(Multiple-Choice)
1. Which of the following is a characteristic of a corporation?
a. No income tax
b. Mutual agency
c. Limited liability of stockholders
d. Both a and b

2. Home Team, Inc., issues 280,000 shares of no-par common stock for $15 per share. The journal entry is which of the following?

3. Par value
a. is established for a share of stock after it is issued.
b. represents the original selling price for a share of stock.
c. is an arbitrary amount that establishes the legal capital for each share.
d. may exist for common stock but not for preferred stock.
e. represents what a share of stock is worth.

4. The paid-in capital portion of stockholders€™ equity does not include.
a. Paid-in Capital in Excess of Par Value.
b. Common Stock.
c. Preferred Stock.
d. Retained Earnings.

5. Preferred stock is least likely to have which of the following characteristics?
a. Preference as to dividends
b. The right of the holder to convert to common stock
c. Preference as to assets on liquidation of the corporation
d. Extra liability for the preferred stockholders

6. Which of the following classifications represents the most shares of common stock?
a. Issued shares
b. Outstanding shares
c. Authorized shares
d. Treasury shares
e. Unissued shares

Use the following information for Questions Q10-7 to Q9:
These account balances at December 31 relate to Aqua Sport, Inc.:

7- What is total paid-in capital for Aqua Sport, Inc.?
a. $659,700
b. $648,300
c. $725,600
d. $654,000
e. None of the above

8. What is total stockholders€™ equity for Aqua Sport, Inc.?
a. $719,900
b. $725,600
c. $731,300
d. $654,000
e. None of the above

9. Aqua Sport€™s net income for the period is $119,300 and beginning common stockholders€™ equity is $681,200. Calculate Aqua Sport€™s return on common stockholders€™ equity.
a. 16.8%
b. 18.1%
c. 18.9%
d. 17.0%

10. A company paid $26 per share to purchase 500 shares of its common stock as treasury stock. The stock was originally issued at $10 per share. The journal entry to record the purchase of the treasury stock is which of the following?

11. When treasury stock is sold for less than its cost, the entry should include a debit to
a. Gain on Sale of Treasury Stock.
b. Loss on Sale of Treasury Stock.
c. Retained Earnings.
d. Paid-in Capital in Excess of Par.

12. A company purchased 100 shares of its common stock at $49 per share. It then sells 75 of the treasury shares at $58 per share. The entry to sell the treasury stock includes a
a. credit to Cash for $4,350.
b. credit to Paid-in Capital, Treasury Stock for $675.
c. credit to Treasury Stock for $4,350.
d. debit to Retained Earnings for $675.
e. credit to Retained Earnings for $900.

13. Stockholders are eligible for a dividend if they own the stock on the date of
a. issuance.
b. record.
c. payment.
d. declaration.

14. Toni€™s Foods has outstanding 300 shares of 2% preferred stock, $100 par value; and 1,900 shares of common stock, $20 par value. Toni€™s declares dividends of $18,200. The correct entry is which of the following?


15. A corporation has 50,000 shares of 1% preferred stock outstanding. Also, there are 50,000 shares of common stock outstanding. Par value for each is $100. If a $450,000 dividend is paid, how much goes to the preferred stockholders?
a. None
b. $4,500
c. $50,000
d. $450,000
e. $30,000

16. Assume the same facts as in question 66. What is the amount of dividends per share on common stock?
a. $4.50
b. $11.00
c. $8.00
d. $9.00
e. None of these

17. Which of the following is not true about a 10% stock dividend?
a. Total stockholders€™ equity remains the same.
b. Paid-in Capital increases.
c. Par value decreases.
d. Retained Earnings decreases.
e. The market value of the stock is needed to record the stock dividend.

18. A company declares a 5% stock dividend. The debit to Retained Earnings is an amount equal to
a. the book value of the shares to be issued.
b. the excess of the market price over the original issue price of the shares to be issued.
c. the par value of the shares to be issued.
d. the market value of the shares to be issued.

19. Which of the following statements is not true about a 3-for-1 stock split?
a. Total stockholders€™ equity increases.
b. Par value is reduced to one-third of what it was before the split.
c. Retained Earnings remains the same.
d. The market price of each share of stock will decrease.
e. A stockholder with 10 shares before the split owns 30 shares after the split.

20. Blue Company€™s net income and net sales are $38,000 and $900,000, respectively, and average total assets are $250,000. What is Blue€™s return on assets?
a. 15.2%
b. 27.8%
c. 17.2%
d.4.2%

Transcribed Image Text:

a. Cash 4,200,000 Common Stock Gain on the Sale of Stock 280,000 3,920,000 b. Cash 4,200,000 Common Stock 4,200,000 c. Cash 4,200,000 Common Stock Paid-in Capital in Excess of Par 560,000 3,640,000 d. Cash 280,000 Common Stock 280,000 Accounts Payable Accounts Receivable. Common Stock Treasury Stock Bonds Payable. 51,400 Paid-in Capital in Excess 81,950 313,000 of Par-Common... Preferred Stock, 10%, $100 Par. $260,000 81,000 71,600 12,300 5,700 Retained Earnings. a. Treasury Stock 5,000 8,000 Paid-in Capital in Excess of Par Cash 13,000 b. Common Stock 13,000 Cash 13,000 c. Treasury Stock 13,000 Cash 13,000 d. Treasury Stock 5,000 8,000 Retained Earnings Cash 13,000