Chapter 10 Accounting
Salty's Seafood has 2,000 shares of $12 par common stock outstanding. During the current year, the company distributed a 10% stock dividend. The market value of the stock at that time was $19/share. After the distribution, Salty's total Stockholders' Equity should increase or decrease by:
$0.
A company issues 55,000 shares of its $5 par common stock for $20 per share. The amount to be debited to Cash is:
$1,100,000.
Stonework Company's outstanding stock is 80 shares of $80, 4% cumulative preferred stock and 2,000 shares of $12 par common stock. Stonework paid $2,000 in cash dividends including one-year dividends in arrears to preferred stockholders. Common stockholders received:
$1,488
HiTech Industries has a $13,000 credit balance in Paid-In Capital-Treasury Stock. It sells 1,000 shares of treasury stock, which the company reacquired at $59/share, for $56/share. After the transaction, what will the balance be in the Paid-In Capital in Excess of Par-Treasury account?
$10,000 credit
Stars, Inc. has declared a $22,000 cash dividend to shareholders. The company has 3,000 shares of $14-par, 9% preferred stock and 12,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $8,000 in arrears?
$11,780 preferred, $10,220 common
Caesar Corporation has 280,000 shares of $9-par common stock outstanding. They have declared a 8% stock dividend. The current market price of the common stock is $14/share. The amount that will be credited to Paid-in Capital in Excess of Par Common Stock on the date of declaration is:
$112,000
Cellars, Inc. Stockholders' Equity section includes the following information: Preferred Stock $24,000 Paid-in Capital in Excess of Par—Preferred 3,000 Common Stock 52,000 Paid-in Capital in Excess of Par—Common 35,000 Retained Earnings 7,500 Total paid-in capital is
$114,000.
Mike's Motors has 220,000 shares of $6-par common stock outstanding. They have declared a 10% stock dividend. The current market price of the common stock is $14/share. The amount that will be credited to Common Stock on the date of declaration is:
$132,000
Lionworks, Inc. issues 5,000 shares of $40 par common stock for $43 per share. The amount credited to paid-in capital in excess of par is:
$15,000.
Evergreen Building, Inc. has declared a $43,000 cash dividend to shareholders. The company has 4,500 shares of $20-par, 5% preferred stock and 20,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears?
$16,500 preferred, $26,500 common
Elite Electrical has 360,000 shares of $3-par common stock outstanding. They have declared a 6% stock dividend. The current market price of the common stock is $8.50/share. The amount that will be debited to Retained Earnings on the date of declaration is:
$183,600.
Cypress Corporation's outstanding stock is 75 shares of $55-par, 7% non-cumulative preferred stock and 2,100 shares of $12-par common stock. Cypress paid $2,500 in dividends during the year. Common stockholders received:
$2,211
The Wellington Winery's Stockholders' Equity section includes the following information: Preferred Stock $15,000 Paid-in Capital in Excess of Par—Preferred 5,000 Common Stock 17,000 Paid-in Capital in Excess of Par—Common 7,000 Retained Earnings 9,000 What was the total selling price of the preferred stock?
$20,000
S&C, Inc. has 420,000 shares of $12-par common stock outstanding. They have declared a 7% stock dividend. The current market price of the common stock is $19/share. The amount that will be credited to Paid-in Capital in Excess of Par Common Stock on the date of declaration is:
$205,800
Taylor Fish Farm's Stockholders' Equity section includes the following information: Preferred Stock $13,000 Paid-in Capital in Excess of Par—Preferred 8,000 Common Stock 18,000 Paid-in Capital in Excess of Par—Common 2,100 Retained Earnings 9,100 What was the total selling price of the preferred stock?
$21,000
Taylor Fish Farm's Stockholders' Equity section includes the following information: Preferred Stock $13,000 Paid-in Capital in Excess of Par—Preferred 6,000 Common Stock 19,000 Paid-in Capital in Excess of Par—Common 4,500 Retained Earnings 9,100 What was the total selling price of the common stock?
$23,500
The Wellington Winery's Stockholders' Equity section includes the following information: Preferred Stock $16,000 Paid-in Capital in Excess of Par—Preferred 6,000 Common Stock 16,000 Paid-in Capital in Excess of Par—Common 8,000 Retained Earnings 9,000 What was the total selling price of the common stock?
$24,000
Charmed, Inc. has 10,000 shares of treasury stock which it purchased for $10/share. It later resold 3,000 of those shares for $18/share. The amount to be credited to Paid-in Capital-Treasury Stock is:
$24,000.
Mike's Motors has 240,000 shares of $5-par common stock outstanding. They have declared a 10% stock dividend. The current market price of the common stock is $11/share. The amount that will be debited to Retained Earnings on the date of declaration is:
$264,000
Charmed, Inc. has a $30,000 credit balance in Paid-In Capital-Treasury Stock. It sells 600 shares of treasury stock, which the company reacquired at $22/share, for $18/share. After the transaction, what will the balance be in the Paid-In Capital in Excess of Par-Treasury account?
$27,600 credit
Sonny's Sails has declared a $44,000 cash dividend to shareholders. The company has 4,000 shares of $20-par, 6% preferred stock and 10,000 shares of $16-par common stock. The preferred stock is non-cumulative. How much will be distributed to the preferred and common stockholders on the date of payment?
$4,800 preferred, $39,200 common
Illusions Corp. issues 8,000 shares of $24 par common stock for $29 per share. The amount credited to paid-in capital in excess of par is:
$40,000
Evergreen Corp. issues 12,000 shares of $5 par common stock for $8.50 per share. The amount credited to paid-in capital in excess of par is:
$42,000
A company issues 15,000 shares of its $22 par common stock for $32 per share. The amount to be debited to Cash is:
$480,000.
Ironworks, Inc. has declared a $21,000 cash dividend to shareholders. The company has 5,000 shares of $15-par, 7% preferred stock and 11,000 shares of $20-par common stock. The preferred stock is non-cumulative. How much will be distributed to the preferred and common stockholders on the date of payment?
$5,250 preferred, $15,750 common
Vintage Boutique's outstanding stock is 90 shares of $110 par, 11% cumulative preferred stock and 2,500 shares of $14 par common stock. Vintage Boutique paid $1,600 in cash dividends during the year. No dividends are in arrears. Common stockholders received:
$511
Dental Designs, Inc. Stockholders' Equity section includes the following information: Preferred Stock $11,000 Paid-in Capital in Excess of Par—Preferred 18,000 Common Stock 19,000 Paid-in Capital in Excess of Par—Common 8,000 Retained Earnings 7,000 Total paid-in capital is:
$56,000.
HiTech Industries has 15,000 shares of treasury cost which it purchased for $63/share. It later resold 3,300 of those shares for $82/share. The amount to be credited to Paid-in Capital-Treasury Stock is:
$62,700.
HiTech Industries reacquired 10,000 shares of its $26-par common stock for $70/share. The debit to Treasury Stock will be:
$700,000
Elite Electrical has 380,000 shares of $4-par common stock outstanding. They have declared a 5% stock dividend. The current market price of the common stock is $7.50/share. The amount that will be credited to common stock on the date of declaration is:
$76,000
Charmed, Inc. reacquired 7,000 shares of its $16-par common stock for $11/share. The debit to Treasury Stock will be:
$77,000.
What are the annual dividends on $22 par preferred 5% stock, if 2,100 shares are authorized and 800 shares have been issued?
$880
If you own 1,200 shares (3% of a corporation's stock) and the corporation issues 11,000 new shares, how many total shares will you have after exercising your preemptive right?
1,530
If you own 700 shares (5% of a corporation's stock) and the corporation issues 17,000 new shares, how many total shares will you have after exercising your preemptive rights?
1,550
Before a 3-for-1 stock split, the shares outstanding were 5,000 shares at $48 par. After the split, what was the par value and number of shares?
15,000 shares and $16/share
Before a 4-for-1 stock split, the shares outstanding were 60,000 shares at $80.00 par. After the split, what was the par value and number of shares?
240,000 shares and $20.00/share
What is the return on equity if sales are $290,000, net income is $49,000 and average common Stockholders' Equity is $188,000? (Round your final answer to one decimal place, X.X%.)
26.1%
7) What is the return on equity if sales are $140,000, net income is $22,700 and average common Stockholders' Equity is $86,000? (Round your final answer to one decimal place, X.X%.)
26.4%
If you own 700 shares (2% of a corporation's stock) and the corporation issues 19,000 new shares, how many of the new shares can you purchase under preemptive right?
380
Before a 5-for-3 stock split, the shares outstanding were 45,000 shares at $15 par. After the split, what was the par value and number of shares? (Round any intermediary calculations to two decimal places, and your final answer to the nearest whole number.)
75,150 shares and $9/share
If you own 1,100 shares (7% of a corporation's stock) and the corporation issues 14,000 new shares, how many of the new shares can your purchase under preemptive right?
980
Which of the following is NOT a date associated with cash dividends? A) Date of issuance B) Date of declaration C) Date of payment D) Date of record
A) Date of issuance
The major parts of the Stockholders' Equity section of the Balance Sheet are: A) Paid-In Capital and Retained Earnings. B) Stock and Retained Earnings. C) Stock, Paid-In Capital and Retained Earnings. D) Authorized Stock and Preferred Stock.
A) Paid-In Capital and Retained Earnings.
Which of the following is NOT an advantage of a corporation? A) Unlimited liability B) Ease of raising capital C) Ease of transfer ownership D) Continuous life
A) Unlimited liability
Which of the following stockholder rights is the one that allows a stockholder to participate in the management of a corporation? A) Vote B) Dividends C) Liquidation D) Preemption
A) Vote
Which of the following is an advantage of a corporation? A) Tax regulations B) Continuous life C) Unlimited liability D) All of the above are advantages
B) Continuous life
Which of the following dates do NOT require a journal entry? A) Date of payment B) Date of record C) Date of declaration D) All dividend dates require a journal entry.
B) Date of record
Which right do preferred stockholders receive before common stockholders? A) Selling rights B) Dividend rights C) Voting rights D) Preemptive rights
B) Dividend rights
Which of the following business types is largest by number? A) Not-for-profits B) Proprietorships and partnerships C) Corporations D) Government entities
B) Proprietorships and partnerships
11) For the current year, Blue Co. had net income of $200,000, beginning Stockholders' Equity $500,000 and ending Stockholders' Equity $535,000. Greene Co. had net income of $100,000, beginning Stockholders' Equity $900,000 and ending Stockholders' Equity $950,000. Which of the following statements is TRUE regarding this scenario?
Blue Co. has a higher level of earnings relative to the amount of stockholders' equity.
Which of the following are considered to be legal entities that exist separate and distinct from their owners? A) Sole proprietorships B) Partnerships C) Corporations D) Organizations with more than 100 partners
C) Corporations
Which of the following business types dominates by the amount of business transacted? A) Partnerships B) Proprietorships C) Corporations D) Government entities
C) Corporations
Which of the following is NOT a reason for a company to purchase treasury stock? A) To reward valued employees B) To avoid a takeover by an outside company C) To buy the stock at a high price to increase total Stockholders' Equity D) To support the company's stock price
C) To buy the stock at a high price to increase total Stockholders' Equity
Which is NOT included in paid-in capital? A) Preferred Stock B) Common Stock C) Cash D) Additional Paid-in Capital
Cash
9) For the current year, Company A had sales of $450,000, net income of $290,000 and average common Stockholders' Equity of $940,000. During the same year, Company B had sales of $200,000, net income of $160,000 and average common Stockholders' Equity of $410,000. Which of the following statements is TRUE regarding this situation?
Company B has a better return on equity, 39.02% compared to Company A's 30.85%.
Evergreen Building, Inc. issued 2,000 shares of $14 par common stock in exchange for a truck with a current market value of $45,000. Which of the following is NOT part of the journal entry for this transaction?
Crediting Common Stock for $45,000
Ironworks, Inc. issued 400 shares of $9 par common stock in exchange for a piece of equipment with a current market value of $5,000. Which of the following is NOT part of the journal entry for this transaction? A) Debiting equipment for $5,000 B) Crediting Common Stock for $5,000 C) Crediting paid-in capital in excess of par-common for $1,400 D) Crediting Common Stock for $3,600
Crediting Common Stock for $5,000
Which of the following is TRUE regarding treasury stock? A) Treasury Stock has a debit balance. B) Treasury Stock is a contra-asset account. C) Treasury Stock is recorded at cost. D) Both A and C are true of Treasury Stock.
D) Both A and C are true of Treasury Stock.
Which is NOT a value placed on a certificate for a share of the company's stock? A) Par B) Stated value C) No par D) Market value
D) Market value
Anderson Industries purchased 600 shares of the company's issued common stock, paying $14 per share. To record the purchase, the journal entry will be:
Debit to Treasury Stock $8,400, credit to Cash $8,400
A company issued 700 shares of $2 par common stock in exchange for a piece of equipment with a current market value of $24,000. Which of the following is the correct journal entry for this transaction?
Debit- Equipment 24,000 Credit -Common Stock 1,400 Paid-in Capital in Excess of Par — Common 22,600
NW Stone Supply issued 50 shares of $14 par common stock in exchange for a piece of equipment with a current market value of $1,000. Which of the following is NOT part of the journal entry for this transaction?
Debiting equipment for $700
Earnings that a stockholder receives from a corporation is an example of which stockholder right?
Dividends
A 2-for-1 stock split will:
Double the number of shares of stock and halve the par value per share.
When a company purchases treasury stock, outstanding stock is computed as:
Issued stock - Treasury stock
Stockholders receiving their proportionate share of any assets left after a company goes out of business is an example of which stockholder right?
Liquidation
Maintaining their proportionate share in the ownership of a corporation when new stock is available to be purchased is an example of which stockholder right?
Preemption
Which of the following would cause the decrease of the par value of a company's stock?
Stock split
What are dividends in arrears?
The portion of an annual dividend on cumulative preferred stock which has not been paid
10) Based on the following information, in which year did the company have the best return on equity? Sales Year 1 $3,000,000 Year 2 $2,000,000 Year 3 $1,100,000 Net Income Year 1 $500,000 Year 2 $500,000 Year 3 $500,000 Average Common Stockholders' Equity Year 1 $2,500,000 Year 2 $2,380,952 Year 3 $2,272,727
Year 3
The number of shares of stock that a corporation is given the right to sell is called:
authorized stock.
Values such as par, stated value, and no-par are assigned based upon:
choice of the organizers of the corporation.
If there is only one class of stock outstanding, such stock would be classified as:
common stock.
The first step in becoming a corporation is to file a(n) _______ with the state government.
corporate charter
TLR Productions issued 40 shares of $16 par value stock to its accountant in full payment for her $1,300 fee for assisting in setting up the new company. The entry to record the issuance of the stock would include a:
credit to Common Stock for $640.
The journal entry to record the distribution of a stock dividend includes a:
credit to Common Stock.
A journal entry for the sale of $10 par-common stock for $18 per share would include a:
credit to Paid-In Capital in Excess of Par-Common Stock.
The entry to record selling 400 shares of $28 stated value common stock for $44 per share would include:
crediting Paid-in Capital in Excess of Stated Value for $6,400.
A type of stock that pays dividends in arrears is:
cumulative preferred stock.
The entry to record TLR, Inc. selling 1,200 shares of $6 par common stock at $10 per share would be to:
debit Cash $12,000; credit Common Stock $7,200; credit Paid-In Capital in Excess of Par-Common Stock $4,800.
Sassycat, Inc. has a $9,000 credit balance in Paid-In Capital - Treasury Stock. It sells 4,500 shares of treasury stock, which the company reacquired at $35/share for $29/share. The journal entry to record this sale is:
debit Cash $130,500, debit Paid-In Capital - Treasury Stock $9,000, debit Retained Earnings $18,000, credit Treasury Stock $157,500.
The entry to record S&C, Inc. selling 1,500 shares of $9 par common stock for $22 per share would be to:
debit Cash $33,000; credit Common Stock $13,500; credit Paid-In Capital in Excess of Par-Common Stock $19,500.
The entry to record selling 800 shares of stated value $37 common stock for $59 per share would be:
debit Cash $47,200; credit Common Stock $29,600; credit Paid-in Capital in Excess of Stated Value-$17,600.
The entry to record selling 700 shares of stated value $50 common stock for $74 per share would be:
debit Cash $51,800; credit Common Stock $35,000; credit Paid-in Capital in Excess of Stated Value-$16,800.
On the date of payment:
debit Dividends Payable and credit Cash.
Caesar's Coffee Co. declared its annual cash dividend on its 3% preferred stock (total par value $90,000) and a $0.25 per share cash dividend on its common stock (50,000 shares outstanding). The journal entry for the declaration date is:
debit Retained Earnings $15,200, credit Dividends Payable - Preferred $2,700, credit Dividends Payable - Common $12,500
On the date of declaration:
debit Retained Earnings and credit Dividends Payable
If shares of preferred stock are sold at par value for cash, the transaction would be entered by:
debiting Cash and crediting Preferred Stock.
The liability "dividend payable" is recognized on the date of:
declaration
Payment of a cash dividend causes a(n):
decrease in an assets
A company has 50,000 shares of $1 par, 10% preferred stock. The 10% refers to the stock's:
dividend rate.
One disadvantage to the corporate form of organization is:
government regulations.
The initial selling price for a share of stock is called the:
issue price
The date of declaration creates a(n) ________ for the corporation.
liability
Authorized capital stock are those shares:
listed in the charter.
A stock split is recorded as a(n):
memorandum entry.
On the date of record:
no entry is required.
The type of stock that does NOT carry paid-in capital in excess of par is called:
no-par stock.
The formula needed to compute "additional paid-in capital in excess of par" is:
number of shares of stock times (selling price per share - par value per share).
Stock that is held by stockholders is called:
outstanding stock.
Stockholders' Equity consists of:
paid-in capital and Retained Earnings.
Accounting for stock at a stated value is almost identical to recording:
par stock.
The formula to determine dividends on par-value preferred stock is:
par value times number of outstanding shares times dividend rate.
In the Stockholders' Equity section of a Balance Sheet:
preferred stock goes first.
When a company issues stock dividends:
retained earnings are decreased.
The basic unit of stock is called a(n):
share
Stockholders will be issued ________ physically or electronically.
stock certificates
Preferred stockholders generally have the same basic rights as common stockholders EXCEPT for:
voting
At least one "class" of stock MUST have:
voting rights.
Stated value is assigned:
when the company decides to issue the stock.
Par value is assigned.
when the corporate charter is filed.
The date of record is the date that:
will determine which shareholders receive the dividends.
