

Preferred stock has a mixture of attributes of both equity and _____________________

Blank 1: debt, liabilities, bonds, or liability

When a noncash asset is distributed to stockholders, it is called a property _______________________

Blank 1: dividend

Corporations may be ______________________ held or ____________________ held.

Blank 1: publicly, public, or publically Blank 2: privately, private, or privatly

A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as ______________________ earnings.

Blank 1: retained or reinvested

Match stock splits and stock dividends with their characteristics. Instructions Stock splits and stock dividends

Cause total stockholders' equity to remain the same

Select all that apply Which of the following accounts are classified as shareholders' equity? Common stock Bonds payable Additional paid-in capital Investments in securities Retained earnings

Common stock Additional paid-in capital Retained earnings

Limited liability and ease of raising outside capital are advantages of this business form: Corporation Partnership Sole Proprietorship

Corporation

Select all that apply Farley Corp. has 50,000 shares of $1 par value common stock issued and outstanding. Farley declares a 10% stock dividend when the fair value of the stock is $9 per share. Which of the following entries will be included in the entries required to record the declaration and payment of the stock dividend? Credit additional paid-in capital $40,000. Debit retained earnings $5,000. Credit common stock $5,000. Debit stock dividends $45,000. Credit common stock $45,000.

Credit additional paid-in capital $40,000. Credit common stock $5,000. Debit stock dividends $45,000.

Select all that apply Farley Corp. has 50,000 shares of $1 par value common stock issued and outstanding. Farley declares a 10% stock dividend when the fair value of the stock is $9 per share. Which of the following entries will be included in the entries required to record the declaration and payment of the stock dividend? Debit retained earnings $5,000. Credit common stock $45,000. Credit common stock $5,000. Debit stock dividends $45,000. Credit additional paid-in capital $40,000.

Credit common stock $5,000. Debit stock dividends $45,000. Credit additional paid-in capital $40,000.

Mars Inc. issues 5,000 shares of no par stock for $100,000. Which of the following entries is required? Debit additional paid-in capital. Credit cash. Debit common stock. Credit common stock. Credit additional paid-in capital.

Credit common stock.

Select all that apply Justin Corp. issues 10,000 shares of $1 par value common stock for $5 per share. The journal entry to record this transaction will include which of the following? Credit to additional paid-in capital $40,000 Credit to other comprehensive income $40,000 Credit to common stock $50,000 Credit to common stock $10,000

Credit to additional paid-in capital $40,000 Credit to common stock $10,000

Select all that apply When a corporation issues shares of common stock for an amount above par, which of the following entries occur? Credit to common stock Credit to revenue Credit to retained earnings Credit to additional paid-in capital

Credit to common stock Credit to additional paid-in capital

Select all that apply Justin Corp. issues 10,000 shares of $1 par value common stock for $5 per share. The journal entry to record this transaction will include which of the following? Credit to other comprehensive income $40,000 Credit to common stock $50,000 Credit to common stock $10,000 Credit to additional paid-in capital $40,000

Credit to common stock $10,000 Credit to additional paid-in capital $40,000

Select all that apply Knorr issues 1,000 shares of $2 par value common stock for $10 per share. The journal entry to record this transaction will include which of the following? Credit to common stock $10,000 Credit to retained earnings $8,000 Credit to common stock $2,000 Credit to additional paid-in capital $8,000

Credit to common stock $2,000 Credit to additional paid-in capital $8,000

Peter Inc. issues 15,000 shares of no par stock for $500,000. Common stock should be: Debited for $500,000 neither debited nor credited since no par value was assigned to the shares Credited for $500,000 Credited for $15,000 Debited for $15,000

Credited for $500,000

In year 1, Goal Corp. purchases 1,000 shares of treasury stock for $10 per share. In year 2, Goal reissues 500 shares of the treasury stock for $13 per share. In year 3, Goal reissues 200 shares of its treasury stock for $8 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries? Debit additional paid-in capital $1,500. Debit additional paid-in capital $400. Debit common stock $1,000. Debit retained earnings $1,600.

Debit additional paid-in capital $400. Reason: The shares were originally purchased for $10 per share. They were sold for $8 per share. Therefore the debit to paid-in capital is $400 (($10-$8) x 200 shares)

Select all that apply On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. The journal entry required on March 1, 2018, will include which of the following entries? Debit dividends $3,000. Credit dividends payable $3,000. Debit cash $3,000. Credit cash $3,000.

Debit dividends $3,000. Credit dividends payable $3,000.

Gosling Corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of $0.10 share. Which of the following entries is required at the date of declaration? Debit dividends $6,000. Credit cash $8,000. Credit dividends payable $8,000. Debit dividends $10,000.

Debit dividends $6,000. Reason: 60,000 shares outstanding x $0.10 (no cash is paid on date of declaration) Reason: 60,000 shares outstanding x $0.10

On April 1, 2018, Rawlings declares a dividend of $0.30 per share. Rawlings has 100,000 shares authorized, and 40,000 issued and outstanding. The date of record is April 28, and the payment date is May 15. Which of the following entries is included in the journal entry on May 15? Credit common stock $30,000. Credit cash $30,000. Debit retained earnings $12,000. Debit dividends payable $12,000.

Debit dividends payable $12,000. Reason: 40,000 x $.30 = $12,000

Select all that apply When a cash dividend is declared and paid in the same year, the total effects on the balance sheet include which of the following? Decrease assets. Decrease stockholders' equity. Decrease net income. Increase liabilities.

Decrease assets. Decrease stockholders' equity.

Select all that apply When a cash dividend is declared and paid in the same year, the total effects on the balance sheet include which of the following? Decrease stockholders' equity. Decrease net income. Decrease assets. Increase liabilities.

Decrease stockholders' equity. Decrease assets.

Select all that apply Preferred stockholders usually have preference over common stockholders with respect to which items? Distribution of assets in liquidation Issuance of additional shares Dividends Issuance of additional debt

Distribution of assets in liquidation Dividends

Which financial statement summarizes the changes in the balance of each stockholders' equity account? Both the balance sheet and the statement of stockholders' equity Statement of stockholders' equity only Balance sheet - stockholders' equity section only

Statement of stockholders' equity only

Match the date with the related event. Date of record

Stock records are finalized to determine which stockholders are to receive payment

When a company declares and pays a cash dividend, what are the financial statement effects? Assets increase. Net income decreases. Liabilities increase. Stockholders' equity decreases.

Stockholders' equity decreases.

Ima Rich purchased 100 shares of Stockits, Inc.'s $1 par value common stock for $5 per share. Which statement is true regarding the effect of this transaction on Stockits' financial statements? A gain on sale of stock will be reported on the income statement. Stockholders' equity on the balance sheet decreases. Stockholders' equity on the balance sheet increases. The investing activities section of the statement of cash flows increases.

Stockholders' equity on the balance sheet increases. Reason: Stockit does not report gains or losses on the issuance of its common stock. The entry includes a $500 debit to Cash and a $100 credit to Common Stock and $400 to Additional Paid-In Capital.

Ima Rich purchased 100 shares of Stockits, Inc.'s $1 par value common stock for $5 per share. Which statement is true regarding the effect of this transaction on Stockits' financial statements? Stockholders' equity on the balance sheet increases. A gain on sale of stock will be reported on the income statement. The investing activities section of the statement of cash flows increases. Stockholders' equity on the balance sheet decreases.

Stockholders' equity on the balance sheet increases. Reason: Stockit does not report gains or losses on the issuance of its common stock. The entry includes a $500 debit to Cash and a $100 credit to Common Stock and $400 to Additional Paid-In Capital.

Match the date with the related event. Declaration date

The board of directors officially approves a dividend

Match each term with its definition. Outstanding shares

The number of shares issued less treasury shares repurchased by the corporation

Select all that apply Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders? The right to convert the shares to common shares A variable interest rate that increased each year The right to redeem the preferred shares for cash

The right to convert the shares to common shares The right to redeem the preferred shares for cash

Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following is true? This entry is correct. Total stockholders' equity will be overstated. Total assets will be overstated. Total liabilities will be understated.

This entry is correct.

When a company repurchases its own securities, the stock is recorded in which account? Trading securities Investments Common stock Treasury stock

Treasury stock

Select all that apply Which of the following will change the balance of a stockholders' equity account category? Bonds are issued Treasury stock is resold at cost Cash dividends Preferred stock is issued

Treasury stock is resold at cost Cash dividends Preferred stock is issued

True or false: Common shares issued with a stated value are recorded in the same manner as par value stock.

True

True or false: The board of directors is responsible for establishing corporate policies.

True

True or false: Typically the balance in the additional paid-in capital account will be larger than the common stock account of a company that issues par value stock.

True Reason: Common stock is recorded at par value and will generally be smaller than additional paid-in capital.

True or false: No gain or loss is reported when treasury stock is reissued because GAAP does not consider transactions between a corporation and its owners to be profit-making activities.

True Reason: GAAP does not allow gains or losses to be reported when a corporation reissues its treasury stock.

When does a dividend become a liability to a corporation? On the ex-dividend date On the last day of the fiscal year At the end of each quarter When it is declared by the board of directors

When it is declared by the board of directors

If a company repurchases its shares of stock, the shares are reported as a reduction of retained earnings. a contra equity account—treasury stock. a dividend in the current year. an expense on the income statement.

a contra equity account—treasury stock.

The effect of a large stock dividend on the accounting equation includes ______ in retained earnings. a decrease an increase no change

a decrease

Select all that apply The effect of a large stock dividend on the accounting equation includes: a decrease in retained earnings. no effect on total stockholders' equity. a decrease in total stockholders' equity. an increase in common stock. a decrease in total assets

a decrease in retained earnings. no effect on total stockholders' equity. an increase in common stock.

Under IFRS, preferred stock is typically reported as: a liability stockholders' equity an asset

a liability

Under IFRS, preferred stock is typically reported as: an asset a liability stockholders' equity

a liability

For U.S. GAAP reporting purposes, mandatorily redeemable preferred stock is classified as common stock. other comprehensive income. preferred stock. a liability.

a liability.

When treasury stock is purchased, the cost of treasury stock is reported as a reduction in shareholders' equity. a reduction of common stock. a contra-asset account. a reduction to retained earnings.

a reduction in shareholders' equity.

Select all that apply Canton, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. Mr. Smart, the bookkeeper, recorded this transaction with a $100,000 debit to Cash and a $100,000 credit to Common stock. As a result of this entry, total stockholders' equity will be understated. additional paid-In capital will be understated. common stock will be overstated. total stockholders' equity will be overstated. total assets will be overstated.

additional paid-In capital will be understated. common stock will be overstated. Reason: Common stock is overstated and additional paid-in capital is understated, but total SE is correct.

For most companies that issue par-value common stock, which account balance is typically the highest? common stock both are approximately equal additional paid-in capital

additional paid-in capital

The journal entry to record the resale of treasury stock below cost will result in a debit to cash and: a loss treasury stock additional paid-in capital

additional paid-in capital

The journal entry to record the resale of treasury stock below cost will result in a debit to cash and: treasury stock a loss additional paid-in capital

additional paid-in capital

When treasury shares are reissued for an amount greater than cost, the amount over the cost increases the investment account. additional paid-in capital. retained earnings. gain on sale of treasury stock.

additional paid-in capital.

Select all that apply The effect of a large stock dividend on the accounting equation includes: an increase in common stock. a decrease in total assets. a decrease in retained earnings. a decrease in total stockholders' equity. no effect on total stockholders' equity.

an increase in common stock. a decrease in retained earnings. no effect on total stockholders' equity.

A wealthy individual in the business community who risks investment funds on promising new businesses is referred to as a(n) limited liability corporation. bondholder. angel investor. venture capital firm.

angel investor.

Dividends ______ paid on treasury shares. are not are

are not

The number of shares authorized is set forth in the company's: articles of incorporation general journal general ledger

articles of incorporation

The total number of shares that a company may sell is referred to as __________ shares.

authorized

A corporation may repurchase its shares of stock because management want to manipulate the price of the stock and record gains on the income statement. want to increase its investments in trading securities. believes the market price of the stock is undervalued. needs additional current assets on the balance sheet.

believes the market price of the stock is undervalued.

Preferred stock carries priority over common stock: only when a corporation is dissolved both for dividends and at dissolution only when dividends are declared and paid

both for dividends and at dissolution

Preferred stock carries priority over common stock: only when dividends are declared and paid only when a corporation is dissolved both for dividends and at dissolution

both for dividends and at dissolution

Additional reporting requirements for corporations serve to protect primarily investors both investors and creditors primarily creditors

both investors and creditors

Research shows that which stock dividends tend to cause a drop in the stock price of the company declaring the dividend? both large and small stock dividends small stock dividends only large stock dividends only

both large and small stock dividends

Research shows that which stock dividends tend to cause a drop in the stock price of the company declaring the dividend? small stock dividends only both large and small stock dividends large stock dividends only

both large and small stock dividends

A frequent reason for a stock split is to issue more shares of stock so investors have more value. shift amounts from retained earnings to other equity accounts. give the investors an extra dividend for the year. cause the market price per share to decline.

cause the market price per share to decline.

The journal entry to record a large stock dividend includes a debit to Stock Dividends and a credit to: additional paid-in capital common stock retained earnings cash

common stock

The journal entry to record a large stock dividend includes a debit to Stock Dividends and a credit to: cash common stock retained earnings additional paid-in capital

common stock

The journal entry to record a large stock dividend includes a debit to Stock Dividends and a credit to: cash retained earnings common stock additional paid-in capital

common stock

The journal entry to record a large stock dividend includes a debit to Stock Dividends and a credit to: common stock retained earnings additional paid-in capital cash

common stock

Additional taxes and more paperwork are the two primary disadvantages of this business form: partnership corporation sole proprietorship

corporation

Select all that apply The market value of equity is equal to the product of these two factors: number of shares issued current stock price par value of stock number of shares outstanding

current stock price number of shares outstanding

A ______ balance in retained earnings indicates an accumulated deficit. credit debit

debit

Select all that apply The journal entry to record a large stock dividend includes: credit to Cash debit to Stock Dividends credit to Additional paid-in capital credit to Common stock debit to Common stock

debit to Stock Dividends credit to Common stock

Select all that apply The journal entry to record a large stock dividend includes: credit to Cash debit to Stock Dividends credit to Additional paid-in capital debit to Common stock credit to Common stock

debit to Stock Dividends credit to Common stock

Select all that apply The journal entry to record a large stock dividend includes: debit to Common stock credit to Cash debit to Stock Dividends credit to Common stock credit to Additional paid-in capital

debit to Stock Dividends credit to Common stock

Select all that apply Munster Inc. pays its attorney fees of $12,000 by issuing 1,000 shares of $1 par value common stock. The shares have a current market value of $12 per share. Munster's journal entry to recognize the issuance of stock should include: debit to legal fees for $1,000 debit to legal fees for $12,000 credit to additional paid in capital for $11,000 credit to common stock for $1,000 credit to common stock for $12,000

debit to legal fees for $12,000 credit to additional paid in capital for $11,000 credit to common stock for $1,000

Dividends payable is recorded as a credit on the . date of record. date of payment. declaration date. last day of the fiscal year.

declaration date.

The date on which a cash dividend becomes a liability to a corporation is the ex-dividend date. declaration date. payment date. record date.

declaration date.

A stock dividend typically causes the stock price to ______. decrease remain the same increase

decrease

Select all that apply The declaration and payment of a cash dividend ultimately causes a(n): decrease in Cash. increase in Treasury stock. decrease in stockholders' equity. decrease in Treasury stock. decrease in Retained earnings.

decrease in Cash. decrease in stockholders' equity. decrease in Retained earnings.

Select all that apply T-balls, Inc. bought 1,000 shares of its own stock for $11 per share. Later it reissued all 1,000 shares for $10 per share. The effect of reissuing the treasury stock includes a(n): decrease in additional paid-in capital of $1,000. increase in total assets of $10,000. decrease in retained earnings of $1,000. increase in total stockholders' equity of $11,000.

decrease in additional paid-in capital of $1,000. increase in total assets of $10,000. Reason: Additional paid-in capital decreases $1,000, not retained earnings. Reason: Stockholders' equity increases by $10,000, not $11,000. Treasury stock decreases $11,000, which increases stockholders' equity; additional paid-in capital decreases $1,000 ($11,000-10,000), which decreases stockholders' equity.

Select all that apply Stock dividends have the following effects on stockholders' equity increase in retained earnings decrease in retained earnings increase in common stock increase in total stockholders' equity no change to total stockholders' equity decrease in total stockholders' equity

decrease in retained earnings increase in common stock no change to total stockholders' equity

Select all that apply A corporate charter: describes the business activities. specifies the number of shares outstanding. is required only for publicly-traded corporations. names the board of directors. specifies the shares of stock to be issued.

describes the business activities. names the board of directors. specifies the shares of stock to be issued.

Select all that apply Investors who acquire preferred stock: have preference over creditors. will receive more dividends than common stockholders. do not have voting rights. have preference as to dividends.

do not have voting rights. have preference as to dividends.

Select all that apply Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights: guaranteed dividends first right to specified amount of dividends preference in distribution of assets during dissolution of corporation consistently higher return than earned by common stockholders

first right to specified amount of dividends preference in distribution of assets during dissolution of corporation

Select all that apply Preferred stock: generally does not have voting rights. is useful for raising capital without reducing common stockholders' control. has preference as to dividends. must be issued before any common stock is issued.

generally does not have voting rights. is useful for raising capital without reducing common stockholders' control. has preference as to dividends.

A stock dividend ______. increases each stockholder's ownership percentage causes total stockholders' equity to increase has no effect on each stockholder's ownership percentage causes total stockholders' equity to decrease

has no effect on each stockholder's ownership percentage Reason: A stock dividend reduces Retained Earnings (-SE) and increases Common Stock (+SE). The stockholders receive the same percentage so their percentage ownership remains the same. Reason: A stock dividend reduces Retained Earnings (-SE) and increases Common Stock (+SE) so that SE remains the same.

No-par value stock is common stock that: has no current value is not publicly traded has not been assigned a par value

has not been assigned a par value

Preferred stockholders: must receive more dividends per share than the common stockholders. must receive dividends every year. have the right to receive dividends only in the years the board of directors declares dividends. have the right to receive dividends only if there are enough dividends to pay the common stockholders too.

have the right to receive dividends only in the years the board of directors declares dividends.

Select all that apply The effect on the accounting equation of declaring a dividend that will be paid at a later date includes a(n): decrease in assets. increase in assets. decrease in liabilities. increase in liabilities. increase in stockholders' equity. decrease in stockholders' equity.

increase in liabilities. decrease in stockholders' equity. Reason: The entry to record the declaration of a dividend is a debit to Dividends declared (a decrease in stockholders' equity) and a credit to Dividends payable (an increase in liabilities). Assets will later decrease when the dividends are paid.

Select all that apply T-balls, Inc. bought 1,000 shares of its own stock for $11 per share. Later it reissued all 1,000 shares for $10 per share. The effect of reissuing the treasury stock includes a(n): increase in total assets of $10,000. decrease in retained earnings of $1,000. increase in total stockholders' equity of $11,000. decrease in additional paid-in capital of $1,000.

increase in total assets of $10,000. decrease in additional paid-in capital of $1,000.

Select all that apply Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by: (Select all that apply.) increasing additional paid-in capital. decreasing total stockholders' equity. increasing total liabilities. increasing total assets. increasing retained earnings. increasing total stockholders' equity.

increasing additional paid-in capital. increasing total assets. increasing total stockholders' equity.

Select all that apply Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by: (Select all that apply.) decreasing total stockholders' equity. increasing total assets. increasing retained earnings. increasing additional paid-in capital. increasing total liabilities. increasing total stockholders' equity.

increasing total assets. increasing total stockholders' equity.

Select all that apply Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by: (Select all that apply.) increasing retained earnings. increasing total assets. increasing additional paid-in capital. increasing total stockholders' equity. decreasing total stockholders' equity. increasing total liabilities.

increasing total assets. increasing total stockholders' equity.

Select all that apply Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by: (Select all that apply.) increasing total liabilities. decreasing total stockholders' equity. increasing retained earnings. increasing total stockholders' equity. increasing additional paid-in capital. increasing total assets.

increasing total stockholders' equity. increasing additional paid-in capital. increasing total assets.

The amount of money paid into a company by its owners is referred to as: retained earnings owners' surplus investment in common stock invested capital

invested capital

Select all that apply Treasury stock: is a contra-equity account. reduces stockholders' equity. is the number of shares authorized minus the number of shares issued. is shares of stock no longer outstanding.

is a contra-equity account. reduces stockholders' equity. is shares of stock no longer outstanding.

The number of shares outstanding equals the number of shares ______. authorized plus the number of shares issued authorized minus the number of shares issued issued minus the number of shares in treasury issued plus the number of shares in treasury

issued minus the number of shares in treasury Reason: The number of shares outstanding equals the number of shares issued minus the number of shares bought back by the company. The number of shares authorized is the maximum number of shares the company is allowed to sell.

The most important advantage to the corporate form of business is double taxation. ease of formation. limited liability. regulation.

limited liability.

In a corporation, the stockholders' potential loss is limited to the amount of the investment. unlimited with responsibility for all corporate losses. limited to the amount of net income.

limited to the amount of the investment.

A common reason for companies repurchasing their own shares is that they need additional current assets on the balance sheet. may want to redistribute corporate cash without paying dividends. want to manipulate the price of the stock and record gains on the income statement. want to increase its investments in trading securities.

may want to redistribute corporate cash without paying dividends.

A common reason for companies repurchasing their own shares is that they want to increase its investments in trading securities. want to manipulate the price of the stock and record gains on the income statement. need additional current assets on the balance sheet. may want to redistribute corporate cash without paying dividends.

may want to redistribute corporate cash without paying dividends.

Select all that apply A corporate charter: specifies the number of shares outstanding. names the board of directors. specifies the shares of stock to be issued. describes the business activities. is required only for publicly-traded corporations.

names the board of directors. specifies the shares of stock to be issued. describes the business activities.

A credit balance in retained earnings indicates that net income has exceeded the dividends distributed to shareholders. dividends were not declared during the year. treasury stock was not purchased. liabilities are less than shareholders' equity.

net income has exceeded the dividends distributed to shareholders.

Select all that apply Stock dividends have the following effects on stockholders' equity increase in total stockholders' equity decrease in total stockholders' equity no change to total stockholders' equity decrease in retained earnings increase in retained earnings increase in common stock

no change to total stockholders' equity decrease in retained earnings increase in common stock

Stockit Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock outstanding. In its first 2 years of business, Stockit did not declare a dividend. Stockit's balance sheets at the end of its first 2 years of business should include: no dividends payable dividends expense dividends dividends payable

no dividends payable

An S corporation enjoys which benefit? limited liability no double taxation unlimited number of shareholders

no double taxation

Common stock that has not been assigned a par value is referred to as: registered stock no-par stock zero-value stock penny stock

no-par stock

Retained earnings of $100,000 represent a corporation's cumulative earnings ______ and is shown on the ______. declared; statement of retained earnings and income statement not paid out by dividends; balance sheet and statement of retained earnings in cash; balance sheet

not paid out by dividends; balance sheet and statement of retained earnings Reason: Dividends, not earnings, are "declared". Retained earnings represents the earnings "kept" by the company and is shown on the balance sheet and the statement of retained earnings.

Redeemable preferred stock with a fixed redemption date is reported on the balance sheet as a liability. on the income statement as revenue. on the income statement as an expense. on the balance sheet with shareholders' equity. on the balance sheet as an asset.

on the balance sheet as a liability.

Large stock dividends are recorded at _______ and small stock dividends are recorded at ______. stock price; market value cost; cost par value; par value cost; par value par value; market value

par value; market value

The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the ex-dividend date. record date. declaration date. payment date.

record date.

Select all that apply Special contractually granted features can make preferred stock: extraordinary redeemable convertible cumulative

redeemable convertible cumulative

Corporations will declare a stock split in order to ______. increase the corporation's retained earnings reduce the market price of a share of stock and make it more attractive to some investors increase a stockholders' ownership percentage in the corporation increase the market price of a share of stock to help maximize the stockholders' wealth

reduce the market price of a share of stock and make it more attractive to some investors Reason: The stockholders receive the same percentage so their percentage ownership remains the same. Reason: A stock dividend increases the number of shares outstanding and is recorded with a debit to Retained Earnings (-SE) and credit to Common Stock (+SE). The increase in shares should cause a decrease, not increase, in the price since there are more shares outstanding and no change in total SE.

A company's past profits that are not paid out in dividends are ______. cash reported as income for the current year dividends retained earnings

retained earnings

A company's past profits that are not paid out in dividends are ______. reported as income for the current year dividends retained earnings cash

retained earnings

Earned capital increases ____. retained earnings accumulated other comprehensive income common stock

retained earnings

A corporation's accumulated, undistributed net income or loss is referred as accumulated comprehensive income. retained earnings. comprehensive income. corporate dividends.

retained earnings.

Amounts earned by the corporation and not paid out in dividends are referred to as retained earnings. shareholders' equity. paid-in capital. common stock.

retained earnings.

Amounts earned by the corporation and not paid out in dividends are referred to as shareholders' equity. paid-in capital. common stock. retained earnings.

retained earnings.

Which of the following will decrease the par value of shares? both a stock split and a stock dividend large stock dividend stock split

stock split

Which of the following will decrease the par value of shares? both a stock split and a stock dividend stock split large stock dividend

stock split

Which of the following will decrease the par value of shares? large stock dividend both a stock split and a stock dividend stock split

stock split

Select all that apply Refurbish, Inc. reissued 1,000 shares of its treasury stock for $10,000. Prior to the reissuance, the Treasury stock balance was $12,000, which included the $8,000 cost of the 1,000 shares reissued. As a result of this transaction, Refurbish's: net income on the income statement will be $2,000 higher. stockholders' equity on the balance sheet will be $10,000 higher. treasury stock on the balance sheet will equal $4,000. stockholders' equity on the balance sheet will be $8,000 higher.

stockholders' equity on the balance sheet will be $10,000 higher. treasury stock on the balance sheet will equal $4,000.

The statement of shareholders' equity reports the changes in each shareholder equity account. assets, liabilities, and owners' equity for the period. the changes to assets over the period. the revenues and expenses for the period.

the changes in each shareholder equity account.

A debit balance in retained earnings indicates that dividends were paid during the year. revenues were greater than expenses. the company has an accumulated deficit. the company is expanding.

the company has an accumulated deficit.

A debit balance in retained earnings indicates that dividends were paid during the year. the company has an accumulated deficit. the company is expanding. revenues were greater than expenses.

the company has an accumulated deficit.

A 2-for-1 stock split increases the marketability of the stock because investors have twice as many shares to sell. shareholders receive cash. the market price per share decreases. the new shares are restricted.

the market price per share decreases.

Historically, par value was considered to be the amount of cash that must be maintained in the corporation for contingencies. the maximum amount of money the company could borrow. the amount of retained earnings that must be appropriated for future dividends. the value of the company's shares of stock.

the value of the company's shares of stock.

Select all that apply Attracting outside investment is easier for corporations than for sole proprietorships and partnerships because: investments in common stock are more secure than other investments transfer of ownership interest does not change the organization's operations ownership interest can easily be transferred among individual investors raising capital by selling common stock is less costly

transfer of ownership interest does not change the organization's operations ownership interest can easily be transferred among individual investors

Select all that apply The advantages to the corporate form of business include transferability of ownership. ease of raising capital. double taxation for the corporation.

transferability of ownership. ease of raising capital.

If a corporation repurchases its own common stock, the stock is referred to as: investment in common stock preferred stock common stock treasury stock

treasury stock

Select all that apply Refurbish, Inc. reissued 1,000 shares of its treasury stock for $10,000. Prior to the reissuance, the Treasury stock balance was $12,000, which included the $8,000 cost of the 1,000 shares reissued. As a result of this transaction, Refurbish's: treasury stock on the balance sheet will equal $4,000. stockholders' equity on the balance sheet will be $10,000 higher. net income on the income statement will be $2,000 higher. stockholders' equity on the balance sheet will be $8,000 higher.

treasury stock on the balance sheet will equal $4,000. stockholders' equity on the balance sheet will be $10,000 higher.

True or false: The total net income earned by a corporation on behalf of its shareholders and not paid out as dividends is called retained earnings.

true

Select all that apply What types of companies frequently do not pay dividends? mature companies unprofitable companies growth companies

unprofitable companies growth companies

Shareholders influence a company by appointing the top management of the company. voting for the officers who manage the company. voting to establish corporate policies. voting for the board of directors.

voting for the board of directors.

Select all that apply The journal entry to record reissuing treasury stock at a price below the cost of the treasury stock includes: credit to Treasury Stock credit to Additional Paid-in Capital credit to Common Stock debit to Cash debit to Additional Paid-in Capital

credit to Treasury Stock debit to Cash debit to Additional Paid-in Capital

Select all that apply Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by: (Select all that apply.) increasing additional paid-in capital. increasing total stockholders' equity. increasing retained earnings. increasing total assets. decreasing total stockholders' equity. increasing total liabilities.

increasing additional paid-in capital. increasing total stockholders' equity. increasing total assets.

Xavier Inc. has $10 million par value, 6% cumulative preferred stock outstanding. During the current year, the board of directors declares $2 million in dividends. No dividends were declared for the previous year. Dividends payable to preferred stockholders during the current year will be: $1 million $2 million $600,000 $1.2 million

$1.2 million Reason: $10 million x 0.06 x 2 years

Canton has 60,000 shares of $10 par stock issued and outstanding. Canton declares a 2-for-1 stock split but for convenience accounts for it as a 100% stock dividend. What is the par value per share and number of shares outstanding after the stock split? $10 par; 120,000 shares $5 par; 120,000 shares $5 par; 60,000 shares $10 par; 60,000 shares

$10 par; 120,000 shares

Select all that apply Refurbish, Inc., bought 1,000 shares of its own stock for $8,000. Later it resold the shares for $10,000. The journal entry to record the sale of treasury stock includes a(n) ______. $10,000 credit to Treasury stock $2,000 credit to Additional paid-in capital $10,000 debit to Treasury stock $8,000 credit to Treasury stock $2,000 debit to Additional paid-in capital

$2,000 credit to Additional paid-in capital $8,000 credit to Treasury stock

Allison Company's board of directors assigns a $2 stated value to its no-par common stock. If Allison sells 10,000 shares for $10 per share, the Common Stock account should be credited for: $20,000 $80,000 $100,000

$20,000

How should cash dividends be reported on the statement of shareholders' equity? As a reduction of comprehensive income. As a reduction of treasury stock. As a reduction of common stock. As a reduction of retained earnings.

As a reduction of retained earnings.

____________________ ________________________ represents a corporation's own stock that it has reacquired.

Blank 1: Treasury Blank 2: stock

Unpaid dividends on cumulative preferred stock are referred to as dividends in _______________________

Blank 1: arrears

Select all that apply Limited liability companies and limited liability partnerships share which of the following characteristics? LImited personal liability No double taxation Limited number of owners Unlimited number of owners Double taxation

LImited personal liability No double taxation Unlimited number of owners

Match the type of information provided about stockholders' equity with the correct financial statement Balance sheet

Shows the balance of each equity account at a specific point of time.

Match the type of information provided about stockholders' equity with the correct financial statement Statement of Stockholders' Equity

Shows the change in the account balance of each equity account over time.

Match the term with the preferred stock characteristic. Instructions Redeemable

Stocks can be turned in or re-purchased on demand

Match each term with its definition. Issued shares

Total number of shares of stock issued (sold) to investors

Additional reporting requirements of corporations are intended to ensure adequate disclosure of information needed by investors and creditors. that the company continues to be profitable. that the company has many investment opportunities.

adequate disclosure of information needed by investors and creditors.

Dividends ______ paid on treasury shares.

are not

Select all that apply Special contractually granted features can make preferred stock: convertible extraordinary redeemable cumulative

convertible redeemable cumulative

common stock and retained earnings

highest

Match the level of risk exposure for investors with the respective type of investment. Bonds

lowest

At the date of purchase, an asset's book value typically is equal to its: historical cost opportunity cost value in use market value

market value

Select all that apply Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The journal entry to record this transaction includes: $10,000 credit to Treasury stock. $1,000 debit to Treasury stock. $1,000 credit to Treasury stock. $1,000 debit to Cash. $10,000 credit to Cash. $10,000 debit to Treasury stock.

$10,000 credit to Cash. $10,000 debit to Treasury stock.

_______________ ______________________ represents a corporation's own stock that it has reacquired.

Blank 1: Treasury Blank 2: stock

Select all that apply Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders? The right to redeem the preferred shares for cash A variable interest rate that increased each year The right to convert the shares to common shares

The right to redeem the preferred shares for cash The right to convert the shares to common shares

Preferred stock generally (has/does not have) ______ voting rights and (has/does not have) ______ preference as to dividends. does not have; has does not have; does not have has; does not have has; has

does not have; has

Treasury stock is reported in the financial statements as a noncurrent liability. an expense on the income statement. a contra equity account. an increase in current assets.

a contra equity account.

Corporations raise capital by purchasing new assets. repurchasing treasury stock. issuing stock.

issuing stock.

_____________________ stock dividends are recorded at market value, while ________________ stock dividends are recorded at par value.

Blank 1: Small Blank 2: large

Select all that apply On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. The journal entry required on April 1, 2018, will include which of the following entries? Debit dividends payable $3,000. Debit cash $3,000. Debit retained earnings $3,000. Credit dividends payable $3,000. Credit cash $3,000.

Debit dividends payable $3,000. Credit cash $3,000.

Select all that apply Canton, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. Mr. Smart, the bookkeeper, recorded this transaction with a $100,000 debit to Cash and a $100,000 credit to Common stock. As a result of this entry, total assets will be overstated. total stockholders' equity will be overstated. total stockholders' equity will be understated. additional paid-In capital will be understated. common stock will be overstated.

additional paid-In capital will be understated. common stock will be overstated.

When a corporation distributes assets of the company to its investors, it is referred to as a(n) dividend. warrant. expense. option.

dividend.

Preferred stock generally (has/does not have) ______ voting rights and (has/does not have) ______ preference as to dividends. has; has does not have; has has; does not have does not have; does not have

does not have; has

Which of the following transactions is the most common type of property dividend? A distribution of additional shares of a corporation's stock to current shareholders of the corporation. A distribution of shares of stock held as an investment to stockholders of the corporation. A distribution of stock options to current employees as incentive compensation. A distribution of stock to corporate executives as an inducement to extend their contract with the corporation.

A distribution of shares of stock held as an investment to stockholders of the corporation.

The total number of shares that a company may sell is referred to as _____________________ shares.

Blank 1: authorized

Double taxation represents a disadvantage for _____________________

Blank 1: corporations or corporation

A(n) _______________ balance in retained earnings represents an accumulated deficit.

Blank 1: debit or negative

Select all that apply Which of the following are sources of shareholders' equity? Assets Liabilities Paid-in capital Retained earnings

Paid-in capital Retained earnings

Select all that apply An accumulated deficit ______. indicates that no dividends have been declared indicates accumulated net losses means that Retained earnings has a debit balance means that Retained earnings has a credit balance

indicates accumulated net losses means that Retained earnings has a debit balance

Diva, Inc. declared and paid $10,000 of dividends in 2018. The dividends result in a reduction of revenues. retained earnings. common stock. net income.

retained earnings.

Dividends payable is a(n) _____________________ account with a normal ________________________ balance and is recorded on the declaration date.

Blank 1: liability Blank 2: credit

If we multiply the current stock price per share and the number of shares outstanding, we will be able to calculate the ________ value of equity.

Blank 1: market or fair

Shareholders' equity is another common term for ______________ equity.

Blank 1: stockholders', owners', or stockholder

A corporation is owned by its ________________________.

Blank 1: stockholders, shareholders, or investors

The contra account used to record a company's repurchase of its own common stock is the _____________________ stock account.

Blank 1: treasury

Match the term with the preferred stock characteristic. Instructions Cumulative

Dividends not declared during one year are payable when declared in subsequent periods

Match the date with the related event. Payment date

Dividends payable is decreased

Gosling Corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of $0.10 share. Which of the following entries is required at the date of declaration? Credit dividends payable $8,000. Debit dividends $10,000. Credit cash $8,000. Debit dividends $6,000.

Debit dividends $6,000. Reason: 60,000 shares outstanding x $0.10 (no cash is paid on date of declaration)

On January 1, 2018, Bank & Rupp, Inc. issued 100,000 shares of $1 par value common stock and 1,000 shares of $50 par value, 6%, cumulative preferred stock. No dividends were declared in 2018. In 2019, Bank & Rupp declared and paid dividends to both common and preferred stockholders. A $1 dividend was paid to common stockholders. Assuming all shares originally issued are outstanding, the total dividend paid to the preferred stockholders equals $2,000 $3,000 $6,000 $1,000

$6,000 Reason: Since the preferred stock is cumulative, $6,000 (=1,000 shares x $50 par x 6% x 2 years) must be paid to preferred stockholders before the common stockholders may receive a $1 dividend.

A distribution of assets to shareholders is referred to as a(n) _____________.

Blank 1: dividend or dividends

Additional shares issued to existing owners without an exchange of cash may be in the form of stock _____________ or stock ______________.

Blank 1: dividends or dividend Blank 2: splits or split

For U.S. GAAP reporting purposes, mandatorily redeemable preferred stock is classified as other comprehensive income. preferred stock. common stock. a liability.

a liability.

Under IFRS, preferred stock dividends typically are reported as: accumulated comprehensive income a reduction of retained earnings interest expense an extraordinary loss

interest expense

The exchange of a company's common shares for non-cash consideration should be recognized at the ____________________ value of the goods or services received.

Blank 1: fair or market

Which account is a stockholders' equity account? Additional paid-in capital Lease obligations Bonds payable Investments in common stock

Additional paid-in capital

Which account is a stockholders' equity account? Lease obligations Investments in common stock Additional paid-in capital Bonds payable

Additional paid-in capital

Which of the following transactions are classified as a stock dividend? A distribution of stock options to current employees as incentive compensation. A distribution of stock to corporate executives as an inducement to extend their contract with the corporation. A distribution of additional shares of a corporation's stock to current shareholders of the corporation. A distribution of shares of stock held as an investment to stockholders of the corporation.

A distribution of additional shares of a corporation's stock to current shareholders of the corporation.

A journal entry is required for which of the following? A large stock dividend Both a stock large stock dividend and a stock split A stock split

A large stock dividend

Which of the following occurs on the date of record? A list of shareholders that are entitled to receive a dividend is made. A liability is recorded for the future dividend payment. Dividends are paid to shareholders. The board of directors announces that a dividend will be paid.

A list of shareholders that are entitled to receive a dividend is made.

Which of the following occurs on the date of record? The board of directors announces that a dividend will be paid. A list of shareholders that are entitled to receive a dividend is made. Dividends are paid to shareholders. A liability is recorded for the future dividend payment.

A list of shareholders that are entitled to receive a dividend is made.

Assuming that two companies operating in the same industry are profitable, which of the following companies is more likely to pay dividends to its stockholders? . A mature company A growing company

A mature company

Select all that apply Limited liability companies and limited liability partnerships share which of the following characteristics? Double taxation LImited personal liability No double taxation Unlimited number of owners Limited number of owners

LImited personal liability No double taxation Unlimited number of owners

Match the preferred stock feature with the correct description. Convertible

Marcus turn in his preferred stock and receives common shares in exchange.

Match the preferred stock feature with the correct description. Redeemable

Nurbert Inc. demands return of preferred stock at the pre-specified amount