Question 1

The declaration by a corporation's board of directors of a cash dividend on common stock creates a liability on the declaration date.

Accepted Answer

A) True 
 B)False  True

Question 2

The board of directors of Atlantic Corp. does not know whether to declare and pay a cash dividend or to declare and distribute a stock dividend.
Required:
Complete the following chart to show the overall effect on each financial statement item for a cash dividend and a stock dividend. Enter the letter "I" if the effect of the dividend is to increase the financial statement item, a letter "D" if the effect of the dividend is to decrease the financial statement item, or a letter "N" if there is no overall effect. (Hint: Think of the journal entries that would be prepared for a cash dividend and a stock dividend. The overall effect is the net effect from declaration to final payment or distribution.)

Accepted Answer

$$\begin{array}{l}
&\text { Cash Dividend }& \underline { \text { Stock Dividend } }\
\text { Item on Financial Statement } & & \
\text { Assets } & \mathrm { D } & \mathrm { N } \
\text { Liabilities } & \mathrm { N } & \mathrm { N } \
\text { Capital stock issued } & \mathrm { N } & \mathrm { I } \
\text { Retained earnings } & \mathrm { D } & \mathrm { D } \
\text { Total stockholders' equity } & \mathrm { D } & \mathrm { N }
\end{array}$$

Question 3

Katie Company had 40,000 shares of $2 par value common stock outstanding prior to a 40% common stock dividend declaration and distribution. The market value of the common stock on the declaration date was $10. Which of the following statements incorrectly describes the effect of the common stock dividend and declaration?

Accepted Answer

A)  Retained earnings decreased $32,000. 
B)  Capital in excess of par remained the same. 
C) Additional Paid in capital increased $128,000. 
D) Total stockholders' equity remained the same. 
A)  Retained earnings decreased $32,000. 
B)  Capital in excess of par remained the same. 
C) Additional Paid in capital increased $128,000. 
D) Total stockholders' equity remained the same. C

Question 4

A company reported total stockholders' equity of $340,000 on its balance sheet dated December 31, 2014. During the year ended December 31, 2015, the company reported net income of $40,000, declared and paid a cash dividend of $8,000, declared and distributed a 10% stock dividend with a $10,000 total market value, purchased treasury stock costing $12,000, and issued additional common stock for $60,000. What is total stockholders' equity as of December 31, 2015?

Accepted Answer

A)  $432,000. 
B)  $410,000. 
C) $444,000. 
D) $420,000. 
A)  $432,000. 
B)  $410,000. 
C) $444,000. 
D) $420,000.

Question 5

Stockholders' equity decreases when a company purchases treasury stock.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true about a partnership?

Accepted Answer

A)  One capital and one drawings account is used for each partnership. 
B)  The capital account is used to record each partner's investment and that partner's designated share of the earnings. 
C) Partnerships are subject to separate income taxes. 
D) The drawings account is closed to retained earnings at the end of the perioD.The capital account in a partnership keeps track of each partner's capital balance and is affected by partner investments and withdrawals as well as net income. 
A)  One capital and one drawings account is used for each partnership. 
B)  The capital account is used to record each partner's investment and that partner's designated share of the earnings. 
C) Partnerships are subject to separate income taxes. 
D) The drawings account is closed to retained earnings at the end of the perioD.The capital account in a partnership keeps track of each partner's capital balance and is affected by partner investments and withdrawals as well as net income.

Question 7

The charter of Delta Corporation specified a maximum of 25,000 shares of common stock. At the current date, 5,000 shares remain unissued, and 2,000 of the issued shares have been repurchased and are still held by Delta.
Required:
Calculate the number of shares that are:
A. Authorized
B. Issued
C. Held in the treasury
D. Outstanding

Accepted Answer

A. Authorized shares = 25,000 = number i

Question 8

The issue of $1 par value common stock for $10 per share results in a $9 credit to the capital in excess of par account for each share issued.

Accepted Answer

A) True 
 B)False

Question 9

Chicago Clock Corporation issued a 3-for-2 stock split of its common stock, which had a par value of $100 before the split. What dollar amount of retained earnings should be transferred to the common stock account?

Accepted Answer

A)  Par value of $100 per share. 
B)  Market value per share on the issue date. 
C) Half of the previous total amount in the common stock account. 
D) Retained earnings are not transferred to the common stock account. 
A)  Par value of $100 per share. 
B)  Market value per share on the issue date. 
C) Half of the previous total amount in the common stock account. 
D) Retained earnings are not transferred to the common stock account.

Question 10

Net income increases when treasury stock is sold for an amount in excess of its cost.

Accepted Answer

A) True 
 B)False

Question 11

Kirova Company has provided the following information: • Number of issued common shares, 900,000
• Net income, $1,000,000
• Number of authorized common shares, 1,000,000
• Number of outstanding common shares, 800,000
• Number of treasury shares, 100,000
What is Kirova's earnings per share?

Accepted Answer

A)  $1.43 
B)  $1.25 
C) $1.11 
D) $1.00 
A)  $1.43 
B)  $1.25 
C) $1.11 
D) $1.00

Question 12

A company has 10 million common shares authorized and 2.5 million shares issued. The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split. Which of the following is correct?

Accepted Answer

A)  There will be a transfer of $2.5 million from retained earnings to contributed capital. 
B)  For every one share of stock owned, a shareholder will receive four shares and will now own 5 shares of stock. 
C) The shares issued and outstanding will all quadruple while the par value will be reduced to $.25 per share. 
D) The company will be unable to declare a 4-for-1 split because it does not have enough authorized shares to issue. 
A)  There will be a transfer of $2.5 million from retained earnings to contributed capital. 
B)  For every one share of stock owned, a shareholder will receive four shares and will now own 5 shares of stock. 
C) The shares issued and outstanding will all quadruple while the par value will be reduced to $.25 per share. 
D) The company will be unable to declare a 4-for-1 split because it does not have enough authorized shares to issue.

Question 13

Total assets remain the same when a company uses cash to purchase treasury stock.

Accepted Answer

A) True 
 B)False

Question 14

Earnings per share increases when a company purchases treasury stock.

Accepted Answer

A) True 
 B)False

Question 15

Atkins Company had 20,000 shares of $5 par value common stock outstanding prior to a 10% common stock dividend declaration and distribution. The market value of the common stock on the declaration date was $11. Which of the following statements correctly describes the effect of the common stock dividend and declaration?

Accepted Answer

A)  Retained earnings decreased $22,000. 
B)  Retained earnings decreased $10,000. 
C) Total stockholders' equity decreased $22,000. 
D) Total stockholders' equity decreased $10,000. 
A)  Retained earnings decreased $22,000. 
B)  Retained earnings decreased $10,000. 
C) Total stockholders' equity decreased $22,000. 
D) Total stockholders' equity decreased $10,000.

Question 16

Which of the following statements is correct?

Accepted Answer

A)  A 2-for-1 common stock split decreases both earnings per share and total stockholders' equity. 
B)  A 10% common stock dividend decreases both earnings per share and total stockholders' equity. 
C) A 2-for-1 common stock split increases both the number of common shares outstanding and total stockholders' equity. 
D) A 30% common stock dividend increases the number of common shares outstanding and does not affect total stockholders' equity. 
A)  A 2-for-1 common stock split decreases both earnings per share and total stockholders' equity. 
B)  A 10% common stock dividend decreases both earnings per share and total stockholders' equity. 
C) A 2-for-1 common stock split increases both the number of common shares outstanding and total stockholders' equity. 
D) A 30% common stock dividend increases the number of common shares outstanding and does not affect total stockholders' equity.

Question 17

Common stockholders have voting rights and can declare cash dividends.

Accepted Answer

A) True 
 B)False

Question 18

Most investors who are retired people prefer to receive their return on investment in the form of stock price appreciation rather than in dividends.

Accepted Answer

A) True 
 B)False

Question 19

The dividend yield ratio increases when a cash dividend is paid.

Accepted Answer

A) True 
 B)False

Question 20

CGJ Company has provided the following: • 200,000 shares of $5 par value common stock are authorized
• 140,000 shares of common stock were issued for $11 per share
• 130,000 shares are outstanding
Which of the following statements is false?

Accepted Answer

A)  Common stock is reported at $700,000 on the balance sheet. 
B)  Additional-paid in capital is reported at $840,000 on the balance sheet. 
C) Stockholders' equity decreased $110,000 when the treasury stock was purchased. 
D) There are 10,000 shares of treasury stock. 
A)  Common stock is reported at $700,000 on the balance sheet. 
B)  Additional-paid in capital is reported at $840,000 on the balance sheet. 
C) Stockholders' equity decreased $110,000 when the treasury stock was purchased. 
D) There are 10,000 shares of treasury stock.

The declaration by a corporation's board of directors of a cash dividend on common stock creates a liability on the declaration date.

Stockholders' equity decreases when a company purchases treasury stock.

Which of the following statements is true about a partnership?

The issue of $1 par value common stock for $10 per share results in a $9 credit to the capital in excess of par account for each share issued.

Chicago Clock Corporation issued a 3-for-2 stock split of its common stock, which had a par value of $100 before the split. What dollar amount of retained earnings should be transferred to the common stock account?

Net income increases when treasury stock is sold for an amount in excess of its cost.

Kirova Company has provided the following information: • Number of issued common shares, 900,000 • Net income, $1,000,000 • Number of authorized common shares, 1,000,000 • Number of outstanding common shares, 800,000 • Number of treasury shares, 100,000 What is Kirova's earnings per share?

A company has 10 million common shares authorized and 2.5 million shares issued. The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split. Which of the following is correct?

Total assets remain the same when a company uses cash to purchase treasury stock.

Earnings per share increases when a company purchases treasury stock.

Which of the following statements is correct?

Common stockholders have voting rights and can declare cash dividends.

Most investors who are retired people prefer to receive their return on investment in the form of stock price appreciation rather than in dividends.

The dividend yield ratio increases when a cash dividend is paid.

CGJ Company has provided the following: • 200,000 shares of $5 par value common stock are authorized • 140,000 shares of common stock were issued for $11 per share • 130,000 shares are outstanding Which of the following statements is false?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Exam 11: Reporting and Interpreting Owners Equity

The declaration by a corporation's board of directors of a cash dividend on common stock creates a liability on the declaration date.

Stockholders' equity decreases when a company purchases treasury stock.

Which of the following statements is true about a partnership?

The issue of $1 par value common stock for $10 per share results in a $9 credit to the capital in excess of par account for each share issued.

Chicago Clock Corporation issued a 3-for-2 stock split of its common stock, which had a par value of $100 before the split. What dollar amount of retained earnings should be transferred to the common stock account?

Net income increases when treasury stock is sold for an amount in excess of its cost.

A company has 10 million common shares authorized and 2.5 million shares issued. The par value is $1 per share and the market price is $30 when the company declares a 4-for-1 stock split. Which of the following is correct?

Total assets remain the same when a company uses cash to purchase treasury stock.

Earnings per share increases when a company purchases treasury stock.

Which of the following statements is correct?

Common stockholders have voting rights and can declare cash dividends.

Most investors who are retired people prefer to receive their return on investment in the form of stock price appreciation rather than in dividends.

The dividend yield ratio increases when a cash dividend is paid.

CGJ Company has provided the following: • 200,000 shares of $5 par value common stock are authorized • 140,000 shares of common stock were issued for $11 per share • 130,000 shares are outstanding Which of the following statements is false?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters