DeRoy- ACC 212- Multiple Choice

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A debit in retained earnings is a ..... A credit in retained earnings is a .....

- loss - increase

A 3-for-1 common stock split does what?

-Increase the number of shares -decrease par value

What makes up the stockholder's equity section on a balance sheet?

-Retained earnings -paid in capital -capital stock

what are the disadvantages of a corporation

-government regulations -additional taxes

what are the advantages of a corporation

-separate legal existence -limited liability of stockholders -transferable ownership rights -ability to acquire capital -continuous life -corporate management

Under the equity method, the stock investments account is increased when the A. investee company reports net income B. investee company reports a loss C. investee company pays a dividend D. stock investment is sold at a gain

A. Investee company reports net income

Trading securities are classified as A. current or short-term investments only B. either short-term or long-term investments C. long-term investments only D. current assets only

A. current or short-term investments only

If 10% of the common stock of an investee company is purchased, the appropriate method of accounting is A. the cost method B. the preparation of consolidated financial statements C. the equity method D. determined by agreement with owners of the remaining stock

A. the cost method

If no-par stock is issued without a stated value, then A. the par value is automatically $1 B. The entire proceeds are considered legal capital C. There is no legal capital D. The corporation is automatically in violation of the state charter

B. The entire proceeds are considered to be legal capital

In accounting for debt investments, entries are made for each of the following except the A. acquisition B. amortization of any discount or premium C. interest revenue D. sale

B. amortization of any discount or premium

Which one of the following is not necessary in order for a corporation to pay a cash dividend A. adequate cash B. approval of stockholders C. declaration of dividends by the board D. retained earnings

B. approval of stockholders

Available for sale securities are classified as A. short-term investments only B. either short-term or long-term investments C. long-term investments only D. current assets only

B. either short-term or long-term investments

The two ways that a corporation can be classified by purpose are A. general and limited B. profit and not-for-profit C. state and federal D. publicly held and privately held

B. profit and not-for-profit

2000 shares of 5%, $10 par value, cumulative preferred stock. What is the annual dividend that needs to be paid to the preferred stockholders A. $5 per share B. $10,000 in total C. $1,000 in total D. $0.05 per share

C. $1000 in total

At the time of the acquisition of a debt investment A. no journal entry is required B. The stock investment account is debited when bonds are purchased C. the historical cost principle applies D. the investment account is Credited for its cost+brokerage fees

C. the historical cost principle applies

When you sell a debt investment you..

Credit: debt investment Debit: cash

the two ways a corporation can be classified by ownership are A. general and limited B. state and federal C. profit and not-for-profit D. publicly held and privately held

D. publicly held and privately held

The dividends are closed, so what are they closed to? Regular dividends are declared out of what? A. Paid in capital of excess B. Treasury stock C. common stock D. retained earnings

D. retained earnings

Under the equity method, the investor records dividends received by crediting A. dividend revenue B. revenue from investment C. investment income D. stock investment

D. stock investments

Corporation invest in other companies for all of the following reasons except.. A. to house excess cash B. to generate earnings C. to meet strategic goals D. to increase trading of the other companies stock

D. to increase the trading of the other companies stock

T/F A 3-for-1 common stock split will increase total stockholder's equity but reduce the par or stated value per share of common stock

False

T/F A corporation incurs income tax expense only if it pays dividends to stockholders

False

T/F A corporation is not an entity which is separate and distinct from its owners

False

T/F If a corporation pays taxes on income, then Shareholder's will not have to pay taxes on the dividends received

False

T/F The stockholder's equity section of a corporation's balance sheet consists of paid-in capital, Retained earnings, and drawings

False

T/F When debt investments are sold, the gain or loss is the difference between the net proceeds and the fair value

False

T/F dividends received on stock investment of less than 20% should be credited to the stock investments account

False

T/F each stockholder has a separate capital account in the stockholder's equity section of the balance sheet

False

T/F in accounting for stock investments of less than 20%, the equity method is used

False

Treasury stock reduces what?

Stockholder's equity

T/F A 10% stock dividend will increase the number of shares outstanding, but the par value will stay the same

True

T/F Dividends are declared out of retained earnings

True

T/F Dividends may be declared and paid in cash or stock

True

T/F Preferred stockholders generally do not have the right to vote for the board of directors

True

T/F Treasury stock is a contra stockholders' equity account

True

T/F When debt investments are sold, the gain or loss is the difference between the net proceeds and the cost

True

T/F a debit balance in the Retained Earnings account is identified as a deficit

True

T/F a major difference among corporations, proprietors, and partnerships is income tax expense

True

T/F according to historical cost principle, brokerage fees should be added to cost of investment

True

T/F cash dividends are not a liability of the corporation until declared by the board of directors

True

T/F the number of common shares outstanding can never be greater than the number of shares issued

True

Stockholders of a corporation directly elect

board of directors

with the cost method when you receive dividends you credit....

dividend revenue

T/F an accounting journal entry should be made to record the total value of shares authorized

false


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