1) When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to A. additional paid-in capital from stock warrants. B. premium on bonds payable. C. retained earnings. D. a liability account. 2) A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferably A. zero. B. based on the relative market values of the two securities involved. C. calculated by the excess of the proceeds over the face amount of the bonds. D. equal to the market value of the warrants. 3) The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be A. reflected currently in income, but NOT as an extraordinary item. B. treated as a direct reduction of retained earnings. C. reflected currently in income as an extraordinary item. D. treated as a prior period adjustment. 4) Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? A. authorized shares B. outstanding shares C. issued shares D. unissued shares 5) The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the A. pro forma method. B. either the proportional method or the incremental method. C. proportional method. D. incremental method. 6) Stockholders' equity is generally classified into two major categories: A. contributed capital and appropriated capital. B. earned capital and contributed capital. C. appropriated capital and retained earnings. D. retained earnings and unappropriated capital. 7) How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions? A. As paid-in capital from treasury stock transactions. B. As ordinary earnings shown on the income statement. C. As an extraordinary item shown on the income statement. D. As an increase in the amount shown for common stock. 8) When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? A. Paid-in capital in excess of par for the purchase price. B. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value. C. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value. D. Treasury stock for the purchase price. 9) Gains" on sales of treasury stock (using the cost method) should be credited to A. capital stock. B. paid-in capital from treasury stock. C. other income. D. retained earnings. 10) Antidilutive securities A. are those whose inclusion in earnings per share computations would cause basic earnings per share to exceed diluted earnings per share. B. should be included in the computation of diluted earnings per share but NOT basic earnings per share. C. should be ignored in all earnings per share calculations. D. include stock options and warrants whose exercise price is less than the average market price of common stock. 11) In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would A. fairly present the maximum potential dilution of diluted earnings per share on a prospective basis. B. fairly present diluted earnings per share on a prospective basis. C. be antidilutive. D. reflect the excess of the number of shares assumed issued over the number of shares assumed reacquired as the potential dilution of earnings per share. 12) What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively? A. Increase and no effect B. Decrease and no effect C. Increase and decrease D. Decrease and increase 13) A corporation declared a dividend, a portion of which was liquidating. How would this distribution affect each of the following? Additional Paid-in Capital | Retained Earnings A. Decrease | Decrease B. Decrease | No effect C. No effect | No effect D. No effect | Decrease 14) On May 1, 2007, Kent Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Kent had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Kent 's common stock was $20 per share on May 1, 2007. As a result of this stock dividend, Kent's total stockholders' equity A. decreased by $200,000. B. increased by $200,000. C. did NOT change. D. decreased by $10,000. 15) Palmer Corp. owned 20,000 shares of Dixon Corp. purchased in 2003 for $240,000. On December 15, 2006, Palmer declared a property dividend of all of its Dixon Corp. shares on the basis of one share of Dixon for every 10 shares of Palmer common stock held by its stockholders. The property dividend was distributed on January 15, 2007. On the declaration date, the aggregate market price of the Dixon shares held by Palmer was $400,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of A. $160,000. B. $0. C. $400,000. D. $240,000