Question 1

Common Stock Dividends Distributable is classified as a(n)

Accepted Answer

A)  asset account. 
B)  stockholders' equity account. 
C)  expense account. 
D)  liability account. 
A)  asset account. 
B)  stockholders' equity account. 
C)  expense account. 
D)  liability account.

Question 2

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

Accepted Answer

A) True 
 B)False

Question 3

Prior period adjustments to income are reported in the current year's income statement.

Accepted Answer

A) True 
 B)False

Question 4

The date on which a cash dividend becomes a binding legal obligation is on the

Accepted Answer

A)  declaration date. 
B)  date of record. 
C)  payment date. 
D)  last day of the fiscal year-end. 
A)  declaration date. 
B)  date of record. 
C)  payment date. 
D)  last day of the fiscal year-end.

Question 5

Which one of the following is not an ownership right of a stockholder in a corporation?

Accepted Answer

A)  To vote in the election of directors 
B)  To declare dividends on the common stock 
C)  To share in assets upon liquidation 
D)  To share in corporate earnings 
A)  To vote in the election of directors 
B)  To declare dividends on the common stock 
C)  To share in assets upon liquidation 
D)  To share in corporate earnings

Question 6

The date a cash dividend becomes a binding legal obligation to a corporation is the

Accepted Answer

A)  declaration date. 
B)  earnings date. 
C)  payment date. 
D)  record date. 
A)  declaration date. 
B)  earnings date. 
C)  payment date. 
D)  record date.

Question 7

Last Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015, and December 31, 2014. The board of directors declared and paid a $4,000 dividend in 2014. In 2015, $24,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2015?

Accepted Answer

A)  $16,000 
B)  $12,000 
C)  $8,000 
D)  $6,000 
A)  $16,000 
B)  $12,000 
C)  $8,000 
D)  $6,000

Question 8

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

Accepted Answer

A) True 
 B)False

Question 9

Arm, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the board of directors declares a $200,000 dividend, the

Accepted Answer

A)  preferred stockholders will receive 1/10th of what the common stockholders will receive. 
B)  preferred stockholders will receive the entire $200,000. 
C)  $50,000 will be held as restricted retained earnings and paid out at some future date. 
D)  preferred stockholders will receive $50,000 and the common stockholders will receive $150,000. 
A)  preferred stockholders will receive 1/10th of what the common stockholders will receive. 
B)  preferred stockholders will receive the entire $200,000. 
C)  $50,000 will be held as restricted retained earnings and paid out at some future date. 
D)  preferred stockholders will receive $50,000 and the common stockholders will receive $150,000.

Question 10

Which one of the following events would not require a formal journal entry on a corporation's books?

Accepted Answer

A)  2 for 1 stock split 
B)  100% stock dividend 
C)  2% stock dividend 
D)  $1 per share cash dividend 
A)  2 for 1 stock split 
B)  100% stock dividend 
C)  2% stock dividend 
D)  $1 per share cash dividend

Question 11

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Accepted Answer

A)  Common Stock Dividends Distributable. 
B)  Common Stock. 
C)  Paid-in Capital in Excess of Par. 
D)  Retained Earnings. 
A)  Common Stock Dividends Distributable. 
B)  Common Stock. 
C)  Paid-in Capital in Excess of Par. 
D)  Retained Earnings.

Question 12

Treasury stock should not be classified as a current asset.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements about retained earnings restrictions is incorrect?

Accepted Answer

A)  Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased. 
B)  Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan. 
C)  The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes. 
D)  Retained earnings restrictions are generally disclosed through a journal entry on the books of a company. 
A)  Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased. 
B)  Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan. 
C)  The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes. 
D)  Retained earnings restrictions are generally disclosed through a journal entry on the books of a company.

Question 14

The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to

Accepted Answer

A)  decrease current liabilities and stockholders' equity. 
B)  increase total assets and stockholders' equity. 
C)  increase current liabilities and stockholders' equity. 
D)  decrease stockholders' equity and total assets. 
A)  decrease current liabilities and stockholders' equity. 
B)  increase total assets and stockholders' equity. 
C)  increase current liabilities and stockholders' equity. 
D)  decrease stockholders' equity and total assets.

Question 15

On the dividend record date,

Accepted Answer

A)  a dividend becomes a current obligation. 
B)  no entry is required. 
C)  an entry may be required if it is a stock dividend. 
D)  Dividends Payable is debited. 
A)  a dividend becomes a current obligation. 
B)  no entry is required. 
C)  an entry may be required if it is a stock dividend. 
D)  Dividends Payable is debited.

Question 16

Of the various dividends types, the two most common types in practice are

Accepted Answer

A)  cash and large stock. 
B)  cash and property. 
C)  cash and small stock. 
D)  property and small stock. 
A)  cash and large stock. 
B)  cash and property. 
C)  cash and small stock. 
D)  property and small stock.

Question 17

On January 2, 2012, Porter Corporation issued 30,000 shares of 5% cumulative preferred stock at $100 par value. On December 31, 2015, Porter Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stockholders?

Accepted Answer

A)  $0 
B)  $150,000 
C)  $450,000 
D)  $600,000 
A)  $0 
B)  $150,000 
C)  $450,000 
D)  $600,000

Question 18

Retained earnings represents the amount of cash available for dividends.

Accepted Answer

A) True 
 B)False

Question 19

Book value per share of common stock is the same amount as the market value per share.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following is a privately held corporation?

Accepted Answer

A)  Intel 
B)  General Electric 
C)  Caterpillar Inc. 
D)  Cargill Inc. 
A)  Intel 
B)  General Electric 
C)  Caterpillar Inc. 
D)  Cargill Inc.

Common Stock Dividends Distributable is classified as a(n)

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

Prior period adjustments to income are reported in the current year's income statement.

The date on which a cash dividend becomes a binding legal obligation is on the

Which one of the following is not an ownership right of a stockholder in a corporation?

The date a cash dividend becomes a binding legal obligation to a corporation is the

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

Arm, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the board of directors declares a $200,000 dividend, the

Which one of the following events would not require a formal journal entry on a corporation's books?

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Treasury stock should not be classified as a current asset.

Which of the following statements about retained earnings restrictions is incorrect?

The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to

On the dividend record date,

Of the various dividends types, the two most common types in practice are

Retained earnings represents the amount of cash available for dividends.

Book value per share of common stock is the same amount as the market value per share.

Which one of the following is a privately held corporation?

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

Common Stock Dividends Distributable is classified as a(n)

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account.

Prior period adjustments to income are reported in the current year's income statement.

The date on which a cash dividend becomes a binding legal obligation is on the

Which one of the following is not an ownership right of a stockholder in a corporation?

The date a cash dividend becomes a binding legal obligation to a corporation is the

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

Arm, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the board of directors declares a $200,000 dividend, the

Which one of the following events would not require a formal journal entry on a corporation's books?

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Treasury stock should not be classified as a current asset.

Which of the following statements about retained earnings restrictions is incorrect?

The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to

On the dividend record date,

Of the various dividends types, the two most common types in practice are

Retained earnings represents the amount of cash available for dividends.

Book value per share of common stock is the same amount as the market value per share.

Which one of the following is a privately held corporation?

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