Question 1

The concept of an "artificial being" refers to which form of business organization?

Accepted Answer

A)  Partnership 
B)  Sole proprietorship 
C)  Corporation 
D)  Limited partnership 
A)  Partnership 
B)  Sole proprietorship 
C)  Corporation 
D)  Limited partnership C

Question 2

Reserves include each of the following except

Accepted Answer

A)  other comprehensive income items. 
B)  revaluation surplus. 
C)  share premium. 
D)  unrealized gains on available-for-sale securities. 
A)  other comprehensive income items. 
B)  revaluation surplus. 
C)  share premium. 
D)  unrealized gains on available-for-sale securities. C

Question 3

The term residual claim refers to a stockholders' right to

Accepted Answer

A)  receive dividends. 
B)  share in assets upon liquidation. 
C)  acquire additional shares when offered. 
D)  exercise a proxy vote. 
A)  receive dividends. 
B)  share in assets upon liquidation. 
C)  acquire additional shares when offered. 
D)  exercise a proxy vote. B

Question 4

IFRS uses each of the following terms to describe retained earnings except

Accepted Answer

A)  accumulated profit or loss. 
B)  retained earnings. 
C)  retained profits. 
D)  share earnings. 
A)  accumulated profit or loss. 
B)  retained earnings. 
C)  retained profits. 
D)  share earnings.

Question 5

Kong Inc. reported net income of $298,000 during 2015 and paid dividends of $26,000 on common stock. It also has 10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. Common stockholders' equity was $1,200,000 on January 1, 2015, and $1,600,000 on December 31, 2015. The company's return on common stockholders' equity for 2015 is:

Accepted Answer

A)  17.4% 
B)  17.0% 
C)  15.1% 
D)  21.3% 
A)  17.4% 
B)  17.0% 
C)  15.1% 
D)  21.3%

Question 6

A net loss

Accepted Answer

A)  occurs if operating expenses exceed cost of goods sold. 
B)  is not closed to Retained Earnings if it would result in a debit balance. 
C)  is closed to Retained Earnings even if it would result in a debit balance. 
D)  is closed to the paid-in capital account of the stockholders' equity section of the balance sheet. 
A)  occurs if operating expenses exceed cost of goods sold. 
B)  is not closed to Retained Earnings if it would result in a debit balance. 
C)  is closed to Retained Earnings even if it would result in a debit balance. 
D)  is closed to the paid-in capital account of the stockholders' equity section of the balance sheet.

Question 7

If stock is issued for less than par value, the account

Accepted Answer

A)  Paid-In Capital in Excess of Par is credited. 
B)  Paid-In Capital in Excess of Par is debited if a debit balance exists in the account. 
C)  Paid-In Capital in Excess of Par is debited if a credit balance exists in the account. 
D)  Retained Earnings is credited. 
A)  Paid-In Capital in Excess of Par is credited. 
B)  Paid-In Capital in Excess of Par is debited if a debit balance exists in the account. 
C)  Paid-In Capital in Excess of Par is debited if a credit balance exists in the account. 
D)  Retained Earnings is credited.

Question 8

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

The declaration of a stock dividend will

Accepted Answer

A)  increase paid-in capital. 
B)  change the total of stockholders' equity. 
C)  increase total liabilities. 
D)  increase total assets. 
A)  increase paid-in capital. 
B)  change the total of stockholders' equity. 
C)  increase total liabilities. 
D)  increase total assets.

Question 10

Prior period adjustments

Accepted Answer

A)  may only increase retained earnings. 
B)  may only decrease retained earnings. 
C)  may either increase or decrease retained earnings. 
D)  do not affect retained earnings. 
A)  may only increase retained earnings. 
B)  may only decrease retained earnings. 
C)  may either increase or decrease retained earnings. 
D)  do not affect retained earnings.

Question 11

If an investment firm underwrites a stock issue, the

Accepted Answer

A)  risk of being unable to sell the shares stays with the issuing corporation. 
B)  corporation obtains cash immediately from the investment firm. 
C)  investment firm has guaranteed profits on the sale of the stock. 
D)  issuance of stock is likely to be directly to creditors. 
A)  risk of being unable to sell the shares stays with the issuing corporation. 
B)  corporation obtains cash immediately from the investment firm. 
C)  investment firm has guaranteed profits on the sale of the stock. 
D)  issuance of stock is likely to be directly to creditors.

Question 12

Cork Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 6%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Cork distribute to the common stockholders?

Accepted Answer

A)  $88,000. 
B)  $72,000. 
C)  $124,000. 
D)  None of these answers are correct. 
A)  $88,000. 
B)  $72,000. 
C)  $124,000. 
D)  None of these answers are correct.

Question 13

Moore, Inc. had 250,000 shares of common stock outstanding before a stock split occurred, and 1,000,000 shares outstanding after the stock split. The stock split was

Accepted Answer

A)  2-for-4. 
B)  5-for-1. 
C)  1-for-4. 
D)  4-for-1. 
A)  2-for-4. 
B)  5-for-1. 
C)  1-for-4. 
D)  4-for-1.

Question 14

Treasury stock is a contra stockholders' equity account.

Accepted Answer

A) True 
 B)False

Question 15

Marion, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2015. There were no dividends declared in 2014. The board of directors declares and pays a $65,000 dividend in 2015. What is the amount of dividends received by the common stockholders in 2015?

Accepted Answer

A)  $0 
B)  $25,000 
C)  $65,000 
D)  $40,000 
A)  $0 
B)  $25,000 
C)  $65,000 
D)  $40,000

Question 16

A corporation commits to a legal obligation when it declares

Accepted Answer

A)  a cash dividend. 
B)  either a cash dividend or a stock dividend. 
C)  a stock dividend. 
D)  a distribution date. 
A)  a cash dividend. 
B)  either a cash dividend or a stock dividend. 
C)  a stock dividend. 
D)  a distribution date.

Question 17

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

Accepted Answer

A) True 
 B)False

Question 18

A corporation has the following account balances: Common stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the

Accepted Answer

A)  legal capital is $1,360,000. 
B)  number of shares issued are 60,000. 
C)  number of shares outstanding are 1,360,000. 
D)  average price per share issued is $22.50. 
A)  legal capital is $1,360,000. 
B)  number of shares issued are 60,000. 
C)  number of shares outstanding are 1,360,000. 
D)  average price per share issued is $22.50.

Question 19

Under IFRS, Revaluation Surplus is part of

Accepted Answer

A)  share premium. 
B)  retained earnings. 
C)  general reserves. 
D)  contributed capital. 
A)  share premium. 
B)  retained earnings. 
C)  general reserves. 
D)  contributed capital.

Question 20

A corporation purchases 40,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

A)  Increase by $1,800,000 
B)  Decrease by $1,200,000 
C)  Decrease by $1,800,000 
D)  Increase by $1,200,000 
A)  Increase by $1,800,000 
B)  Decrease by $1,200,000 
C)  Decrease by $1,800,000 
D)  Increase by $1,200,000

The concept of an "artificial being" refers to which form of business organization?

Reserves include each of the following except

The term residual claim refers to a stockholders' right to

IFRS uses each of the following terms to describe retained earnings except

A net loss

If stock is issued for less than par value, the account

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

The declaration of a stock dividend will

Prior period adjustments

If an investment firm underwrites a stock issue, the

Cork Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 6%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Cork distribute to the common stockholders?

Moore, Inc. had 250,000 shares of common stock outstanding before a stock split occurred, and 1,000,000 shares outstanding after the stock split. The stock split was

Treasury stock is a contra stockholders' equity account.

A corporation commits to a legal obligation when it declares

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

A corporation has the following account balances: Common stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the

Under IFRS, Revaluation Surplus is part of

A corporation purchases 40,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters

Exam 11: Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

The concept of an "artificial being" refers to which form of business organization?

Reserves include each of the following except

The term residual claim refers to a stockholders' right to

IFRS uses each of the following terms to describe retained earnings except

A net loss

If stock is issued for less than par value, the account

Return on common stockholders' equity is computed by dividing net income by ending stockholders' equity.

The declaration of a stock dividend will

Prior period adjustments

If an investment firm underwrites a stock issue, the

Cork Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 6%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Cork distribute to the common stockholders?

Moore, Inc. had 250,000 shares of common stock outstanding before a stock split occurred, and 1,000,000 shares outstanding after the stock split. The stock split was

Treasury stock is a contra stockholders' equity account.

A corporation commits to a legal obligation when it declares

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

A corporation has the following account balances: Common stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the

Under IFRS, Revaluation Surplus is part of

A corporation purchases 40,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters