Chapter 15 Accounting

Noncumulative preferred dividends in arrears A. must be paid before any other cash dividends can be distributed. B. are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend. C. are disclosed as a liability until paid. D. are not paid or disclosed.

Are not paid or disclosed

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? A. Outstanding shares B. Unissued shares C. Authorized shares D. Issued shares

Authorized shares

Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called A. par value per share. B. stated value per share. C. book value per share. D. fair value per share.

Book value per share

The residual interest in a corporation belongs to the A. common stockholders. B. preferred stockholders. C. management. D. creditors.

Common Stockholders

An entry is not made on the A. date or payment and date of declaration. B. date of record. C. date of declaration. D. date of payment

Date of Record

Cash dividends are paid on the basis of the number of shares A. issued. B. authorized. C. outstanding. D. outstanding less the number of treasury shares.

Outstanding

If management wishes to "capitalize" part of the earnings, it may issue a A. stock dividend. B. property dividend. C. cash dividend. D. liquidating dividend.

Stock Dividend

Which dividends do not reduce stockholders' equity? A. Liquidating dividends B. Property dividends C. Cash dividends D. Stock dividends

Stock Dividends

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as A. a footnote. B. an increase in stockholders' equity. C. an increase in current liabilities for the current portion and long-term liabilities for the long-term portion. D. an increase in current liabilities.

a Footnote

The balance in Common Stock Dividend Distributable should be reported as a(n) A. deduction from common stock issued. B. addition to capital stock. C. contra current asset. D. current liability.

addition to capital stock

The payout ratio can be calculated by dividing A. dividends per share by earnings per share. B. cash dividends by net income less preferred dividends. C. cash dividends by market price per share. D. dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends.

cash dividends by net income less preferred dividends.

Stockholders' equity is generally classified into two major categories: A. contributed capital and appropriated capital. B. appropriated capital and retained earnings. C. retained earnings and unappropriated capital. D. earned capital and contributed capital.

earned capital and contributed capital

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is A. the pro forma method. B. the proportional method. C. the incremental method. D. either the proportional method or the incremental method.

either the proportional method or the incremental method.

Treasury shares are shares A. held as an investment by the treasurer of the corporation. B. issued and outstanding. C. issued but not outstanding. D. held as an investment of the corporation.

issued but not outstanding.

A dividend which is a return to stockholders of a portion of their original investments is a A. participating dividend. B. liquidating dividend. C. liability dividend. D. property dividend.

liquidating dividend.

The cumulative feature of preferred stock A. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends. B. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock. C. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders. D. limits the amount of cumulative dividends to the par value of the preferred stock.

requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders

The preemptive right of a common stockholder is the right to A. share proportionately in corporate assets upon liquidation. B. exclude preferred stockholders from voting rights. C. share proportionately in any new issues of stock of the same class. D. receive cash dividends before they are distributed to preferred stockholders.

share proportionately in any new issues of stock of the same class

Dividends are not paid on A. noncumulative preferred stock. B. cumulative preferred stock. C. nonparticipating preferred stock. D. treasury common stock.

treasury common stock