Question
10. The board of directors of Berweck Corporation declared a cash dividend on January 18, 20x7, to be paid on February 18, 20x7, to shareholders
10. The board of directors of Berweck Corporation declared a cash dividend on January 18, 20x7, to be paid on February
18, 20x7, to shareholders holding the stock on February 2, 20x7. Given these facts, the date February 2, 20x7, is
referred to as the
a.
payment date.
c.
declaration date.
b.
ex-dividend date.
d.
record date.
11. The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of
common stock on June 14, 20x7. The dividend is to be paid on July 15, 20x7, to shareholders of record on July 1,
20x7. The proper entry to be recorded on June 14, 20x7, will include a
a.
credit to Retained Earnings.
c.
debit to Dividends Payable.
b.
debit to Dividends.
d.
credit to Cash.
12. The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of
common stock on June 14, 20x7. The dividend is to be paid on July 15, 20x7, to shareholders of record on July 1,
20x7. The effects of the entry to record the declaration of the dividend on June 14, 20x7, are to
a.
increase stockholders' equity and increase liabilities.
b.
decrease stockholders' equity and increase liabilities.
c.
decrease stockholders' equity and decrease assets.
d.
increase stockholders' equity and decrease assets.
13. The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of
common stock on June 14, 20x7. The dividend is to be paid on July 15, 20x7, to shareholders of record on July 1,
20x7. The proper entry to be recorded on July 15, 20x7, will include a
a.
credit to Dividends.
c.
credit to Dividends Payable.
b.
debit to Dividends Payable.
d.
debit to Dividends.
14. The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of
common stock on June 14, 20x7. The dividend is to be paid on July 15, 20x7, to shareholders of record on July 1,
20x7. The effects of the entry to record the payment of the dividend on July 15, 20x7, are to
a.
increase stockholders' equity and decrease liabilities.
b.
increase assets and decrease stockholders' equity.
c.
decrease stockholders' equity and decrease liabilities.
d.
decrease liabilities and decrease assets.
15. The entry to close the Dividends account at the end of an accounting period will include a
a.
debit to Dividends.
c.
credit to Cash.
b.
credit to Retained Earnings.
d.
debit to Retained Earnings.
16. The net effects on a corporation of the declaration and payment of a cash dividend are to
a.
increase both assets and stockholders' equity.
b.
increase stockholders' equity and decrease liabilities.
c.
decrease both assets and stockholders' equity.
d.
decrease both liabilities and stockholders' equity.
17. A corporation records a dividend-related liability
a.
on the payment date.
c.
when the stock sells ex-dividend.
b.
on the declaration date.
d.
on the record date.
18. A liquidating dividend is
a.
A dividend that exceeds current retained earnings.
b.
normally declared when a corporation is experiencing large profits.
c.
A dividend that exceeds current profits.
d.
legal in most states.
19. All of the following are stockholders' equity accounts except
a.
Retained Earnings.
b.
Treasury Stock.
c.
Preferred Stock.
d.
Dividends Payable.
20. Start-up and organization costs include all of the following except
a.
cost of printing stock certificates.
b.
state incorporation fees.
c.
attorney's fees.
d.
prepaid insurance.
21. Start-up and organization costs
a.
appear on the balance sheet as a current asset.
b.
are expensed in the year incurred.
c.
are capitalized and amortized, usually over five years.
d.
are capitalized, but never amortized.
22. The number of shares of issued stock equals
a.
outstanding shares plus treasury shares.
b.
unissued shares minus authorized shares.
c.
authorized shares minus treasury shares.
d.
subscribed shares plus outstanding shares.
23. Treasury shares plus outstanding shares equal
a.
unissued shares.
b.
authorized shares.
c.
subscribed shares.
d.
issued shares.
24. The contributed capital of a corporation does not include
a.
retained earnings.
b.
preferred stock.
c.
additional paid-in capital.
d.
the stated value of common stock issued.
25. A corporation's residual equity is its
a.
common stock.
b.
retained earnings.
c.
preferred stock.
d.
cash.
26. The maximum number of shares of common stock that may be issued according to the corporation's charter is
referred to as
a.
outstanding shares.
b.
issued shares.
c.
authorized shares.
d.
unissued shares.
27. Which of the following classifications represents the fewest shares of common stock?
a.
Issued shares
b.
Impossible to determine
c.
Outstanding shares
d.
Treasury shares
28. Holders of preferred stock normally do not have
a.
full voting rights.
b.
ownership interests in the corporation.
c.
preference as to dividends.
d.
preference as to assets in liquidations.
Use the following information to answer questions: 29 & 30.
The following accounts appear in the ledger of Sayre Corporation on December 31, 20x8:
Preferred Stock
$30,000
Common Stock
42,000
Additional Paid-in Capital, Preferred
7,000
Additional Paid-in Capital, Common
18,000
Retained Earnings
40,000
29.A balance sheet prepared on December 31, 20x8, would report total contributed capital of
a.
$137,000.
b.
$79,000.
c.
$97,000.
d.
$72,000.
30.A balance sheet prepared on December 31, 20x8, would report total stockholders' equity of
a.
$132,000.
b.
$114,000.
c.
$172,000.
d.
$107,000.
31. If Willis Corporation has 80,000 shares of common stock authorized, has 50,000 shares of common stock issued, and
holds 6,500 shares of common stock as treasury stock, the total number of outstanding shares of Willis Corporation
amounts to
a.
73,500.
b.
43,500.
c.
27,500.
d.
31,500.
32. Outstanding shares of stock are
a.
also called treasury shares.
b.
authorized shares that have not yet been issued.
c.
issued shares that are still in circulation.
d.
shares of stock owned by unknown individuals.
33. Shares of treasury stock are
a.
shares held by the U.S. Treasury Department.
b.
unissued shares that are held by the treasurer of the corporation.
c.
issued shares that have been bought back by the corporation and are being held by the corporation.
d.
part of the total outstanding shares but not part of the total issued shares of a corporation.
34. Residual equity is a descriptive phrase for
a.
common stock.
b.
long-term liabilities.
c.
treasury stock.
d.
preferred stock.
35. Legal capital is a descriptive phrase for
a.
stockholders' equity.
b.
residual equity.
c.
par value.
d.
market value.
36. How should dividends in arrears be shown on a corporation's balance sheet?
a.
As an increase in liabilities
b.
In a note or in the body of the financial statements
c.
As an increase in stockholders' equity
d.
As a decrease in assets
37. When shares of preferred stock may be redeemed by the corporation at a certain price, the shares are said to be
a.
convertible.
b.
nonconvertible.
c.
callable.
d.
cumulative.
38. Convertible preferred stock is preferred stock that may be exchanged for
a.
cash at the option of the corporation.
b.
common stock at the option of the corporation.
c.
common stock at the option of the stockholder.
d.
cash at the option of the stockholder.
39. Most preferred stocks are callable preferred stocks, which means that the callable feature may be exercised by
a.
either the issuing corporation or a preferred stockholder.
b.
the state that issued the corporation's charter.
c.
the issuing corporation.
d.
a preferred stockholder.
40. Dividends in arrears are dividends on
a.
noncumulative preferred stock that have not been declared for some specified period of time.
b.
cumulative preferred stock that have not been declared for some specified period of time.
c.
common stock that may never be declared.
d.
cumulative preferred stock that have been declared but not yet paid.
41. Honig Corporation had the following shares of stock outstanding on December 31, 20x8:
Common stock, $50 par value, 100,000 shares outstanding
Preferred stock, 8 percent, $100 par value, cumulative, 10,000 shares outstanding
Dividends were in arrears for 20x6 and 20x7. On December 31, 20x8, total cash dividends of $400,000 were declared. The total amounts payable to preferred stockholders and common stockholders, respectively, are
a.
$160,000 and $240,000.
b.
$80,000 and $320,000.
c.
$200,000 and $200,000.
d.
$240,000 and $160,000.
42. Beckham Corporation has 3,000 shares of $100 par value, 7 percent cumulative preferred stock, and 10,000 shares of
$10 par value common stock outstanding during its first five years of operation. Beckham Corporation paid cash
dividends as follows: 20x4, $8,500; 20x5, $0; 20x6, $65,000; 20x7, $30,000; 20x8, $15,000. The amount of
dividends received by the preferred stockholders during 20x6 was
a.
$26,500.
b.
$54,500.
c.
$33,500.
d.
$65,000.
43. A corporation has 5,000 shares of 8 percent noncumulative preferred stock and 10,000 shares of common stock
outstanding. Par value for each is $100. No dividends were paid last year, but this year a(n) $73,000 dividend is paid.
How much of this $73,000 goes to the holders of common stock?
a.
$33,000
b.
$43,000
c.
$53,000
d.
$63,000
44. Dividends in arrears cannot exist in conjunction with
a.
cumulative preferred stock.
b.
noncumulative preferred stock.
c.
callable preferred stock.
d.
convertible preferred stock.
45. Which of the following would not be an account in the general ledger of a corporation?
a.
Dividends in Arrears
b.
Retained Earnings
c.
Dividends Payable
d.
Additional Paid-in Capital
46. When callable preferred stock is called and surrendered, the shareholder is entitled to all of the following except
a.
dividends in arrears.
b.
a call premium.
c.
a prorated portion of the current period's dividend.
d.
the market value of the stock.
47. Par value is the minimum cushion of capital established for the protection of
a.
creditors.
b.
all of these.
c.
investors (stockholders).
d.
management.
48. If a corporation has issued common stock at various prices that exceed par value, legal capital will be made up of the
a.
total amount of contributed capital plus retained earnings.
b.
par value of the shares issued.
c.
total stockholders' equity plus total liabilities.
d.
total amount of contributed capital.
49. In the rare instance when a par value stock is issued at a cash price below par, the excess of the par value over the
amount of cash received should be
a.
credited to the Retained Earnings account.
b.
debited to an account titled Discount on Capital Stock.
c.
credited to a liability account.
d.
debited to the Retained Earnings account.
50. When common stock is issued by a corporation for a cash price above par value, the excess of the cash proceeds over
the par value should be reported in the financial statements as a component of
a.
retained earnings on the balance sheet.
b.
operating income on the income statement.
c.
total liabilities on the balance sheet.
d.
total contributed capital on the balance sheet.
51. When stock is issued for noncash assets or services, the dollar amount to be recorded for this exchange is determined
by the
a.
treasurer of the corporation.
b.
par value of the stock.
c.
market value of the stock or the market value of the consideration received when the market value of the stock cannot be determined.
d.
market value of the stock or the market value of the consideration received, whichever is greater.
52. The Additional Paid-in Capital account normally arises in the accounting records when
a.
the stated value of capital stock is greater than the par value.
b.
capital stock is issued at an amount greater than par value.
c.
the number of shares issued exceeds par value.
d.
the market value of the stock rises above par value.
Use the following information to answer the questions 53 - 56.
When Calvert Corporation was formed on January 1, 20x7, the corporate charter provided for 50,000 shares of $20 par value common stock. The following transactions were among those engaged in by the corporation during its first month of operation:
1. The corporation issued 200 shares of stock to its lawyer in full payment of the $5,000 bill for assisting the company in drawing up its articles of incorporation and filing the proper papers with the state agency.
2. The company issued 8,000 shares of common stock at a price of $25 per share.
3. The company issued 7,000 shares of common stock in exchange for equipment that had a fair market value of $160,000.
53. The entry to record transaction 1 would include a
a.
debit to Start-up and Organization Costs for $4,000.
b.
credit to Additional Paid-in Capital for $4,000.
c.
debit to Start-up and Organization Costs for $5,000.
d.
credit to Common Stock for $5,000.
54.The entry to record transaction 2 would include a
a.
debit to Additional Paid-in Capital for $40,000.
b.
credit to Common Stock for $200,000.
c.
credit to Common Stock for $160,000.
d.
debit to Cash for $160,000.
.
55.The entry to record transaction 3 would include a
a.
credit to Common Stock for $160,000.
b.
credit to Additional Paid-in Capital for $20,000.
c.
debit to Equipment for $140,000.
d.
debit to Common Stock for $140,000.
56. The entry to record transaction 3 would include a
a.
credit to Common Stock for $140,000.
b.
debit to Common Stock for $160,000.
c.
credit to Equipment for $160,000.
d.
debit to Additional Paid-in Capital for $35,000.
57. A company purchases 300 shares of its $100 par value common stock at $110 per share. It then reissues 50 shares at
$114 per share. The entry upon reissue of the stock would include a credit to
a.
Treasury Stock, Common for $5,700.
b.
Paid-in Capital, Treasury Stock for $200.
c.
Retained Earnings for $700.
d.
Gain on Sale of Treasury Stock for $200.
58. The sale of treasury stock cannot result in
a.
the crediting of Paid-in Capital, Treasury Stock.
b.
an increase in Retained Earnings.
c.
the debiting of Paid-in Capital, Treasury Stock.
d.
an increase in total stockholders' equity.
59. A company purchases 400 shares of its $50 par value common stock at $55 per share. It then reissues 60 shares at
$58 per share. The entry upon reissue of the stock would include a credit to
a.
Treasury Stock, Common for $348.
b.
Retained Earnings for $480.
c.
Cash for $348.
d.
Paid-in Capital, Treasury Stock for $180.
60. On January 1, 20x7, Belmont Corporation had 50,000 shares of $10 par value common stock issued and outstanding.
All 50,000 shares had been issued in a prior period at $15 per share. On February 1, 20x7, Belmont purchased 2,000
shares of treasury stock for $18 per share and later sold the treasury shares for $20 per share on March 2, 20x7. The
entry to record the purchase of the treasury shares on February 1, 20x7, would include a
a.
loss of $6,000.
b.
gain of $6,000.
c.
debit to the Treasury Stock, Common account for $36,000.
d.
credit to the Treasury Stock, Common account for $36,000.
61. On January 1, 20x7, Belmont Corporation had 50,000 shares of $10 par value common stock issued and outstanding.
All 50,000 shares had been issued in a prior period at $15 per share. On February 1, 20x7, Belmont purchased 2,000
shares of treasury stock for $18 per share and later sold the treasury shares for $20 per share on March 2, 20x7. The
entry to record the sale of the treasury shares on March 2, 20x7, would include a
a.
credit to Retained Earnings for $4,000.
b.
debit to Retained Earnings for $6,000.
c.
credit to a gain account for $4,000.
d.
credit to Paid-in Capital, Treasury Stock for $4,000.
____65.The purchase of treasury stock will result in
a.
a decrease in assets and a decrease in stockholders' equity.
b.
no net changes in assets, liabilities, or stockholders' equity.
c.
a decrease in one asset account and an increase in a different asset account.
d.
a decrease in assets and a decrease in liabilities.
____66.If the entry to record the retirement of treasury stock contains a credit to a Paid-in Capital, Retirement of Stock account, it is apparent that the
a.
cost of the treasury shares was less than par value.
b.
cost of the treasury shares was greater than the original issuance price of the shares.
c.
cost of the treasury shares was less than the original issuance price of the shares.
d.
original issuance price of the shares was less than par value.
____67.According to generally accepted accounting principles, treasury stock should be recorded at
a.
expected reissue price.
b.
original issue price.
c.
cost.
d.
par or stated value.
____68.On the balance sheet, treasury stock owned by the company is classified properly as
a.
an investment.
b.
a current asset.
c.
a note to the financial statements.
d.
a contra-stockholders' equity item.
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Intermediate Accounting
Authors: David Spiceland
11th Edition
1264134525, 9781264134526
