Question 1

The entry required to record start-up and organization costs will cause a decrease in net income for the period.

Accepted Answer

A) True 
 B)False

Question 2

People's Electric Company omitted all its preferred stock dividends indefinitely in an effort to improve liquidity.All of the company's cumulative preferred stock was affected.According to the Wall Street Journal,"Some interpreted the drastic action as a requisite for the cash-strapped utility to secure a new credit agreement....If the credit agreement falls through,the omission of preferred-stock dividends would suggest People's Electric is perilously close to filing for bankruptcy." What is cumulative preferred stock? Why is the omission of dividends on those shares a drastic action? If new bank financing is not obtained,why would the company have to consider declaring bankruptcy?

Accepted Answer

Cumulative preferred stock is capital st

Question 3

Which of the following would not be an account in the general ledger of a corporation?

Accepted Answer

A)  Dividends Payable 
B)  Retained Earnings 
C)  Additional Paid-in Capital 
D)  Dividends in Arrears 
A)  Dividends Payable 
B)  Retained Earnings 
C)  Additional Paid-in Capital 
D)  Dividends in Arrears

Question 4

Beckham Corporation has 3,000 shares of $100 par value,7 percent cumulative preferred stock,and 10,000 shares of $10 par value common stock outstanding during its first five years of operation.Beckham Corporation paid cash dividends as follows: 2006,$17,000; 2007,$0; 2008,$65,000; 2009,$30,000; 2010,$15,000.The amount of dividends received by the preferred stockholders during 2008 was

Accepted Answer

A)  $65,000. 
B)  $46,000. 
C)  $25,000. 
D)  $18,000. 
A)  $65,000. 
B)  $46,000. 
C)  $25,000. 
D)  $18,000.

Question 5

Use the following information to answer the question below. The following transactions involving Lupine Corporation occurred during the year:
Apr. 1 Purchased 2,000 shares of its own preferred stock for $ \$ 20 $, the current market price. This is the first transaction involving its own stock engaged in by the company.

May 3 Sold 400 of the shares purchased on April 1 for $25 per share.
June 5 Retired 600 of the shares purchased on April 1. The original issue price was $ \$ 10 $. The par value of the stock is $ \$ 5 $.
 The entry to record the April 1 transaction would be:

Accepted Answer

A) 
$\begin{array}{llr}
  \text {Cash  } &40,000\
 \text { Treasury Stock, Preferred } &&40,000\
\end{array}$ 
B) 
$\begin{array}{l}
\text { Retained Earnings }&40,000 \
\text { Cash }&&40,000
\end{array}$ 
C) 
$\begin{array}{llr}
  \text { Paid-in Capital, Preferred } & 40,000\
 \text { Treasury Stock, Preferred } & & 40,000\
\end{array}$ 
D) 
$\begin{array}{l}
\text { Treasury Stock, Preferred } &40,000\
\text { Cash }&&40,000
\end{array}$ 
A) 
$\begin{array}{llr}
  \text {Cash  } &40,000\
 \text { Treasury Stock, Preferred } &&40,000\
\end{array}$ 
B) 
$\begin{array}{l}
\text { Retained Earnings }&40,000 \
\text { Cash }&&40,000
\end{array}$ 
C) 
$\begin{array}{llr}
  \text { Paid-in Capital, Preferred } & 40,000\
 \text { Treasury Stock, Preferred } & & 40,000\
\end{array}$ 
D) 
$\begin{array}{l}
\text { Treasury Stock, Preferred } &40,000\
\text { Cash }&&40,000
\end{array}$

Question 6

Treasury stock may be either common or preferred stock.

Accepted Answer

A) True 
 B)False

Question 7

A dividend that represents a return to the stockholders of a part of their paid-in capital rather than a distribution out of retained earnings is called a liquidating dividend.

Accepted Answer

A) True 
 B)False

Question 8

The sale of treasury stock at an amount greater than cost results in a gain to be reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of common stock on June 14,2010.The dividend is to be paid on July 15,2010,to shareholders of record on July 1,2010.The proper entry to be recorded on June 14,2010,will be:

Accepted Answer

A)  
$\begin{array}{lll}
\text { Dividends } & 142,500 \
\text { Dividends Payable } & & 142,500
\end{array}$ 
B)  
$\begin{array}{lll}
\text { Dividends Payable} & 142,500 \
\text { Cash  } & & 142,500 
\end{array}$ 
C)  
$\begin{array}{lll}
\text { Dividends } & 142,500 \
\quad \text { Retained Earnings } & & 142,500
\end{array}$ 
D)  
$\begin{array}{lcc}
\text { Dividends payable } & 142,500\
\text { Dividends }&& 142,500 \
\end{array}$ 
A)  
$\begin{array}{lll}
\text { Dividends } & 142,500 \
\text { Dividends Payable } & & 142,500
\end{array}$ 
B)  
$\begin{array}{lll}
\text { Dividends Payable} & 142,500 \
\text { Cash  } & & 142,500 
\end{array}$ 
C)  
$\begin{array}{lll}
\text { Dividends } & 142,500 \
\quad \text { Retained Earnings } & & 142,500
\end{array}$ 
D)  
$\begin{array}{lcc}
\text { Dividends payable } & 142,500\
\text { Dividends }&& 142,500 \
\end{array}$

Question 10

Use the following information to answer the question below. On January 1,2009,Falcon Corporation had 40,000 shares of $10 par value common stock issued and outstanding.All 40,000 shares had been issued in a prior period at $17 per share.On February 1,2009,Falcon purchased 1,000 shares of treasury stock for $19 per share and later sold the treasury shares for $26 per share on March 2,2009.
The entry to record the sale of the treasury shares on March 2,2009 is:

Accepted Answer

A) 
$\begin{array} { l r } 
\text { Cash } & 26,000 \
\text { Common Stock } && 19,000 \
\text { Retained Earnings } && 7,000
\end{array}$ 
B) 
$\begin{array} { l c c } 
\text { Cash } & 24,000 & \
\text { Retained Earnings } & 2,000 & \
\text { Treasury Stock, Common } & & 26,000
\end{array}$ 
C) 
$\begin{array}{l}
\text { Cash }&26,000\
\text { Treasury Stock, Common } && 19,000 \
\text { Gain on Treasury Stock, Common } && 7,000
\end{array}$ 
D) 
$\begin{array}{l}
\text { Cash }&26,000\
\text { Treasury Stock, Common } && 19,000 \
\text { Gain on Treasury Stock, Common } && 7,000
\end{array}$. 
A) 
$\begin{array} { l r } 
\text { Cash } & 26,000 \
\text { Common Stock } && 19,000 \
\text { Retained Earnings } && 7,000
\end{array}$ 
B) 
$\begin{array} { l c c } 
\text { Cash } & 24,000 & \
\text { Retained Earnings } & 2,000 & \
\text { Treasury Stock, Common } & & 26,000
\end{array}$ 
C) 
$\begin{array}{l}
\text { Cash }&26,000\
\text { Treasury Stock, Common } && 19,000 \
\text { Gain on Treasury Stock, Common } && 7,000
\end{array}$ 
D) 
$\begin{array}{l}
\text { Cash }&26,000\
\text { Treasury Stock, Common } && 19,000 \
\text { Gain on Treasury Stock, Common } && 7,000
\end{array}$.

Question 11

Which of the following statements is not descriptive of common stock?

Accepted Answer

A)  Stockholders are considered owners, not creditors, of a corporation. 
B)  The payment of dividends is never required. 
C)  Dividends paid are an expense for the issuing corporation. 
D)  Issuing stock is less risky than issuing bonds. 
A)  Stockholders are considered owners, not creditors, of a corporation. 
B)  The payment of dividends is never required. 
C)  Dividends paid are an expense for the issuing corporation. 
D)  Issuing stock is less risky than issuing bonds.

Question 12

The information that follows pertains to stockholders' equity data of Delano Corporation on December 31,20xx.Compute the amount of each item indicated by a letter in the listing below.
 $\begin{array}{llr}
  \text { Par value per common share } &\$10\
 \text { Balance of Common Stock account } &\$150,000\
 \text {No. of shares authorized  } &20,000\
 \text { No. of shares issued and outstanding } & \text {a}\
\
 \text { Balance of Additional Paid-in Capital account }&\text { \$b } \
\
\text {Balance of Retained Earnings account}&\$80,000\
\text {Total contributed capital}&\$ \text { c}\
\text {Total stockholders' equity}& \$ 300,000  
\end{array}$

Accepted Answer

a.15,000 shares ($150,000 ÷ $1

Question 13

Par value is the minimum cushion of capital established for the protection of

Accepted Answer

A)  investors (stockholders). 
B)  management. 
C)  creditors. 
D)  all of these. 
A)  investors (stockholders). 
B)  management. 
C)  creditors. 
D)  all of these.

Question 14

When stock is issued for noncash assets or services,the dollar amount to be recorded for this exchange is determined by the

Accepted Answer

A)  treasurer of the corporation. 
B)  par value of the stock. 
C)  market value of the stock or the market value of the consideration received, whichever is greater. 
D)  market value of the stock or the market value of the consideration received when the market value of the stock cannot be determined. 
A)  treasurer of the corporation. 
B)  par value of the stock. 
C)  market value of the stock or the market value of the consideration received, whichever is greater. 
D)  market value of the stock or the market value of the consideration received when the market value of the stock cannot be determined.

Question 15

Which of the following is a correct statement relating to the concept of mutual agency and the corporate form of business?

Accepted Answer

A)  There is no mutual agency with the corporate form of business. 
B)  Mutual agency may or may not exist in a corporation, depending on the individual state law. 
C)  Mutual agency always exists in the corporate form of business. 
D)  Mutual agency may or may not exist in a corporation, depending on a vote by the shareholders. 
A)  There is no mutual agency with the corporate form of business. 
B)  Mutual agency may or may not exist in a corporation, depending on the individual state law. 
C)  Mutual agency always exists in the corporate form of business. 
D)  Mutual agency may or may not exist in a corporation, depending on a vote by the shareholders.

Question 16

On the balance sheet,treasury stock owned by the company is classified properly as

Accepted Answer

A)  contra-stockholders' equity. 
B)  current assets. 
C)  investments. 
D)  a note to the financial statements. 
A)  contra-stockholders' equity. 
B)  current assets. 
C)  investments. 
D)  a note to the financial statements.

Question 17

When common stock is issued by a corporation for a cash price above par value,the excess of the cash proceeds over the par value should be reported in the financial statements as a component of

Accepted Answer

A)  retained earnings on the balance sheet. 
B)  total liabilities on the balance sheet. 
C)  operating income on the income statement. 
D)  total contributed capital on the balance sheet. 
A)  retained earnings on the balance sheet. 
B)  total liabilities on the balance sheet. 
C)  operating income on the income statement. 
D)  total contributed capital on the balance sheet.

Question 18

When treasury stock is sold at a price below its cost,the entry to record the sale has the effect of reducing total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 19

Match between columns
                        Premises:  Ownership of more than 50 percent of another company's voting stock
 Debt and equity investments that may or may not be held short- or long-term
 Debt investments that will be kept for the long run
 Ownership of less than 20 percent of another company's voting stock
 Illegally using unreleased company knowledge for personal gain
 Ownership of 20 to 50 percent of another company's voting stock
 Debt and equity investments that will be sold shortly after purchase
 Another term for short-term investments

Accepted Answer

The Answer of Marketable securities and Held-to-maturity securities and Significant is...

Question 20

Legal capital is a descriptive phrase for

Accepted Answer

A)  stockholders' equity. 
B)  residual equity. 
C)  market value. 
D)  par value. 
A)  stockholders' equity. 
B)  residual equity. 
C)  market value. 
D)  par value.

Exam 11: Contributed Capital

The entry required to record start-up and organization costs will cause a decrease in net income for the period.

Which of the following would not be an account in the general ledger of a corporation?

Treasury stock may be either common or preferred stock.

A dividend that represents a return to the stockholders of a part of their paid-in capital rather than a distribution out of retained earnings is called a liquidating dividend.

The sale of treasury stock at an amount greater than cost results in a gain to be reported on the income statement.

The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of common stock on June 14,2010.The dividend is to be paid on July 15,2010,to shareholders of record on July 1,2010.The proper entry to be recorded on June 14,2010,will be:

Which of the following statements is not descriptive of common stock?

Par value is the minimum cushion of capital established for the protection of

When stock is issued for noncash assets or services,the dollar amount to be recorded for this exchange is determined by the

Which of the following is a correct statement relating to the concept of mutual agency and the corporate form of business?

On the balance sheet,treasury stock owned by the company is classified properly as

When common stock is issued by a corporation for a cash price above par value,the excess of the cash proceeds over the par value should be reported in the financial statements as a component of

When treasury stock is sold at a price below its cost,the entry to record the sale has the effect of reducing total stockholders' equity.

Legal capital is a descriptive phrase for

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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