Accounting questions :

1. The general public is entitled to invest in a privately held corporation.

True

false

2. Identify the primary advantages of the corporate form of business compared to a sole proprietorship or partnership. (check all that apply)

Limited liability

Ability to raise capital

lower taxes

Less paperwork

ease of incorporation

3. Identify the primary disadvantages of the corporate form of business compared to a sole proprietorship or partnership. (check all that apply)

Ownership limitations

double taxation

Personal liability

more paperwork

4. Shares actually sold, which includes treasury stock

issued stock

outstanding stock

Authorized stock

5. Total number of shares available to sell

issued stock

outstanding stock

Authorized stock

6. Shares held by investors

issued stock

outstanding stock

Authorized stock

7. There is a direct relationship between the par value and market value of common stock: stocks with a low par value have a low market value, while stocks with a high par value have a high market value.

true

false

8. Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:

increase assets and increases liabilities

increases assets and decreases liabilities

Increases assets and increases stockholders equity

increases assets and decreases stockholders equity

9. On January 1, Year 1, Davidson Corporation issues 1,000 shares of $1 par value common stock for $20 per share. Complete the necessary journal entry for the issuance of common stock by indicating the relevant account names and dollar amounts below. If more than one account title is debited or credited, enter the account titles in their alphabetical order.

journal enetry (record the issue of additional common stock

10. The shares of preferred stock issued by Saturn Corporation can be exchanged for common stock. However, any dividends in arrears are lost. Which of the following features are present in the preferred stock issued by Saturn?

Select all answers that apply to this question.

Convertible

redeemable

cumulative

Noncumulative

11. EyeCare Corporation issued 10,000 shares of 7%, $100 par value preferred stock at the beginning of Year 1. The company did not pay dividends in Year 1. However, preferred stockholders received dividends for Year 1 and Year 2, when the company declared dividends in Year 2. Preferred stockholders also have the option, under specified conditions, to return their shares for a predetermined price. Which of the following features are in present the preferred stock issued by EyeCare?

Select all answers that apply to this question.

Convertible

redeemable

cumulative

Noncumulative

12. Preferred stock is preferred to common stock two ways: (1) preferred stockholders have first rights to dividends, and (2) in the event the company is dissolved, preferred stockholders receive preference over common stockholders in the distribution of assets.

True

False

13. Innovative Media issues 1,000 shares of 8%, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue?

a credit to additional paid-in capital for $10,000

a debit to cash for $50,000

a credit to preferred stock for $10,000

a creaser to preferred tock for $60,000

14. On January 1, Year 3, Boxwood, Inc. issues 1,000 shares of $1 par value common stock for $30 per share. Later that year, the company issues 1,000 shares of $10 par value preferred stock for $80 per share. The companys balance sheet as of December 31, Year 3, will show total paid-in capital of:

$11,000

$30,000

$99,000

$110,000

15. Lego, Inc., issued common stock in Year 1. It issued 10,000 shares of 8%, $100 par value cumulative preferred stock for $110 per share at the beginning of Year 4. It did not pay any dividends during Year 4. In December of Year 5, it declares total dividends of $200,000. How much will the preferred stockholders of Lego receive as dividends in Year 5?

$200,000

$160,000

$80,000

$40,000

16. Marine Corporation issued common stock in Year 1. It issued 10,000 shares of 10%, $100 par value noncumulative preferred stock for $110 per share at the beginning of Year 3. It did not pay any dividends in Year 3 or Year 4. In December of Year 5, it declares total dividends of $250,000. How much will the common stockholders of Marine Corporation receive as dividends in Year 5?

$150,000

$250,000

$50,000

$100,000

17. When a corporation acquires shares of its own common stock, it records a:

debit to common stock for par value

debit to common stock for cost

debit to treasury stock par value

debit to treasury stock for cost

18. Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a:

Debit to common stock for $10,000

debit to common stock for $100,000

Debit to treasury stock for $10,000

debit to treasury stock for 100,000

19. The Common Stock account increases when treasury stock is resold for more than its original cost.

true

false

20. Marina, Inc., acquires 1 million shares of its own $1 par value common stock at $70 per share. It later resells the 1 million shares of treasury stock for $75. We record the $5 difference per share as a:

gain in the income statement

revenue in the income statement

credit to additional paid-in capital

credit to common stock

21. Delta Corporation acquires 10,000 shares of its own $0.01 par value common stock at $10 per share. It later resells the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve a:

debit to cash for $100,000

credit to additional paid-in capital for $20,000

credit to common stock for $100

Credit to treasury stock for $120,000