Question 1

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 2

The following information is available for Pencil Corporation:   
A 20% stock dividend is declared and paid when the market value was $16 per share.
Instructions
Compute each of the following after the stock dividend.
(a) Total stockholders' equity.
(b) Number of shares outstanding.

Accepted Answer

(a) Total stockholders' equity = $2,900,

Question 3

The two ways that a corporation can be classified by ownership are

Accepted Answer

A)  publicly held and privately held. 
B)  stock and non-stock. 
C)  inside and outside. 
D)  majority and minority. 
A)  publicly held and privately held. 
B)  stock and non-stock. 
C)  inside and outside. 
D)  majority and minority.

Question 4

Stock can be issued only in exchange for cash.

Accepted Answer

A) True 
 B)False

Question 5

Parker Company has 24,000 shares of $1 par common stock issued and outstanding. The company also has 2,000 shares of $100 par 5% cumulative preferred stock outstanding. The company did not pay the preferred dividends in 2017 or 2018. What amount of dividends must the company pay the preferred shareholders in 2019 if they wish to pay the common stockholders a dividend?

Accepted Answer

Annual preferred dividend: 2,0

Question 6

Adams Corporation began business by issuing 400,000 shares of $5 par value common stock for $24 per share. During its first year, the corporation sustained a net loss of $40,000. The year-end balance sheet would show

Accepted Answer

A)  Common stock of $2,000,000. 
B)  Common stock of $9,600,000. 
C)  Total paid-in capital of $9,560,000. 
D)  Total paid-in capital of $7,600,000. 
A)  Common stock of $2,000,000. 
B)  Common stock of $9,600,000. 
C)  Total paid-in capital of $9,560,000. 
D)  Total paid-in capital of $7,600,000.

Question 7

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 8

A corporation can issue more shares than it is authorized in its charter, if the board of directors approves of an increase in the number of authorized shares.

Accepted Answer

A) True 
 B)False

Question 9

Treasury stock should not be classified as a current asset.

Accepted Answer

A) True 
 B)False

Question 10

On January 1, 2018, the stockholders' equity section of Nance Corporation shows: Common stock ($5 par value) $1,500,000; paid-in capital in excess of par value $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.
Mar. 1 Purchased 30,000 shares for cash at $22 per share.
July 1 Sold 6,000 treasury shares for cash at $27 per share.
Sept. 1 Sold 5,000 treasury shares for cash at $19 per share.
Instructions
(a) Journalize the treasury stock transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share.

Accepted Answer

The answer of On January 1, 2018, the stockholders' equity...

Question 11

Stockholders generally have the right to share in corporate _______________ and in ______________ upon liquidation.

Accepted Answer

The answer of Stockholders generally have the right to share...

Question 12

Aaron, Inc. paid $120,000 to buy back 10,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $8 per share. The entry to record the sale includes a

Accepted Answer

A)  debit to Retained Earnings for $40,000. 
B)  credit to Retained Earnings for $10,000. 
C)  debit to Paid-in Capital from Treasury Stock for $120,000. 
D)  credit to Paid-in Capital from Treasury Stock for $10,000. 
A)  debit to Retained Earnings for $40,000. 
B)  credit to Retained Earnings for $10,000. 
C)  debit to Paid-in Capital from Treasury Stock for $120,000. 
D)  credit to Paid-in Capital from Treasury Stock for $10,000.

Question 13

Under IFRS, equity is described as each of the following except

Accepted Answer

A)  retained equity. 
B)  shareholders' funds. 
C)  owners' equity. 
D)  capital and reserves. 
A)  retained equity. 
B)  shareholders' funds. 
C)  owners' equity. 
D)  capital and reserves.

Question 14

Additional paid-in capital includes all of the following except

Accepted Answer

A)  paid-in capital from treasury stock. 
B)  paid-in capital in excess of par. 
C)  paid-in capital in excess of stated value. 
D)  paid-in capital in excess of book value. 
A)  paid-in capital from treasury stock. 
B)  paid-in capital in excess of par. 
C)  paid-in capital in excess of stated value. 
D)  paid-in capital in excess of book value.

Question 15

The return on common stockholders' equity is computed by dividing

Accepted Answer

A)  net income by ending common stockholders' equity. 
B)  net income by average common stockholders' equity. 
C)  net income minus preferred dividends by ending common stockholders' equity. 
D)  net income minus preferred dividends by average common stockholders' equity. 
A)  net income by ending common stockholders' equity. 
B)  net income by average common stockholders' equity. 
C)  net income minus preferred dividends by ending common stockholders' equity. 
D)  net income minus preferred dividends by average common stockholders' equity.

Question 16

Each of the following decreases total stockholders' equity except a

Accepted Answer

A)  cash dividend. 
B)  liquidating dividend. 
C)  stock dividend. 
D)  All of these decrease total stockholders' equity. 
A)  cash dividend. 
B)  liquidating dividend. 
C)  stock dividend. 
D)  All of these decrease total stockholders' equity.

Question 17

When stock dividends are distributed,

Accepted Answer

A)  Common Stock Dividends Distributable is decreased. 
B)  Retained Earnings is decreased. 
C)  Paid-in Capital in Excess of Par is debited if it is a small stock dividend. 
D)  no entry is necessary if it is a large stock dividend. 
A)  Common Stock Dividends Distributable is decreased. 
B)  Retained Earnings is decreased. 
C)  Paid-in Capital in Excess of Par is debited if it is a small stock dividend. 
D)  no entry is necessary if it is a large stock dividend.

Question 18

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a

Accepted Answer

A)  corporation is organized for the purpose of making a profit. 
B)  corporation is subject to more federal and state government regulations. 
C)  corporation is an accounting economic entity. 
D)  corporation's temporary accounts are closed at the end of the accounting period. 
A)  corporation is organized for the purpose of making a profit. 
B)  corporation is subject to more federal and state government regulations. 
C)  corporation is an accounting economic entity. 
D)  corporation's temporary accounts are closed at the end of the accounting period.

Question 19

The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value.

Accepted Answer

A) True 
 B)False

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

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

If an investment firm underwrites a stock issue, the

The following information is available for Pencil Corporation: A 20% stock dividend is declared and paid when the market value was $16 per share. Instructions Compute each of the following after the stock dividend. (a) Total stockholders' equity. (b) Number of shares outstanding.

The two ways that a corporation can be classified by ownership are

Stock can be issued only in exchange for cash.

Adams Corporation began business by issuing 400,000 shares of $5 par value common stock for $24 per share. During its first year, the corporation sustained a net loss of $40,000. The year-end balance sheet would show

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

A corporation can issue more shares than it is authorized in its charter, if the board of directors approves of an increase in the number of authorized shares.

Treasury stock should not be classified as a current asset.

Stockholders generally have the right to share in corporate _______________ and in ______________ upon liquidation.

Aaron, Inc. paid $120,000 to buy back 10,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $8 per share. The entry to record the sale includes a

Under IFRS, equity is described as each of the following except

Additional paid-in capital includes all of the following except

The return on common stockholders' equity is computed by dividing

Each of the following decreases total stockholders' equity except a

When stock dividends are distributed,

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a

The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value.

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 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

Filters

Stockholders generally have the right to share in corporate _ and in upon liquidation.