Question 1

The issuance of common stock affects both paid-in capital and retained earnings.

Accepted Answer

A) True 
 B)False

Question 2

Retained Earnings represents past net income less past dividends; therefore, any balance in this account would be listed on the income statement.

Accepted Answer

A) True 
 B)False

Question 3

The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.

Accepted Answer

A) True 
 B)False

Question 4

Assume that retained earnings had a beginning balance of $75,000. Match the following amounts to the appropriate term (a-h).
-Treasury Stock = Number of Common Stock Purchased × Purchase Price of Common Stock = 1,000 × $15 = $15,000

Accepted Answer

A) Treasury stock 
B) Retained earnings 
C) Preferred stock 
D) Excess of issue price over par (preferred) 
E) Common stock
F)Total paid-in capital
G)Excess of issue price over par (common)
H)Total stockholders' equity 
A) Treasury stock 
B) Retained earnings 
C) Preferred stock 
D) Excess of issue price over par (preferred) 
E) Common stock
F)Total paid-in capital
G)Excess of issue price over par (common)
H)Total stockholders' equity

Question 5

Match each of the following stockholders' equity concepts to the appropriate term (a-h).
-Document that formally creates a corporation

Accepted Answer

A) Articles of incorporation 
B) Limited liability 
C) Bylaws 
D) Corporation 
E) Public corporation
F)Board of directors
G)Private corporation
H)Dividends 
A) Articles of incorporation 
B) Limited liability 
C) Bylaws 
D) Corporation 
E) Public corporation
F)Board of directors
G)Private corporation
H)Dividends

Question 6

Match each of the following stockholders' equity concepts to the appropriate term (a-h).
-The day of the event that creates a liability to company

Accepted Answer

A) Cash dividend 
B) Date of record 
C) Stock Dividends Distributable 
D) Date of declaration 
E) Treasury stock
F)Preferred stock
G)Date of payment
H)Paid-In Capital in Excess of Par 
A) Cash dividend 
B) Date of record 
C) Stock Dividends Distributable 
D) Date of declaration 
E) Treasury stock
F)Preferred stock
G)Date of payment
H)Paid-In Capital in Excess of Par

Question 7

Which of the following statements concerning taxation is accurate?

Accepted Answer

A)  Corporations pay federal income taxes but not state income taxes. 
B)  Corporations pay federal and state income taxes. 
C)  Only the owners must pay taxes on corporate income. 
D)  Corporations pay income taxes but their owners do not. 
A)  Corporations pay federal income taxes but not state income taxes. 
B)  Corporations pay federal and state income taxes. 
C)  Only the owners must pay taxes on corporate income. 
D)  Corporations pay income taxes but their owners do not.

Question 8

Twenty percent of all businesses in the United States are corporations, and they account for 80% of the total business dollars generated.

Accepted Answer

A) True 
 B)False

Question 9

The cost method of accounting for the purchase and sale of treasury stock is a commonly used method.

Accepted Answer

A) True 
 B)False

Question 10

When a corporation issues stock at a premium, it reports the premium as an Other income item on the income statement.

Accepted Answer

A) True 
 B)False

Question 11

Alma Corp. issues 1,000 shares of $10 par common stock at $14 per share. When the transaction is recorded, credits are made to

Accepted Answer

A)  Common Stock, $14,000 
B)  Common Stock, $10,000, and Paid-In Capital in Excess of Par-Common Stock, $4,000 
C)  Common Stock, $4,000, and Paid-In Capital in Excess of Stated Value, $10,000 
D)  Common Stock, $10,000, and Retained Earnings, $4,000 
A)  Common Stock, $14,000 
B)  Common Stock, $10,000, and Paid-In Capital in Excess of Par-Common Stock, $4,000 
C)  Common Stock, $4,000, and Paid-In Capital in Excess of Stated Value, $10,000 
D)  Common Stock, $10,000, and Retained Earnings, $4,000

Question 12

A large retained earnings account means that there is cash available to pay dividends.

Accepted Answer

A) True 
 B)False

Question 13

The stock dividends distributable account is listed in the Current liabilities section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 14

A 10% stock dividend will increase the number of shares outstanding, but the book value per share will decrease.

Accepted Answer

A) True 
 B)False

Question 15

One of the prerequisites to paying a cash dividend is sufficient retained earnings.

Accepted Answer

A) True 
 B)False

Question 16

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2-per-share dividend is declared?

Accepted Answer

A)  $80,000 
B)  $10,000 
C)  $90,000 
D)  $100,00 
A)  $80,000 
B)  $10,000 
C)  $90,000 
D)  $100,00

Question 17

A corporation has 50,000 shares of $25 par stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be

Accepted Answer

A)  $5 
B)  $60 
C)  $25 
D)  $24 
A)  $5 
B)  $60 
C)  $25 
D)  $24

Question 18

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

Accepted Answer

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

Question 19

Which of the following statements is not true about a 2-for-1 split?

Accepted Answer

A)  Par value per share is reduced to half of what it was before the split. 
B)  Total contributed capital increases. 
C)  The market price will probably decrease. 
D)  A stockholder with 10 shares before the split owns 20 shares after the split. 
A)  Par value per share is reduced to half of what it was before the split. 
B)  Total contributed capital increases. 
C)  The market price will probably decrease. 
D)  A stockholder with 10 shares before the split owns 20 shares after the split.

Question 20

The liability for a dividend is recorded on which of the following dates?

Accepted Answer

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

Exam 13: Corporations: Organization, Stock Transactions, and Dividends

The issuance of common stock affects both paid-in capital and retained earnings.

Retained Earnings represents past net income less past dividends; therefore, any balance in this account would be listed on the income statement.

The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.

Assume that retained earnings had a beginning balance of $75,000. Match the following amounts to the appropriate term (a-h). -Treasury Stock = Number of Common Stock Purchased × Purchase Price of Common Stock = 1,000 × $15 = $15,000

Match each of the following stockholders' equity concepts to the appropriate term (a-h). -Document that formally creates a corporation

Match each of the following stockholders' equity concepts to the appropriate term (a-h). -The day of the event that creates a liability to company

Which of the following statements concerning taxation is accurate?

Twenty percent of all businesses in the United States are corporations, and they account for 80% of the total business dollars generated.

The cost method of accounting for the purchase and sale of treasury stock is a commonly used method.

When a corporation issues stock at a premium, it reports the premium as an Other income item on the income statement.

Alma Corp. issues 1,000 shares of $10 par common stock at $14 per share. When the transaction is recorded, credits are made to

A large retained earnings account means that there is cash available to pay dividends.

The stock dividends distributable account is listed in the Current liabilities section of the balance sheet.

A 10% stock dividend will increase the number of shares outstanding, but the book value per share will decrease.

One of the prerequisites to paying a cash dividend is sufficient retained earnings.

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2-per-share dividend is declared?

A corporation has 50,000 shares of $25 par stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be

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

Which of the following statements is not true about a 2-for-1 split?

The liability for a dividend is recorded on which of the following dates?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

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