Question 1

In the financial statements, organization costs appears

Accepted Answer

A)  immediately below Retained Earnings in the stockholders' equity section. 
B)  in the income statement. 
C)  as part of paid-in capital in the stockholders' equity section. 
D)  as an intangible asset.

Question 2

A small stock dividend is defined as

Accepted Answer

A)  less than 30% but greater than 25% of the corporation's issued stock. 
B)  between 50% and 100% of the corporation's issued stock. 
C)  more than 30% of the corporation's issued stock. 
D)  less than 20-25% of the corporation's issued stock.

Question 3

Art, Inc., has 5,000 shares of 4%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2016. The board of directors declares and pays a $45,000 dividend in 2017 and in 2018. What is the amount of dividends received by the common stockholders in 2018?

Accepted Answer

A)  $25,000 
B)  $20,000 
C)  $45,000 
D)  $0

Question 4

The date a cash dividend becomes a binding legal obligation to a corporation is the

Accepted Answer

A)  declaration date. 
B)  earnings date. 
C)  payment date. 
D)  record date.

Question 5

If a corporation has only one class of stock, it is referred to as

Accepted Answer

A)  classless stock. 
B)  preferred stock. 
C)  solitary stock. 
D)  common stock.

Question 6

The trial balance of Houston Inc. includes the following balances: Common Stock, $40,000; Paid-in Capital in Excess of Par, $64,000; Treasury Stock, $6,000; Preferred Stock, $30,000. Capital stock totals

Accepted Answer

A)  $70,000. 
B)  $104,000. 
C)  $134,000. 
D)  $140,000.

Question 7

The stockholders' equity statement shows the changes in each stockholders' equity account and in total stockholders' equity during the year.

Accepted Answer

A) True 
 B)False

Question 8

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Accepted Answer

A)  Preferred Stock for $840,000. 
B)  Paid-in Capital from Preferred Stock for $840,000. 
C)  Preferred Stock for $700,000 and Retained Earnings for $140,000. 
D)  Preferred Stock for $700,000 and Paid-in Capital in Excess of Par-Preferred Stock for $140,000.

Question 9

The payout ratio is computed by dividing cash dividends declared on common stock by

Accepted Answer

A)  net income. 
B)  retained earnings. 
C)  total paid-in capital. 
D)  total stockholders' equity.

Question 10

On January 1, Edison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 20% stock dividend. Market value of the stock was $18/share. As a result of this event,

Accepted Answer

A)  Edison's Paid-in Capital in Excess of Par account increased $1,600,000. 
B)  Edison's total stockholders' equity was unaffected. 
C)  Edison's Stock Dividends account increased $3,600,000. 
D)  All of these answers are correct.

Question 11

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; &emsp;   &emsp;     Event
Total retained earnings  &ensp;        Stock dividend

Accepted Answer

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

Question 12

On February 1, Barton Corporation issued 5,000 shares of its $20 par value preferred stock for $28 per share.
Instructions
Journalize the transaction.

Accepted Answer

The answer of On February 1, Barton Corporation issued 5,000...

Question 13

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.

Question 14

The ability of a corporation to obtain capital is

Accepted Answer

A)  enhanced because of limited liability and ease of share transferability. 
B)  less than a partnership. 
C)  restricted because of the limited life of the corporation. 
D)  about the same as a partnership.

Question 15

Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of Treasury Stock being recognized on the income statement.

Accepted Answer

A) True 
 B)False

Question 16

Dividends in arrears on cumulative preferred stock are considered a liability.

Accepted Answer

A) True 
 B)False

Question 17

A stockholder has the right to vote in the election of the board of directors.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Identify the effect the declaration and distribution of a stock dividend has on the par value per share. Par Value per Share

Accepted Answer

A)  Increase 
B)  Decrease 
C)  Increase or decrease 
D)  No effect

Question 20

The accounting is essentially the same under IFRS and GAAP for

Accepted Answer

A)  prior period adjustments. 
B)  revaluation surplus. 
C)  equity account terminology. 
D)  All of these answers are correct.

Exam 11: Corporations: Organization, Stock Transactions

In the financial statements, organization costs appears

A small stock dividend is defined as

The date a cash dividend becomes a binding legal obligation to a corporation is the

If a corporation has only one class of stock, it is referred to as

The trial balance of Houston Inc. includes the following balances: Common Stock, $40,000; Paid-in Capital in Excess of Par, $64,000; Treasury Stock, $6,000; Preferred Stock, $30,000. Capital stock totals

The stockholders' equity statement shows the changes in each stockholders' equity account and in total stockholders' equity during the year.

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

The payout ratio is computed by dividing cash dividends declared on common stock by

On January 1, Edison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 20% stock dividend. Market value of the stock was $18/share. As a result of this event,

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 Total retained earnings Stock dividend

On February 1, Barton Corporation issued 5,000 shares of its $20 par value preferred stock for $28 per share. Instructions Journalize the transaction.

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

The ability of a corporation to obtain capital is

Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of Treasury Stock being recognized on the income statement.

Dividends in arrears on cumulative preferred stock are considered a liability.

A stockholder has the right to vote in the election of the board of directors.

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.

Identify the effect the declaration and distribution of a stock dividend has on the par value per share. Par Value per Share

The accounting is essentially the same under IFRS and GAAP for