Chapter 11 A-304

What is par value

nominal value per share of stock has no relationship to the market value of stock

After a 3-for-1 stock split, the par value of each stock is Blank______ the par value prior to the split. Multiple choice question. 3 times the same as one third

one third

Vests, Inc. has 1,000 shares of 5%, par $100, non-cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. Vests declared a $12,500 dividend. How much of the dividend is allocated to the preferred and common shares? (Check all that apply.) Multiple select question. $5,000 is allocated to the preferred stock. $7,500 is allocated to the common stock. $1,250 is allocated to the preferred stock. $11,250 is allocated to the common stock. $0 is allocated to the common stock. $12,500 is allocated to the preferred stock.

$5,000 is allocated to the preferred stock. $7,500 is allocated to the common stock.

Wok N Roll, Inc. began on January 1, Year 1 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 Year 1 or Year 2. In Year 3, Wok N Roll declared and paid a $0.50 dividend to its common stockholders. Assuming all shares originally issued are outstanding, the total dividend declared and paid in Year 3 equals Blank______. Multiple choice question. $50,000 $65,000 $50,500 $55,000

$65,000

Common stock's par value Blank______. (Check all that apply.) Multiple select question. equals the amount of cash contributed by shareholders affects how common stock is recorded was introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful because states use other means to prevent stockholders from removing capital from financially distressed companies

affects how common stock is recorded was introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful because states use other means to prevent stockholders from removing capital from financially distressed companies

Preferred stockholders Blank______. Multiple choice question. must receive more dividends per share than the common stockholders 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 must receive dividends every year

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

An IPO stands for a(n) " " " " offering

initial public

Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The effect of this transaction on the accounting equation, using the cost method, includes a Blank______. (Check all that apply.) Multiple select question. $9,000 decrease in Additional Paid-In Capital $10,000 decrease in Cash $10,000 increase in Treasury Stock $1,000 increase in stockholders' equity

$10,000 decrease in Cash $10,000 increase in Treasury Stock

Atomic, Inc. had 10,000 shares of $1 par value common stock outstanding prior to a 2-for-1 stock split. As a result of the stock split Blank______. Multiple choice question. 5,000 shares are outstanding with a $2 par value 20,000 shares are outstanding with a $0.50 par value the common stock balance doubles the journal entry includes a debit to Common Stock for $10,000 the number of shares authorized is halved

20,000 shares are outstanding with a $0.50 par value

In an IPO of shares, Timmy Hilfigure purchased 1,000 shares of Abner Crummie, Inc. for $5,000. Eight years later, Timmy Hilfigure sold the 1,000 shares for $8,000 to Ralph Loring. How does the sale from Timmy to Ralph impact Abner? Multiple choice question. Abner Crummie, Inc., will record a decrease in Cash of $8,000. Abner Crummie, Inc., will record a $3,000 gain. Abner Crummie, Inc., will record a $3,000 loss. Abner Crummie, Inc., will not be directly affected by this transa

Abner Crummie, Inc., will not be directly affected by this transaction.

Stock options Blank______. (Check all that apply.) Multiple select question. provide the holder with the option to purchase stock at a specified price during a specified period of time are a corporation's option to issue both preferred and common stock are often given to employees as part of their compensation are stock dividends in which additional shares equal to more than 20-25% of the shares outstanding are issued

provide the holder with the option to purchase stock at a specified price during a specified period of time are often given to employees as part of their compensation

A corporation is owned by its..

shareholders

Stock options Blank______. (Check all that apply.) Multiple select question. provide the holder with the option to purchase stock at a specified price during a specified period of time are stock dividends in which additional shares equal to more than 20-25% of the shares outstanding are issued are often given to employees as part of their compensation are a corporation's option to issue both preferred and common stock

provide the holder with the option to purchase stock at a specified price during a specified period of time are often given to employees as part of their compensation

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 a Blank______. (Check all that apply.) Multiple select question. $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

Lox, Stock and 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 Blank______shares. Multiple choice question. 50,000 105,000 55,000 45,000 95,000

45,000

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 Blank______ shares. Multiple choice question. 90,000 910,000 10,000 100,000 1,000,000

100,000 these are shares sold not share outstanding

Preferred stock Blank______. (Check all that apply.) Multiple select question. generally does not have voting rights is useful for raising capital without reducing common stockholders' control must be issued before any common stock is issued has preference as to dividends

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

On January 1, Year 1, 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 Year 1. In Year 2, Bank & Rupp declared and paid a $1 dividend to its common stockholders. Assuming all shares originally issued are outstanding, the total dividend paid to the preferred stockholders equals Blank______.

6,000 how??

Ownership structure can vary from one company to another, but the most basic form of corporation offers Blank______. Multiple choice question. common stock preferred stock treasury stock net income

common stock

Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by Blank______. (Check all that apply.) Multiple select question. increasing total liabilities increasing Retained Earnings increasing total assets increasing Additional Paid-in Capital increasing total stockholders' equity decreasing total stockholders' equity

increasing total assets increasing Additional Paid-in Capital increasing total stockholders' equity

Stock options are given to Blank______. Multiple choice question. increase retained earnings. provide a corporation with the choice of issuing different types of stock, such as preferred stock. provide incentives for employees to work harder. increase a corporation's liquidity.

provide incentives for employees to work harder.

The purpose of the statement of stockholders' equity is to Blank______. Multiple choice question. reconcile net income with taxable income and retained earnings report the changes and the sources of the changes of shareholder equity accounts report the additional expenses of the company that were not accrued during the year reconcile the balance sheet with the statement of cash flows

report the changes and the sources of the changes of shareholder equity accounts

Vests, Inc. has 1,000 shares of 5%, par $100 preferred stock and 10,000 shares of $1 par value common stock outstanding. If the common stockholders received $2 per share in dividends, then the preferred stock dividend was Blank______ per share. Multiple choice question. $5 $2 $100 $1

5

Common stock's par value is Blank______. Multiple choice question. the same as a bond's par value an insignificant amount specified in the corporate charter the common stock's average price the same as the common stock's market price

an insignificant amount specified in the corporate charter

Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The journal entry to record this transaction includes a Blank______. (Check all that apply.) Multiple select question. $1,000 debit to Treasury Stock $1,000 credit to Treasury Stock $10,000 credit to Cash $10,000 debit to Treasury Stock $10,000 credit to Treasury Stock $1,000 debit to Cash

$10,000 credit to Cash $10,000 debit to Treasury Stock

Vests, Inc. has 1,000 shares of 5%, par $100, non-cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. Vests declared a $12,500 dividend. How much of the dividend is allocated to the preferred and common shares? (Check all that apply.) Multiple select question. $0 is allocated to the common stock. $7,500 is allocated to the common stock. $1,250 is allocated to the preferred stock. $12,500 is allocated to the preferred stock. $11,250 is allocated to the common stock. $5,000 is allocated to the preferred stock.

$7,500 is allocated to the common stock. $5,000 is allocated to the preferred stock.

Treasure This, Inc. had total assets of $100,000, liabilities of $60,000 and stockholders' equity of $40,000 before repurchasing 1,000 shares of its $1 par value common stock for $5 each. After this repurchase, total assets equal Blank______, liabilities equal Blank______ and stockholders' equity equals Blank______. Multiple choice question. $105,000; $60,000; $45,000 $100,000; $55,000; $45,000 $100,000; $65,000; $35,000 $95,000; $60,000; $35,000

$95,000; $60,000; $35,000

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? (Check all that apply.) Multiple select question. Credit to Common stock $10,000 Credit to Common stock $40,000 Credit to Common stock $50,000 Credit to Additional paid-in capital $40,000

Credit to Common stock $10,000 Credit to Additional paid-in capital $40,000

When does a corporation record an increase in Dividends Payable? Multiple choice question. On the date of issuance On the date of record On the date of payment On the declaration date

On the declaration date

Stockable, Inc. began business on January 1 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of 6%, noncumulative, $100 par value preferred stock. No dividends were declared in the first year of operations. In the second year of operations, Stockable declared and paid a $0.50 dividend to its common stockholders. Which of the following is true? Multiple choice question. If there are enough dividends remaining after the common stockholders receive $0.50 per share, the preferred stockholders will be paid. Stockable, Inc. has no legal obligation to pay a dividend to preferred stockholders in the first year of operations. A liability for dividends owed to preferred stockholders must be recorded in the first year of operations.

Stockable, Inc. has no legal obligation to pay a dividend to preferred stockholders in the first year of operations.

Treasury stock represents Blank______. (Check all that apply.) Multiple select question. a contra-equity account the amount paid to acquire US treasury stock the amount paid for stock reacquired and currently held in treasury stock issued in exchange for treasury bills

a contra-equity account the amount paid for stock reacquired and currently held in treasury

Mars Inc. issues 5,000 shares of no par stock for $100,000. Which of the following entries is required? Multiple choice question. Credit Cash Debit Common stock Credit Common stock Credit Additional paid-in capital

credit common stock

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.

debit

A corporation's board of directors could prefer a stock split to a stock dividend because a stock split Blank______. Multiple choice question. does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future increases the market price of the stock reduces retained earnings, so the company pays less taxes increases total stockholders' equity and allows the corporation more flexibility

does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future

A corporation's board of directors could prefer a stock split to a stock dividend because a stock split Blank______. Multiple choice question. increases the market price of the stock reduces retained earnings, so the company pays less taxes does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future increases total stockholders' equity and allows the corporation more flexibility

does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future

Which of the following are typical benefits to being a shareholder? (Check all that apply.) Multiple select question. residual claim voting rights dividends principal interest

residual claim voting rights dividends

The number of shares issued represents the number of shares Blank______. Multiple choice question. repurchased sold less repurchased the company is allowed to sell sold

sold

An IPO Blank______. (Check all that apply.) Multiple select question. stands for issued private options stands for independent public obligations stands for initial public offering is when a private company goes public

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

Which of the following have voting rights in a corporation? Multiple choice question. stockholders creditors both stockholders and creditors

stockholders

A distribution of a company's accumulated prior earnings is a(n)

dividends

A corporation may repurchase its stock in order to Blank______. Multiple choice question. have shares of stock to issue when stock options are exercised make the stock more affordable increase the total stockholders' equity balance and improve the return on equity (ROE) raise extra cash

have shares of stock to issue when stock options are exercised

Par value is also referred to as Blank______. Multiple choice question. additional paid-in capital retained earnings legal capital

legal capital

Atomic, Inc. had 100,000 shares authorized, and 10,000 shares issued and outstanding of its $2 par value common stock. At December 31, Common Stock equaled $20,000 and total stockholders' equity equaled $100,000 prior to a 2-for-1 stock split. As a result of a 2-for-1 stock split, Blank______. (Check all that apply.) Multiple select question. par value equals $1 the Common Stock equals $20,000 stockholders' equity equals $100,000 par value equals $4 the number of shares outstanding equals 20,000 the number of shares outstanding equals 5,000

par value equals $1 the Common Stock equals $20,000 stockholders' equity equals $100,000 the number of shares outstanding equals 20,000

Preferred stock is advantageous in that it Blank______. (Check all that apply.) Multiple select question. receives dividends before creditors are to receive any interest payments has priority over creditors at liquidation has priority over common stock when dividends are declared has priority over common stock at liquidation

has priority over common stock when dividends are declared has priority over common stock at liquidation

Atomic, Inc. had 100,000 shares authorized, and 10,000 shares issued and outstanding of its $2 par value common stock. At December 31, Common Stock equaled $20,000 and total stockholders' equity equaled $100,000 prior to a 2-for-1 stock split. As a result of a 2-for-1 stock split, Blank______. (Check all that apply.) Multiple select question. the number of shares outstanding equals 5,000 par value equals $4 the Common Stock equals $20,000 par value equals $1 stockholders' equity equals $100,000 the number of shares outstanding equals 20,000

the Common Stock equals $20,000 par value equals $1 stockholders' equity equals $100,000 the number of shares outstanding equals 20,000

Why might a corporation repurchase its own stock? (Check all that apply.) Multiple select question. to have shares of stock to issue when stock options are exercised to avoid the dilutive effect of issuing new shares when stock options are exercised to make the stock more affordable to increase the total stockholders' equity balance and improve the return on equity (ROE)

to have shares of stock to issue when stock options are exercised to avoid the dilutive effect of issuing new shares when stock options are exercised