Question 1

Retained earnings restrictions are reported

Accepted Answer

A)  in the footnotes of the current year's financial statements. 
B)  on the current year's balance sheet. 
C)  on the current year's income statement. 
D)  on the current year's retained earnings statement. 
A)  in the footnotes of the current year's financial statements. 
B)  on the current year's balance sheet. 
C)  on the current year's income statement. 
D)  on the current year's retained earnings statement.

Question 2

Treasury stock should be reported in the financial statements of a corporation as a(n)

Accepted Answer

A)  investment. 
B)  liability. 
C)  deduction from total paid-in capital. 
D)  deduction from total paid-in capital and retained earnings. 
A)  investment. 
B)  liability. 
C)  deduction from total paid-in capital. 
D)  deduction from total paid-in capital and retained earnings.

Question 3

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 4

Previously issued financial statements with errors are required to be restated under

Accepted Answer

A)  GAAP only. 
B)  IFRS only. 
C)  Both GAAP and IFRS. 
D)  Neither GAAP nor IFRS. 
A)  GAAP only. 
B)  IFRS only. 
C)  Both GAAP and IFRS. 
D)  Neither GAAP nor IFRS.

Question 5

A corporation acts under its own name rather than in the name of its stockholders.

Accepted Answer

A) True 
 B)False

Question 6

Arens Corporation purchased 4,000 shares of its $5 par value common stock for a cash price of $10 per share. Two months later, Arens sold the treasury stock for a cash price of $8 per share.
Instructions
Prepare the journal entry to record the sale of the treasury stock assuming
(a) No balance in Paid-in Capital from Treasury Stock.
(b) A $3,000 balance in Paid-in Capital from Treasury Stock.

Accepted Answer

The answer of Arens Corporation purchased 4,000 shares of its...

Question 7

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.

Question 8

On January 1, 2018, Catlin Corporation had Retained Earnings of $448,000. During the year, Catlin had the following selected transactions:
1. Declared stock dividends of $50,000.
2. Declared cash dividends of $80,000.
3. A 2 for 1 stock split involving the issuance of 200,000 shares of $5 par value common stock for 100,000 shares of $10 par value common stock.
4. Suffered a net loss of $60,000.
Instructions
Prepare a retained earnings statement for the year.

Accepted Answer

The answer of On January 1, 2018, Catlin Corporation had...

Question 9

Book value per share is

Accepted Answer

A)  the equity a common stockholder has in the net assets of the corporation from owning one share of stock. 
B)  the equity a common stockholder has in the total assets of the corporation from owning one share of stock. 
C)  always equal to the market value of the stock. 
D)  computed only for preferred stockholders. 
A)  the equity a common stockholder has in the net assets of the corporation from owning one share of stock. 
B)  the equity a common stockholder has in the total assets of the corporation from owning one share of stock. 
C)  always equal to the market value of the stock. 
D)  computed only for preferred stockholders.

Question 10

Hsu, Inc. issued 10,000 shares of stock at a stated value of $8/share. The total issue of stock sold for $15 per share. The journal entry to record this transaction would include a

Accepted Answer

A)  debit to Cash for $80,000. 
B)  credit to Common Stock for $80,000. 
C)  credit to Paid-in Capital in Excess of Par for $150,000. 
D)  credit to Common Stock for $150,000. 
A)  debit to Cash for $80,000. 
B)  credit to Common Stock for $80,000. 
C)  credit to Paid-in Capital in Excess of Par for $150,000. 
D)  credit to Common Stock for $150,000.

Question 11

The declaration and distribution of a stock dividend will

Accepted Answer

A)  increase total stockholders' equity. 
B)  increase total assets. 
C)  decrease total assets. 
D)  have no effect on total assets. 
A)  increase total stockholders' equity. 
B)  increase total assets. 
C)  decrease total assets. 
D)  have no effect on total assets.

Question 12

Paid-In Capital in Excess of Stated Value

Accepted Answer

A)  is credited when no-par stock does not have a stated value. 
B)  is reported as part of paid-in capital on the balance sheet. 
C)  represents the amount of legal capital. 
D)  normally has a debit balance. 
A)  is credited when no-par stock does not have a stated value. 
B)  is reported as part of paid-in capital on the balance sheet. 
C)  represents the amount of legal capital. 
D)  normally has a debit balance.

Question 13

The following information is available for Matlin Inc.:   
Instructions
Based on the preceding information, prepare a retained earnings statement for 2018.

Accepted Answer

The answer of The following information is available for Matlin...

Question 14

The following selected amounts are available for Clark Company.   What is its ending retained earnings balance?

Accepted Answer

A)  $750 
B)  $800 
C)  $550 
D)  $700 
A)  $750 
B)  $800 
C)  $550 
D)  $700

Question 15

Saint, Inc. declares a 15% common stock dividend when it has 30,000 shares of $10 par value common stock outstanding. If the market value of $24 per share is used, the amounts debited to Stock Dividends and credited to Paid-in Capital in Excess of Par are:

Accepted Answer

The answer of Saint, Inc. declares a 15% common stock...

Question 16

Cloud Manufacturing declared a 10% stock dividend when it had 700,000 shares of $3 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to

Accepted Answer

A)  Stock Dividends for $210,000. 
B)  Paid-in Capital in Excess of Par for $630,000. 
C)  Common Stock for $210,000. 
D)  Common Stock Dividends Distributable for $840,000. 
A)  Stock Dividends for $210,000. 
B)  Paid-in Capital in Excess of Par for $630,000. 
C)  Common Stock for $210,000. 
D)  Common Stock Dividends Distributable for $840,000.

Question 17

Which of the following represents the largest number of common shares?

Accepted Answer

A)  Treasury shares 
B)  Issued shares 
C)  Outstanding shares 
D)  Authorized shares 
A)  Treasury shares 
B)  Issued shares 
C)  Outstanding shares 
D)  Authorized shares

Question 18

A stockholder who receives a stock dividend would

Accepted Answer

A)  expect the market price per share to increase. 
B)  own more shares of stock. 
C)  expect retained earnings to increase. 
D)  expect the par value of the stock to change. 
A)  expect the market price per share to increase. 
B)  own more shares of stock. 
C)  expect retained earnings to increase. 
D)  expect the par value of the stock to change.

Question 19

New Corp. issues 2,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to

Accepted Answer

A)  Common Stock $20,000 and Paid-in Capital in Excess of Stated Value $12,000. 
B)  Common Stock $32,000. 
C)  Common Stock $20,000 and Paid-in Capital in Excess of Par $12,000. 
D)  Common Stock $20,000 and Retained Earnings $12,000. 
A)  Common Stock $20,000 and Paid-in Capital in Excess of Stated Value $12,000. 
B)  Common Stock $32,000. 
C)  Common Stock $20,000 and Paid-in Capital in Excess of Par $12,000. 
D)  Common Stock $20,000 and Retained Earnings $12,000.

Question 20

Match each item/event pair below with the indicated change in the item. An individual classification may be used more than once, or not at all. For each dividend, assume that both declaration and payment or distribution has occurred.
Classifications
A. Item increases
B. Item decreases
C. Item is unchanged
D. Direction of change cannot be determined

Accepted Answer

1. B 4. C

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

Retained earnings restrictions are reported

Treasury stock should be reported in the financial statements of a corporation as a(n)

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

Previously issued financial statements with errors are required to be restated under

A corporation acts under its own name rather than in the name of its stockholders.

The term residual claim refers to a stockholders' right to

Book value per share is

Hsu, Inc. issued 10,000 shares of stock at a stated value of $8/share. The total issue of stock sold for $15 per share. The journal entry to record this transaction would include a

The declaration and distribution of a stock dividend will

Paid-In Capital in Excess of Stated Value

The following information is available for Matlin Inc.: Instructions Based on the preceding information, prepare a retained earnings statement for 2018.

The following selected amounts are available for Clark Company. What is its ending retained earnings balance?

Saint, Inc. declares a 15% common stock dividend when it has 30,000 shares of $10 par value common stock outstanding. If the market value of $24 per share is used, the amounts debited to Stock Dividends and credited to Paid-in Capital in Excess of Par are:

Cloud Manufacturing declared a 10% stock dividend when it had 700,000 shares of $3 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to

Which of the following represents the largest number of common shares?

A stockholder who receives a stock dividend would

New Corp. issues 2,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to

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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