Question 1

The issue of $1 par value common stock for $10 per share results in a $9 credit to the capital in excess of par value account for each share issued.

Accepted Answer

A) True 
 B)False

Question 2

The issue of $5 par value common stock for $10 per share results in a $10 credit to the common stock account for each share issued.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following correctly describes the affect of declaring and distributing a common stock dividend?

Accepted Answer

A) Total stockholders' equity decreases. 
B) Total stockholders' equity remains the same. 
C) The number of shares outstanding increases while the par value of each share decreases. 
D) The number of shares outstanding decreases while the par value of each share increases.

Question 4

Wendell Company provided the following pertaining to its recent year of operation:
 Common stock with a $10,000 par value was sold for $50,000 cash.
Cash dividends totaling $20,000 were declared,of which $15,000 were paid.
Net income was $70,000.
A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value.
 Treasury stock costing $9,000 was sold for $7,000.
How much did Wendell's capital in excess of par increase during the recent year of operation?

Accepted Answer

A) $60,000 
B) $58,000 
C) $67,000 
D) $24,000

Question 5

Common stockholders have voting rights and can declare cash dividends.

Accepted Answer

A) True 
 B)False

Question 6

Total assets remain the same when a company uses cash to purchase treasury stock.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following represents the number of shares currently in the hands of investors?

Accepted Answer

A) Authorized shares 
B) Issued shares 
C) Outstanding shares 
D) Treasury shares

Question 8

The declaration and payment of a cash dividend

Accepted Answer

A) reduces retained earnings and increases liabilities by the amount of the dividend. 
B) reduces retained earnings and increases contributed capital by the same amount. 
C) reduces assets and increases liabilities by the amount of the dividend. 
D) reduces both assets and retained earnings by the amount of the dividend.

Question 9

Which of the following statements is correct?

Accepted Answer

A) A treasury stock purchase for less than its original issue cost results in a decrease in total stockholders' equity. 
B) A treasury stock purchase for less than its original issue cost results in an increase in total stockholders' equity. 
C) A treasury stock purchase for an amount equal to its original issue cost results in no change to total stockholders' equity. 
D) A treasury stock purchase for more than its original issue cost results in an increase in total stockholders' equity.

Question 10

Chicago Clock Corporation issued a 3-for-2 stock split of its common stock,which had a par value of $100 before the split.What dollar amount of retained earnings should be transferred to the common stock account?

Accepted Answer

A) Par value of $100 per share. 
B) Market value per share on the issue date. 
C) Half of the previous total amount in the common stock account. 
D) Retained earnings aren't transferred to the common stock account.

Question 11

Which of the following represents the maximum number of shares of stock issuable to the public?

Accepted Answer

A) Authorized shares 
B) Issued shares 
C) Outstanding shares 
D) Treasury shares

Question 12

RKJ Company has provided the following:
100,000 shares of $5 par value common stock are authorized;
70,000 shares were issued for $9 per share;
 65,000 shares are outstanding.
Which of the following statements is correct based only on the above facts?

Accepted Answer

A) Common stock is reported at $630,000 on the balance sheet. 
B) Additional-paid in capital is reported at $260,000 on the balance sheet. 
C) Common stock is reported at $350,000 on the balance sheet. 
D) Treasury stock is reported at $45,000 on the balance sheet.

Question 13

Wendell Company provided the following pertaining to its recent year of operation:
 Common stock with a $10,000 par value was sold for $50,000 cash.
 Cash dividends totaling $20,000 were declared,of which $15,000 were paid.
 Net income was $70,000.
 A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value.
 Treasury stock costing $9,000 was sold for $7,000.
How much did Wendell's retained earnings increase during the recent year of operation?

Accepted Answer

A) $32,000 
B) $45,000 
C) $29,000 
D) $27,000

Question 14

RKJ Company has provided the following:
 100,000 shares of $5 par value common stock are authorized;
 70,000 shares have been issued;
 65,000 shares are outstanding.
Which of the following statements is correct?

Accepted Answer

A) RKJ has 35,000 shares of treasury stock. 
B) RKJ has 30,000 shares of treasury stock. 
C) RKJ can reissue an additional 35,000 shares of common stock. 
D) RKJ can issue an additional 30,000 shares of common stock.

Question 15

On December 15,2009,the board of directors of Cross Corporation declared a cash dividend,payable on January 8,2010 of $.80 per share on the 2,000,000 common shares outstanding.On December 15,2009,Cross Corporation should

Accepted Answer

A) not prepare a journal entry because the event had no effect on the corporation's financial position until 2010. 
B) decrease retained earnings $1.6 million and increase expenses $1.6 million. 
C) decrease retained earnings $1.6 million and increase liabilities by $1.6 million. 
D) decrease cash $1.6 million and decrease retained earnings $1.6 million.

Question 16

Which of the following journal entries is correct when no-par common stock is initially issued for cash?

Accepted Answer

A)  Cash
$ \quad $ Common stock 
B)  Cash
$ \quad $ Common stock
$ \quad $ Capital in excess of par 
C)  Cash
$ \quad $ Common stock 
$ \quad $ Retained earnings 
D)  Cash
$ \quad $ Common stock 
$ \quad $ Gain on sale of stock

Question 17

Shares of stock held as treasury stock do not have voting rights or the right to receive dividends.

Accepted Answer

A) True 
 B)False

Question 18

When a company pays its previously declared cash dividend,an investing cash outflow is reported.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true about partnership accounting?

Accepted Answer

A) A particular partner's capital account is debited when a withdrawal takes place by that partner. 
B) The process of closing, through the closing entry process, a positive net income results in an increase in overall partner capital. 
C) The drawings account balances are deducted to arrive at the net income to allocate to the partners. 
D) The drawings account is closed to retained earnings at the end of the period.

Question 20

Cornhusker Corporation plans to raise $10 million cash on January 1,2010,by issuing either bonds payable (8% interest rate)or cumulative preferred stock (8% dividend rate).How would the annual interest amount on the bonds or annual preferred dividend amount (if paid)affect the net income for the year ended December 31,2010?

Accepted Answer

A) Net income would be reduced by the annual interest on the bonds and by the annual preferred stock dividends. 
B) Net income would be reduced by the annual interest on the bonds but not by the annual preferred stock dividends. 
C) Net income would not be reduced by either the annual interest on the bonds or the annual preferred stock dividends. 
D) Net income would be reduced by the annual preferred dividends but not by the annual interest on the bonds.

Exam 11: Reporting and Interpreting Owners Equity

The issue of $1 par value common stock for $10 per share results in a $9 credit to the capital in excess of par value account for each share issued.

The issue of $5 par value common stock for $10 per share results in a $10 credit to the common stock account for each share issued.

Which of the following correctly describes the affect of declaring and distributing a common stock dividend?

Common stockholders have voting rights and can declare cash dividends.

Total assets remain the same when a company uses cash to purchase treasury stock.

Which of the following represents the number of shares currently in the hands of investors?

The declaration and payment of a cash dividend

Which of the following statements is correct?

Chicago Clock Corporation issued a 3-for-2 stock split of its common stock,which had a par value of $100 before the split.What dollar amount of retained earnings should be transferred to the common stock account?

Which of the following represents the maximum number of shares of stock issuable to the public?

RKJ Company has provided the following: 100,000 shares of $5 par value common stock are authorized; 70,000 shares were issued for $9 per share; 65,000 shares are outstanding. Which of the following statements is correct based only on the above facts?

RKJ Company has provided the following: 100,000 shares of $5 par value common stock are authorized; 70,000 shares have been issued; 65,000 shares are outstanding. Which of the following statements is correct?

On December 15,2009,the board of directors of Cross Corporation declared a cash dividend,payable on January 8,2010 of $.80 per share on the 2,000,000 common shares outstanding.On December 15,2009,Cross Corporation should

Which of the following journal entries is correct when no-par common stock is initially issued for cash?

Shares of stock held as treasury stock do not have voting rights or the right to receive dividends.

When a company pays its previously declared cash dividend,an investing cash outflow is reported.

Which of the following statements is true about partnership accounting?