Question 1

Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

Accepted Answer

A) True 
 B)False

Question 2

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
-
Item  &emsp;       &emsp;    &emsp; &emsp;   &emsp;     Event
Par value per shar  &ensp;        Stock split

Accepted Answer

A) Item increases 
B) Item decreases 
C) Item is unchanged 
D) Direction of change cannot be determined

Question 3

Stockholders elect the _______________, who in turn hire the ______________ of the company who have day to day responsibility for running the corporation.

Accepted Answer

The answer of Stockholders elect the _______________, who in turn...

Question 4

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.

Question 5

Car and Auto Sisters had retained earnings of $18,000 on the balance sheet but disclosed in the footnotes that $3,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?

Accepted Answer

A)  $14,000 
B)  $15,000 
C)  $18,000 
D)  $12,000

Question 6

The following information is available for Macon Corporation: $\begin{array}{lr}
\text { Common Stock (\$10 par) } & \$ 1,700,000 \
\text { Paid-in Capital in Excess of Par-Preferred } & 200,000 \
\text { Paid-in Capital in Excess of Stated Value-Common } & 750,000 \
\text { Preferred Stock } & 450,000 \
\text { Retained Earnings } & 800,000 \
\text { Treasury Stock—Common } & 50,000
\end{array}$ Instructions
Based on the preceding information, calculate each of the following:
(a) Total paid-in capital.
(b) Total stockholders' equity.

Accepted Answer

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

Question 7

The following information is available for Evans Corporation:  Instructions
Compute the return on common stockholders' equity for both years. Briefly comment on your findings.

Accepted Answer

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

Question 8

The payout ratio is computed by dividing total cash dividends declared by retained earnings.

Accepted Answer

A) True 
 B)False

Question 9

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Treasury Stock is a(n)

Accepted Answer

A)  contra asset account. 
B)  retained earnings account. 
C)  asset account. 
D)  contra stockholders' equity account.

Question 12

Cooke Corporation issues 10,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reported

Accepted Answer

A)  entirely within the capital stock section. 
B)  entirely within the additional paid-in capital section. 
C)  under both the capital stock and additional paid-in capital sections. 
D)  entirely under the retained earnings section.

Question 13

An inexperienced accountant for Olsen Corporation made the following entries.  Instructions
(a) On the basis of the explanation for each entry, prepare the entry that should have been made for the transactions. (Omit explanations.)
(b) Prepare the correcting entries that should be made to correct the accounts of Olsen Corporation. (Do not reverse the original entry.)

Accepted Answer

The answer of An inexperienced accountant for Olsen Corporation made...

Question 14

Seven thousand shares of treasury stock of Marker, Inc., previously acquired at $14 per share, are sold at $20 per share. The entry to record this transaction will include a

Accepted Answer

A)  credit to Treasury Stock for $140,000. 
B)  debit to Paid-In Capital from Treasury Stock for $42,000. 
C)  debit to Treasury Stock for $98,000. 
D)  credit to Paid-In Capital from Treasury Stock for $42,000.

Question 15

The market value of a corporation's stock is determined by the number of shares that the corporation has been authorized to issue.

Accepted Answer

A) True 
 B)False

Question 16

Preferred stock has contractual provisions that give it a preference over common stock as to ___________________ and to ___________________ in the event of liquidation.

Accepted Answer

The answer of Preferred stock has contractual provisions that give...

Question 17

Two classifications appearing in the paid-in capital section of the balance sheet are

Accepted Answer

A)  preferred stock and common stock. 
B)  paid-in capital and retained earnings. 
C)  capital stock and additional paid-in capital. 
D)  capital stock and treasury stock.

Question 18

If Vickers Company issues 5,000 shares of $5 par value common stock for $175,000,

Accepted Answer

A)  Common Stock will be credited for $175,000. 
B)  Paid-In Capital in Excess of Par will be credited for $25,000. 
C)  Paid-In Capital in Excess of Par will be credited for $150,000. 
D)  Cash will be debited for $150,000.

Question 19

On January 1, Collins Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,

Accepted Answer

A)  Collins' Paid-in Capital in Excess of Par account increased $400,000. 
B)  Collins' total stockholders' equity was unaffected. 
C)  Collins' Stock Dividends account increased $1,200,000. 
D)  All of these answers are correct.

Question 20

A retained earnings statement shows the same information as a corporation income statement.

Accepted Answer

A) True 
 B)False

Exam 11: Corporations: Organization, Stock Transactions

Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

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 - Item Event Par value per shar Stock split

Stockholders elect the _, who in turn hire the of the company who have day to day responsibility for running the corporation.

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

The following information is available for Evans Corporation: Instructions Compute the return on common stockholders' equity for both years. Briefly comment on your findings.

The payout ratio is computed by dividing total cash dividends declared by retained earnings.

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

Treasury Stock is a(n)

Cooke Corporation issues 10,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reported

Seven thousand shares of treasury stock of Marker, Inc., previously acquired at $14 per share, are sold at $20 per share. The entry to record this transaction will include a

The market value of a corporation's stock is determined by the number of shares that the corporation has been authorized to issue.

Preferred stock has contractual provisions that give it a preference over common stock as to _ and to _ in the event of liquidation.

Two classifications appearing in the paid-in capital section of the balance sheet are

If Vickers Company issues 5,000 shares of $5 par value common stock for $175,000,

On January 1, Collins Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,

A retained earnings statement shows the same information as a corporation income statement.