Question 1

Which of the following is true of a stock dividend?

Accepted Answer

A) Transfers a portion of equity from retained earnings to a cash reserve account. 
B) The decision to declare a stock dividend resides with the shareholders. 
C) Reduces a corporation's assets and stockholders' equity. 
D) It is a liability on the balance sheet. 
E) Does not affect total equity, but transfer amounts between the components of equity. 
A) Transfers a portion of equity from retained earnings to a cash reserve account. 
B) The decision to declare a stock dividend resides with the shareholders. 
C) Reduces a corporation's assets and stockholders' equity. 
D) It is a liability on the balance sheet. 
E) Does not affect total equity, but transfer amounts between the components of equity.

Question 2

Fargo Company's outstanding stock consists of 400 shares of noncumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. $$\begin{array}{l}

\begin{array} { l r r } &\text { Dividend Declared }\
\text { year 1 } & \$ 20,000 \
\text { year 2 } & \$ 6,000 \
\text { year 3 } & \$ 32,000 \
\end{array}
\end{array}$$ The amount of dividends paid to preferred and common shareholders in year 1 is:

Accepted Answer

A) $4,000 preferred; $16,000 common. 
B) $10,000 preferred; $10,000 common. 
C) $20,000 preferred; $0 common. 
D) $200 preferred; $19,800 common. 
E) $17,000 preferred; $3,000 common. 
A) $4,000 preferred; $16,000 common. 
B) $10,000 preferred; $10,000 common. 
C) $20,000 preferred; $0 common. 
D) $200 preferred; $19,800 common. 
E) $17,000 preferred; $3,000 common.

Question 3

A stock dividend is a distribution of corporate assets that returns part of the original investment to shareholders.

Accepted Answer

A) True 
 B)False

Question 4

Small stock dividends are recorded at par or stated value.

Accepted Answer

A) True 
 B)False

Question 5

Stocks that pay relatively large cash dividends on a regular basis are called:

Accepted Answer

A) Large capital stocks. 
B) Small capital stocks. 
C) Mid capital stocks. 
D) Income stocks. 
E) Growth stocks. 
A) Large capital stocks. 
B) Small capital stocks. 
C) Mid capital stocks. 
D) Income stocks. 
E) Growth stocks.

Question 6

When a corporation has only one class of stock, the stock is called:

Accepted Answer

A) Preferred stock. 
B) No-par value stock. 
C) Common stock. 
D) Stated value stock. 
E) Par value stock. 
A) Preferred stock. 
B) No-par value stock. 
C) Common stock. 
D) Stated value stock. 
E) Par value stock.

Question 7

A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

Accepted Answer

A) True 
 B)False

Question 8

Declaration of a stock dividend results in a liability being recorded.

Accepted Answer

A) True 
 B)False

Question 9

Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

Accepted Answer

A) True 
 B)False

Question 10

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Accepted Answer

A) Debit Common Dividends Payable $4,000; credit Cash $4,000. 
B) Debit Common Dividends Payable $4,500; credit Cash $4,500. 
C) Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000. 
D) Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500. 
E) Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000. 
A) Debit Common Dividends Payable $4,000; credit Cash $4,000. 
B) Debit Common Dividends Payable $4,500; credit Cash $4,500. 
C) Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000. 
D) Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500. 
E) Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

Question 11

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

Accepted Answer

A) Convertible preferred stock. 
B) Preferential preferred stock. 
C) Callable preferred stock. 
D) Participating preferred stock. 
E) Cumulative preferred stock. 
A) Convertible preferred stock. 
B) Preferential preferred stock. 
C) Callable preferred stock. 
D) Participating preferred stock. 
E) Cumulative preferred stock.

Question 12

Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include:

Accepted Answer

A) A debit to Organization Expenses for $5,000. 
B) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000. 
C) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000. 
D) A debit to Organization Expenses for $4,000. 
E) A credit to Common Stock for $5,000. 
A) A debit to Organization Expenses for $5,000. 
B) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000. 
C) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000. 
D) A debit to Organization Expenses for $4,000. 
E) A credit to Common Stock for $5,000.

Question 13

A company made an error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

Accepted Answer

A) on the Year 2 income statement. 
B) on the Year 1 statement of retained earnings. 
C) on the Year 1 income statement. 
D) accounted for with a cumulative "catch-up" adjustment in Year 2. 
E) on the Year 2 statement of retained earnings. 
A) on the Year 2 income statement. 
B) on the Year 1 statement of retained earnings. 
C) on the Year 1 income statement. 
D) accounted for with a cumulative "catch-up" adjustment in Year 2. 
E) on the Year 2 statement of retained earnings.

Question 14

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 15

Common shareholders always share equally with all other shareholders in dividends.

Accepted Answer

A) True 
 B)False

Question 16

A corporation with $10 par common stock issues a small stock dividend. The capitalization of retained earnings is equal to:

Accepted Answer

A) The par value of the shares outstanding. 
B) The par value of the shares to be distributed. 
C) There is no capitalization of retained earnings in the case of a small stock dividend. 
D) The market value of the shares outstanding. 
E) The market value of the shares to be distributed. 
A) The par value of the shares outstanding. 
B) The par value of the shares to be distributed. 
C) There is no capitalization of retained earnings in the case of a small stock dividend. 
D) The market value of the shares outstanding. 
E) The market value of the shares to be distributed.

Question 17

A company has 50,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $1,470,000, and the par value per common share is $5. The book value per share is:

Accepted Answer

A) $4.75. 
B) $47.50. 
C) $10.00. 
D) $29.40. 
E) $14.70. 
A) $4.75. 
B) $47.50. 
C) $10.00. 
D) $29.40. 
E) $14.70.

Question 18

A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:

Accepted Answer

A) No-par stock. 
B) Discounted stock. 
C) Convertible stock. 
D) Noncumulative stock. 
E) Callable stock. 
A) No-par stock. 
B) Discounted stock. 
C) Convertible stock. 
D) Noncumulative stock. 
E) Callable stock.

Question 19

A liquidating dividend is:

Accepted Answer

A) Only declared when a corporation closes down. 
B) A return of a portion of the original investment back to the stockholders. 
C) Only paid in shares of stock. 
D) Only paid in assets other than cash. 
E) Not allowed under federal law. 
A) Only declared when a corporation closes down. 
B) A return of a portion of the original investment back to the stockholders. 
C) Only paid in shares of stock. 
D) Only paid in assets other than cash. 
E) Not allowed under federal law.

Question 20

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

Accepted Answer

Dividend yield is the ratio of annual ca

Which of the following is true of a stock dividend?

A stock dividend is a distribution of corporate assets that returns part of the original investment to shareholders.

Small stock dividends are recorded at par or stated value.

Stocks that pay relatively large cash dividends on a regular basis are called:

When a corporation has only one class of stock, the stock is called:

A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

Declaration of a stock dividend results in a liability being recorded.

Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

A company made an error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

Common shareholders always share equally with all other shareholders in dividends.

A corporation with $10 par common stock issues a small stock dividend. The capitalization of retained earnings is equal to:

A company has 50,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $1,470,000, and the par value per common share is $5. The book value per share is:

A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:

A liquidating dividend is:

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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Exam 13: Accounting for Corporations

Which of the following is true of a stock dividend?

A stock dividend is a distribution of corporate assets that returns part of the original investment to shareholders.

Small stock dividends are recorded at par or stated value.

Stocks that pay relatively large cash dividends on a regular basis are called:

When a corporation has only one class of stock, the stock is called:

A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

Declaration of a stock dividend results in a liability being recorded.

Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

A company made an error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

Common shareholders always share equally with all other shareholders in dividends.

A corporation with $10 par common stock issues a small stock dividend. The capitalization of retained earnings is equal to:

A company has 50,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $1,470,000, and the par value per common share is $5. The book value per share is:

A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:

A liquidating dividend is:

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters