:__________________________________________ DATE:______________________ STUDENT NO: ___________________________________ AC 214 SURVEY OF MANAGERIAL ACCOUNTING EXAM I (Chapters 11, 12, & 13) Multiple Choice Questions: (2 points each) Direction: Underline the correct answer to each question or statement listed below. There is only one correct answer per question or statement. 1.. The par value of stock refers to the: A. Market price of the stock. B. Dividend value of the stock. C. Issue price of the stock. D. Legal value assigned to the stock per the corporate charter. 2.. ____________ generally does not include voting rights. A. Common stock B. Preferred stock C. Par common stock D. No-par common stock 3. The maximum number of shares that a corporation may issue is referred to as: A. Authorized stock. B. Outstanding stock. C. Issued stock. D. Common stock. 4.. Withdrawals are to sole proprietorships as _____________ are to corporations. A. Distributions B. Losses C. Dividends D. Stock splits 5. All of the following are benefits of ownership in a corporation except: A. A corporation has an unlimited life. B. Shareholders have unlimited liability. C. Ownership is easily transferable. D. Both large and small investors can easily participate in corporate ownership 6.. When the corporate charter does not specify a par value for the stock, the total amount received from the sale of stock is credited to: A. Additional paid-in capital. B. Common stock. C. Retained earnings. D. Contributed capital. 7. A company receives equipment worth $50,000 in exchange for 10,000 shares of $2 par value stock. This transaction includes an increase to: A. Common stock for $50,000. B. Additional paid-in capital for $20,000. C. Common stock for $20,000. D. Equipment for $30,000. 8. To calculate the number of shares outstanding, subtract the number of shares: A. Issued from the number of shares authorized. B. Sold from the number of shares issued. C. Repurchased from the number of shares issued. D. Authorized from the number of shares issued. 9. Treasury stock held by a corporation: A. Is subtracted from total stockholders' equity on the balance sheett B. Receives dividends. C. Has voting rights. D. Is included in assets. 10.. Shares of stock issued and not bought back by the corporation are called __________ shares. A. Authorized B. Issued C. Outstanding D. Sold 11. Stock that is reacquired and held by the issuing corporation is known as: A. Retained stock. B. Treasury stock. C. Preferred stock. D. Capital stock 12. Earnings per share is a measure of the: A. Amount of income generated from total stockholders equity. B. Amount of income generated for each share of common stock owned by stockholders. C. Profit generated from the total amount invested in the corporation. D. Assets used to generate income available to common shareholders. 13. The date the board of directors officially approves the dividend is known as the: A. Declaration date. B. Date of record. C. Date of payment. D. Dividend date. 14. When preferred stock carries a cumulative dividend preference, any prior years unpaid dividends for preferred stock are known as: A. Back dividends. B. Stock dividends. C. Dividends in arrears. D. Dividends in default. 15. A corporation's distribution of additional shares of its own stock to its stockholders at no cost to the stockholders is called a: A. Stock distribution. B. Stock premium. C. Stock split. D. Stock dividend. 16. A stock dividend transfers: A. Contributed capital to retained earnings. B. Contributed capital to assets. C. Retained earnings to contributed capital. D. Profit to contributed capital. 17. If a stock dividend is equal to less than 20 - 25% of outstanding shares then it is: A. Recorded at the par value of the stock. B. Recorded at the market value of the stock. C. Recorded at the cost of the stock. D. Not recorded since it is considered a small stock dividend. 18. Stock splits: A. Are the same as stock dividends. B. Increase the total number of shares outstanding. C. Reduce total stockholders' equity. D. Increase the par value per share. 19. Retained earnings: A. Represents the amount of cash available to distribute to shareholders. B. Is only affected by net income (loss) and cash dividends. C. Cannot have a negative balance. D. Represents the total earnings retained in the company after dividends have been distributed. 20. A company had a beginning balance in retained earnings of $65,000. Net income for the current year was $122,000 and cash dividends of $8,500 were paid. The ending balance in retained earnings equals: A. $113,500 B. $178,000 C. $ (48,500) D. $187,000 21.. A corporation issued 50,000 shares of its $1 par value common stock in exchange for land with a market value of $64,000. The entry to record this transaction would include a: A. Credit to Additional paid-in capital for $14,000. B. Credit to common stock for $64,000. C. Debit to land for $50,000. D. Debit to common stock for $50,000. 22.. A corporation's board of directors approves a cash dividend of $0.85 per share. The corporation has 100,000 shares of stock authorized, 85,000 shares issued and 80,000 shares outstanding. The total amount of the cash dividend is equal to: A. $85,000. B. $72,250 C. $68,000. D. $80,000. 23. On October 1, a corporation had 100,000 shares of $2 par value common stock outstanding and a balance in retained earnings of $800,000. On this date the market price per share for the stock was $18 and the corporation issued a 2-for-1 stock split. The journal entry to record this transaction: A. Includes a credit to retained earnings for $1,800,000. B. Includes a credit to contributed capital for $1,800,000. C. Includes a debit to retained earnings for $1,800,000. D. is not required 24. The right of existing stockholders to be given first chance to buy newly issued shares of stock before it is offered to others is a: A. Preferred right. B. Voting right. C. Preemptive right. D. Right to call. __________ generally does not include voting rights. 25. The maximum number of shares that a corporation may issue is referred to as: A. Authorized stock. B. Outstanding stock. C. Issued stock. D. Common stock. 26. A company receives equipment worth $50,000 in exchange for 10,000 shares of $2 par value stock. This transaction includes an increase to: A. Common stock for $50,000. B. Additional paid-in capital for $20,000. C. Common stock for $20,000. D. Equipment for $30,00. 27. Shares of stock issued and not bought back by the corporation are called __________ shares. A. Authorized B. Issued C. Outstanding D. Sold 28. The date the board of directors officially approves the dividend is known as the: A. Declaration date. B. Date of record. C. Date of payment. D. Dividend date. 29. Retained earnings: A. Represents the amount of cash available to distribute to shareholders. B. Is only affected by net income (loss) and cash dividends. C. Cannot have a negative balance. D. Represents the total earnings retained in the company after dividends have been distributed. 30 Dividends in arrears should be: A. Reported as a liability on the balance sheet. B. Reported as an expense on the income statement. C. Recorded as an expense when paid. D. Disclosed in the notes to the financial statements. 31. The following information is available regarding Siesta Corporation for the most recent year: What is the earnings per share for the current year? A. $0.80 B. $1.20 C. $0.20 D. $0.60 32. A corporation's distribution of additional shares of its own stock to its stockholders at no cost to the stockholders is called a: A. Stock distribution. B. Stock premium. C. Stock split. D. Stock dividend. 33. A corporation issued 50,000 shares of its $1 par value common stock in exchange for land with a market value of $64,000. The entry to record this transaction would include a: A. Credit to Additional paid-in capital for $14,000. B. Credit to common stock for $64,000. C. Debit to land for $50,000. D. Debit to common stock for $50,000. 34. A company issued 900 shares of $2 par value stock for $2,000 cash. The total amount of contributed capital is: A. $900. B. $1,800. C. $200. D. $2,000. 35. On October 1, a corporation had 100,000 shares of $2 par value common stock outstanding and a balance in retained earnings of $800,000. On this date the market price per share for the stock was $18 and the corporation issued a 2-for-1 stock split. The journal entry to record this transaction: A. Includes a credit to retained earnings for $1,800,000. B. Includes a credit to contributed capital for $1,800,000. C. Includes a debit to retained earnings for $1,800,000. D. is not required. 36. Secured bonds are: A. The same as serial bonds. B. Also called debentures. C. Backed by assets as collateral. D. Convertible into shares of stock. 37. The three key elements of a bond include all of the following except: A. Maturity date. B. Stated interest rate. C. Face value. D. Bond holder. 38. Which of the following is not an advantage of debt financing? A. Debt does not affect owners' control. B. Interest on debt is tax deductible. C. Debt financing is a method to raise capital when owners cannot contribute to the business. D. Debt financing does not alter return on equity. 39. Which of the following is true regarding bonds? A. Interest on bonds is not tax deductible. B. Interest on bonds is tax deductible. C. Bonds are not required to be repaid. D. Bonds generally change ownership control. 40. The bond stated interest rate is also known as the: A. Coupon rate. B. Market rate. C. Borrowing rate. D. Current rate. 41. When a bond sells at a premium: A. The stated rate is greater than the market rate. B. The stated rate is less than the market rate. C. The stated rate is equal to the market rate. D. The bond pays no interest. 42. A bond will sell at a discount when the: A. The stated rate is greater than the market rate. B. The stated rate is less than the market rate. C. The stated rate is equal to the market rate. D. The bond pays no interest. 43. A company issues 7%, 10-year, bonds with a face value of $300,000 and annual payments of interest. The current market rate is 8%. How much interest will be paid to bondholders when the company makes the first interest payment? A. $2,400. B. $24,000. C. $21,000. D. $2,100. 44. A discount on bonds payable is recorded when: A. A company issues bonds with a stated rate that is more than the market rate. B. A company issues bonds with a stated rate that is less than the market rate. C. A company issues bonds with a stated rate that is equal to the market rate. D. Bond proceeds are greater than the face value. 45. Kyle Company issued 10-year, 6% bonds with a face value of $100,000. Interest is paid annually. Kyle Company received $93,373 for the issuance of the bonds. Which of the following statements is true? A. Kyle Company must pay $100,000 at maturity and no interest payments. B. Kyle Company must pay $93,373 at maturity and no interest payments. C. Kyle Company must pay $100,000 at maturity plus 10 interest payments of $6,000 each. D. Kyle Company must pay $93,373 at maturity plus 10 interest payments of $9,337. 46. A company received cash proceeds of $107,260 for a bond issued with a face value of $100,000. The difference between face value and the price for this bond should be recorded as a: A. Debit to Premium on Bonds Payable. B. Debit to Discount on Bonds Payable. C. Credit to Premium on Bonds Payable. D. Credit to Discount on Bonds Payable. 47. A corporate bond is issued at 102. Which of the following is true? A. A discount on bonds payable will be reported. B. A premium on bonds payable will be reported. C. The stated interest rate is less than the market rate of interest. D. The issue price is less than the face value of the bond. 48. Which of the following describes a bond that is issued without security? A. Serial B. Debenture C. Callable D. Convertible 49. A company issues 7%, 10-year, bonds with a face value of $300,000 and annual payments of interest. The current market rate is 8%. How much interest will be paid to bondholders when the company makes the first interest payment? A. $2,400. B. $24,000. C. $21,000. D $2,100. 50. Withdrawals are to sole proprietorships as _____________ are to corporations. A. Distributions B. Losses C. Dividends D. Stock splits