Question 1

Which of the following statements about a cash dividend is incorrect?

Accepted Answer

A)  The legality of a cash dividend depends on state corporation laws. 
B)  The legality of a dividend does not indicate a company's ability to pay a dividend. 
C)  Dividends are not a liability until declared. 
D)  Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend. 
A)  The legality of a cash dividend depends on state corporation laws. 
B)  The legality of a dividend does not indicate a company's ability to pay a dividend. 
C)  Dividends are not a liability until declared. 
D)  Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend.

Question 2

Which of the following is not true of a corporation?

Accepted Answer

A)  It may buy, own, and sell property. 
B)  It may sue and be sued. 
C)  The acts of its owners bind the corporation. 
D)  It may enter into binding legal contracts in its own name. 
A)  It may buy, own, and sell property. 
B)  It may sue and be sued. 
C)  The acts of its owners bind the corporation. 
D)  It may enter into binding legal contracts in its own name.

Question 3

A detailed stockholders' equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record.

Accepted Answer

A) True 
 B)False

Question 4

Sloman Corporation has 100,000 shares of $50 par value preferred stock authorized. During the year, it had the following transactions related to its preferred stock.
(a) Issued 20,000 shares at $55 per share.
(b) Issued 10,000 shares for equipment having an $800,000 asking price. The stock had a market value of $75 per share
Instructions
Journalize the transactions.

Accepted Answer

The answer of Sloman Corporation has 100,000 shares of $50...

Question 5

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 6

Bacon Corporation began business by issuing 180,000 shares of $5 par value common stock for $25 per share. During its first year, the corporation sustained a net loss of $30,000. The year-end balance sheet would show

Accepted Answer

A)  Common stock of $900,000. 
B)  Common stock of $4,500,000. 
C)  Total paid-in capital of $4,470,000. 
D)  Total paid-in capital of $930,000. 
A)  Common stock of $900,000. 
B)  Common stock of $4,500,000. 
C)  Total paid-in capital of $4,470,000. 
D)  Total paid-in capital of $930,000.

Question 7

The stockholders' equity section of Morton Corporation at December 31 is as follows.   
Instructions
From a review of the stockholders' equity section, answer the following questions.
(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value, what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $15,000, what is the dividend rate on preferred stock?
(e) If dividends of $30,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?

Accepted Answer

(a) Common stock outstanding is 145,000

Question 8

The per share amount normally assigned by the board of directors to a small stock dividend is

Accepted Answer

A)  the market value of the stock on the date of declaration. 
B)  the average price paid by stockholders on outstanding shares. 
C)  the par or stated value of the stock. 
D)  zero. 
A)  the market value of the stock on the date of declaration. 
B)  the average price paid by stockholders on outstanding shares. 
C)  the par or stated value of the stock. 
D)  zero.

Question 9

If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation.

Accepted Answer

A) True 
 B)False

Question 10

Aim, Inc., has 10,000 shares of 4%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2017. The board of directors declares and pays a $120,000 dividend in 2018. What is the amount of dividends received by the common stockholders in 2018?

Accepted Answer

A)  $0 
B)  $40,000 
C)  $60,000 
D)  $80,000 
A)  $0 
B)  $40,000 
C)  $60,000 
D)  $80,000

Question 11

Wave Company originally issued 30,000 shares of $5 par common stock for $210,000 on January 3, 2018. Wave purchased 1,500 shares of treasury stock for $12,000 on November 2, 2018. On December 6, 2018, 600 shares of the treasury stock are sold for $7,200.
Instructions
Prepare journal entries to record these stock transactions.

Accepted Answer

The answer of Wave Company originally issued 30,000 shares of...

Question 12

Dividends may be declared and paid in cash or stock.

Accepted Answer

A) True 
 B)False

Question 13

On November 1, 2018, Tech Corporation's stockholders' equity section is as follows:   
On November 1, Tech declares and distributes a 15% stock dividend when the market value of the stock is $16 per share.
Instructions
Indicate the balances in the stockholders' equity accounts after the stock dividend has been distributed.

Accepted Answer

The answer of On November 1, 2018, Tech Corporation's stockholders'...

Question 14

The numerator of the return on common stockholders' equity is

Accepted Answer

A)  net income. 
B)  net income less common and preferred dividends. 
C)  net income less common dividends. 
D)  net income less preferred dividends. 
A)  net income. 
B)  net income less common and preferred dividends. 
C)  net income less common dividends. 
D)  net income less preferred dividends.

Question 15

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Accepted Answer

A)  Preferred Stock for $840,000. 
B)  Paid-in Capital from Preferred Stock for $840,000. 
C)  Preferred Stock for $700,000 and Retained Earnings for $140,000. 
D)  Preferred Stock for $700,000 and Paid-in Capital in Excess of Par-Preferred Stock for $140,000. 
A)  Preferred Stock for $840,000. 
B)  Paid-in Capital from Preferred Stock for $840,000. 
C)  Preferred Stock for $700,000 and Retained Earnings for $140,000. 
D)  Preferred Stock for $700,000 and Paid-in Capital in Excess of Par-Preferred Stock for $140,000.

Question 16

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

Accepted Answer

A) True 
 B)False

Question 17

On January 1, 2018, Ralph Corporation had $2,000,000 of $10 par value common stock outstanding that was issued at par and retained earnings of $1,000,000. The company issued 200,000 shares of common stock at $12 per share on July 1. On December 15, the board of directors declared a 15% stock dividend to stockholders of record on December 31, 2018, payable on January 15, 2019. The market value of Ralph Corporation stock was $14 per share on December 15 and $16 per share on December 31. Net income for 2018 was $500,000.
Instructions
(1) Journalize the issuance of stock on July 1 and the declaration of the stock dividend on December 15.
(2) Prepare the stockholders' equity section of the balance sheet for Ralph Corporation at December 31, 2018.

Accepted Answer

(1) @#IMG-DLM& ($2,000,000 ÷ $

Question 18

A corporation has a separate __________________________ apart from its owners.

Accepted Answer

The answer of A corporation has a separate __________________________ apart...

Question 19

Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2018. If the board of directors declares a $70,000 dividend, the

Accepted Answer

A)  preferred shareholders will receive 1/10th of what the common shareholders will receive. 
B)  preferred shareholders will receive the entire $70,000. 
C)  $70,000 will be held as restricted retained earnings and paid out at some future date. 
D)  preferred shareholders will receive $35,000 and the common shareholders will receive $35,000. 
A)  preferred shareholders will receive 1/10th of what the common shareholders will receive. 
B)  preferred shareholders will receive the entire $70,000. 
C)  $70,000 will be held as restricted retained earnings and paid out at some future date. 
D)  preferred shareholders will receive $35,000 and the common shareholders will receive $35,000.

Question 20

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.

Exam 11: Corporations: Organization, Stock Transactions, and Stockholders Equity

Which of the following statements about a cash dividend is incorrect?

Which of the following is not true of a corporation?

A detailed stockholders' equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record.

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

Bacon Corporation began business by issuing 180,000 shares of $5 par value common stock for $25 per share. During its first year, the corporation sustained a net loss of $30,000. The year-end balance sheet would show

The per share amount normally assigned by the board of directors to a small stock dividend is

If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation.

Dividends may be declared and paid in cash or stock.

The numerator of the return on common stockholders' equity is

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

A corporation has a separate __________________________ apart from its owners.

Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2018. If the board of directors declares a $70,000 dividend, the

Common Stock Dividends Distributable is classified as a(n)

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

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