Question 1

Each of the following decreases retained earnings except a

Accepted Answer

A)  cash dividend. 
B)  liquidating dividend. 
C)  stock dividend. 
D)  All of these decrease retained earnings.

Question 2

Barr, Inc. reports $4,000,000 of common stock, and $6,000,000 of additional paid-in capital on its balance sheet. The number of common shares issued and outstanding is 500,000 shares. The book value per share is

Accepted Answer

A)  $20. 
B)  $12. 
C)  $8. 
D)  not determinable.

Question 3

The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value.

Accepted Answer

A) True 
 B)False

Question 4

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: Paid-in Capital in $\begin{array}{ll}&\text { Stock Dividends }&\text { Excess of Par }\
a.&\$ 45,000 & \$ 0 \
b.&\$ 108,000 & \$ 63,000 \
c.&\$ 108,000 & \$ 45,000 \
d.&\$ 45,000 & \$ 63,000
\end{array}$

Accepted Answer

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

Question 5

The authorized stock of a corporation

Accepted Answer

A)  only reflects the initial capital needs of the company. 
B)  is indicated in its by-laws. 
C)  is indicated in its charter. 
D)  must be recorded in a formal accounting entry.

Question 6

Land Inc. has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 300,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Land declares a 10% stock dividend on its common stock:

Accepted Answer

A)  net income will decrease by $150,000. 
B)  retained earnings will decrease by $150,000 and total stockholders' equity will increase by $150,000. 
C)  retained earnings will decrease by $900,000 and total stockholders' equity will increase by $900,000. 
D)  retained earnings will decrease by $900,000 and total paid-in capital will increase by $900,000.

Question 7

The effect of a stock dividend is to

Accepted Answer

A)  decrease total assets and stockholders' equity. 
B)  change the composition of stockholders' equity. 
C)  decrease total assets and total liabilities. 
D)  increase the book value per share of common stock.

Question 8

A prior period adjustment that corrects income of a prior period requires that an entry be made to

Accepted Answer

A)  an income statement account. 
B)  a current year revenue or expense account. 
C)  the retained earnings account. 
D)  an asset account.

Question 9

Accounting for treasury stock is done by the

Accepted Answer

A)  FIFO method. 
B)  LIFO method. 
C)  cost method. 
D)  lower of cost or market method.

Question 10

The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.

Accepted Answer

A) True 
 B)False

Question 11

If Keene Company issues 9,000 shares of $5 par value common stock for $160,000, the account

Accepted Answer

A)  Common Stock will be credited for $45,000. 
B)  Paid-in Capital in Excess of Par will be credited for $45,000. 
C)  Paid-in Capital in Excess of Par will be credited for $160,000. 
D)  Cash will be debited for $115,000.

Question 12

Under the cost method, Treasury Stock is debited at the price paid to reacquire the shares, and the same amount is credited to Treasury Stock when the shares are sold.

Accepted Answer

A) True 
 B)False

Question 13

Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders' equity section.

Accepted Answer

A) True 
 B)False

Question 14

Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the board of directors declares a $70,000 dividend, the

Accepted Answer

A)  preferred shareholders will receive 1/10th of what the common shareholders will receive. 
B)  preferred shareholders will receive the entire $70,000. 
C)  $70,000 will be held as restricted retained earnings and paid out at some future date. 
D)  preferred shareholders will receive $35,000 and the common shareholders will receive $35,000.

Question 15

Township, Inc. has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2014, and December 31, 2015. The board of directors declared and paid a $50,000 dividend in 2014. In 2015, $110,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2015? $\begin{array}{lll}
\text { Preferred } & & \text { Common } \\end{array}$
A)$\begin{array}{lll}\ \$0&&&&& \$ 110,000 \\end{array}$
B)$\begin{array}{lll}\$ 50,000 &&& \$ 60,000 \\end{array}$
C)$\begin{array}{lll}\$ 55,000 &&& \$ 55,000 \\end{array}$
D)$\begin{array}{lll}\$ 70,000 &&& \$ 40,000
\end{array}$

Accepted Answer

The answer of Township, Inc. has 10,000 shares of 5%,...

Question 16

Which of the following would not be true of a privately held corporation?

Accepted Answer

A)  It is sometimes called a closely held corporation. 
B)  Its shares are regularly traded on the New York Stock Exchange. 
C)  It does not offer its shares for sale to the general public. 
D)  It is usually smaller than a publicly held company.

Question 17

Treasury Stock is a(n)

Accepted Answer

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

Question 18

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 19

The following data is available for Blaine Corporation at December 31, 2015: $\begin{array}{ll}
\text {Common stock, par $ \$ 10 $ (authorized 30,000 shares)  }&\$250,000\
\text { Treasury Stock (at cost $ \$ 15 $ per share)}&900\
\end{array}$
 Based on the data, how many shares of common stock have been issued?

Accepted Answer

A)  30,000 
B)  25,000 
C)  29,940 
D)  24,940

Question 20

A company would not acquire treasury stock

Accepted Answer

A)  in order to reissue shares to officers. 
B)  as an asset investment. 
C)  in order to increase trading of the company's stock. 
D)  to have additional shares available to use in acquisitions of other companies.

Exam 11: Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Each of the following decreases retained earnings except a

Barr, Inc. reports $4,000,000 of common stock, and $6,000,000 of additional paid-in capital on its balance sheet. The number of common shares issued and outstanding is 500,000 shares. The book value per share is

The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value.

The authorized stock of a corporation

Land Inc. has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 300,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Land declares a 10% stock dividend on its common stock:

The effect of a stock dividend is to

A prior period adjustment that corrects income of a prior period requires that an entry be made to

Accounting for treasury stock is done by the

The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.

If Keene Company issues 9,000 shares of $5 par value common stock for $160,000, the account

Under the cost method, Treasury Stock is debited at the price paid to reacquire the shares, and the same amount is credited to Treasury Stock when the shares are sold.

Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders' equity section.

Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the board of directors declares a $70,000 dividend, the

Which of the following would not be true of a privately held corporation?

Treasury Stock is a(n)

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

A company would not acquire treasury stock