Question 1 1. For small stock dividends, by what amount are retained earnings reduced? Answer A. Par value of the stock B. Par value of the dividend C. Book value of the dividend D. Market value of the dividend 1 points Question 2 1. Which one of the following selections is a not component of paid-In capital? Answer A. Retained earnings B. Common stock C. Additional paid-In capital D. All of the above 1 points Question 3 1. In October, 2011, Bandar Corporation distributed profits to its preferred shareholders before its common shareholders. What is the name of the preference that allows this? Answer A. Asset distribution preference B. Dividend preference C. Profits preference D. Treasury preference 1 points Question 4 1. Aaron Company plans to issue a large stock dividend. In accounting for this transaction, what effects occur to the contributed capital section of stockholders' equity? Answer A. Common stock increases by the number of dividend shares x par value per share, and retained earnings decreases for the same amount B. Retained earnings increases by the number of dividend shares x par value per share, and additional paid-in capital increases for the balance C. Common stock increases by the number of dividend shares x par value per share, and retained earnings increases for the balance D. Common stock increases by the total market value of the dividend 1 points Question 5 1. As a preferred stockholder, you are entitled to numerous preferences and privileges over common stockholders. If you are a preferred stockholder of a company that has fallen on economic hardship and is likely to go bankrupt, which preference or privilege of preferred stock is going to be most useful to you? Answer A. Dividend preference B. Asset distribution preference C. Conversion privileges D. Participation privilege 1 points Question 6 1. On September 1, 2011, Core Company's balance sheet indicates there are 600,000 shares of $30 par value common shares in the Common Stock account and $4,500,000 in the Additional Paid-in Capital account. There are 2,000,000 shares authorized. On September 2, Core splits its stock 2 for 1. How many Core's shares of common stock are issued and outstanding immediately after the stock split? Answer A. 4,000,000 B. 300,000 C. 1,400,000 D. 1,200,000 1 points Question 7 1. Jasper Company has 30,000 shares of $80 par value, 5% cumulative preferred stock and 140,000 shares of $20 par value common stock. Jasper declares and pays cash dividends amounting to $225,000. If no arrearage on the preferred stock exits, how much in dividends per share is paid to the common stockholders? Answer A. $0.75 B. $4.00 C. $1.00 D. $1.61 1 points Question 8 1. Which of the following is an organizational advantage of a corporation? Answer A. Nontaxable entity B. Legal entity separate from the owners C. Unlimited liability of owners D. Limited ability to raise capital E. None of the above 1 points Question 9 1. A corporation: Answer A. Maintains separate capital and drawing accounts for each owner B. May acquire assets, incur debt, and enter into contracts in its own name C. Issues articles of incorporation as evidence of ownership in the corporation D. Pays state income taxes but is not subject to the federal income tax E. None of the above 1 points Question 10 1. The face value for a share of stock, printed on the stock certificate, is the stock's: Answer A. Liquidation value B. Stated value C. Par value D. Book value E. None of the above 1 points Question 11 1. When only one class of stock is issued by a corporation, it should be termed: Answer A. Treasury stock B. Authorized stock C. Common stock D. Class B stock E. Preferred stock 1 points Question 12 1. Which of the following rights allows a shareholder of a corporation to maintain his or her proportionate interest in the corporation? Answer A. Preemptive right B. Participation right C. Preferred right D. Cumulative right E. None of the above 1 points Question 13 1. Squire, Inc., has outstanding 9,000 shares of $25 par value, 6% nonparticipating, cumulative preferred stock and 16,000 shares of $5 par value common stock. If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $85,000, then the total amounts distributed to preferred and common stockholders, respectively, are: Answer A. $40,500 and $44,500 B. $13,500 and $71,500 C. $31,875 and $53,125 D. $27,000 and $58,000 E. None of the above 1 points Question 14 1. Noble, Inc. has outstanding 10,000 shares of $40 par value, 6% nonparticipating, cumulative preferred stock, and 30,000 shares of $10 par value common stock. If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $207,000, the total amounts distributed to preferred and common stockholders are, respectively: Answer A. $48,000 and $159,000 B. $51,750 and $155,250 C. $24,000 and $183,000 D. $72,000 and $135,000 E. None of the above 1 points Question 15 1. Assume that a corporation's dividends are two years in arrears for its outstanding preferred stock. In the corporation's financial statements, these arrearages are: Answer A. Disclosed as a current liability in the balance sheet B. Disclosed as a long-term liability in the balance sheet C. Disclosed in the notes to the financial statements D. Disclosed as a current liability (for the most recent arrearage) and a long-term liability (for the oldest arrearage) in the balance sheet E. Not disclosed 1 points Question 16 1. Riepen, Inc., issued for $20 per share 3,000 shares of $15 par value common stock. The journal entry to record this transaction is: Answer A. Cash 60,000 Common Stock 60,000 B. Cash 60,000 Common Stock 45,000 Paid-in Capital in Excess of Par Value 15,000 C. Cash 60,000 Common Stock 45,000 Retained Earnings 15,000 D. Cash 60,000 Common Stock 45,000 Gain on Sale of Stock 15,000 E. None of the above 1 points Question 17 1. Spartan Corporation was organized on January 1, 2011, with an authorization of 1,000,000 shares of $5 par value common stock. During 2011, Spartan had the following common stock transactions: Jan. 4: Issued 100,000 shares @ $6 per share. Apr. 8: Issued 200,000 shares @ $7 per share. June 9: Issued 60,000 shares @ $10 per share. July 29: Purchased 40,000 shares (treasury) @ $9 per share. Dec. 31: Sold 40,000 shares held in treasury @ $12 per share. Spartan had no other transactions affecting paid-in capital. At December 31, 2011, what is the total amount of paid-in capital? Answer A. $2,720,000 B. $1,800,000 C. $ 920,000 D. $ 800,000 E. None of the above 1 points Question 18 1. At December 31, 2011, Riley Corporation had 40,000 shares outstanding of $15 par value common stock. The shares were originally issued for $42 per share. On January 1, 2012, Riley split its common stock 3 for 1 with a corresponding reduction in the stock's par value. The market price of the stock just before the split was $75 per share. After the split, the balance in the common stock account is: Answer A. $ 600,000 B. $3,000,000 C. $1,800,000 D. $1,680,000 E. None of the above 1 points Question 19 1. The excess of the sales price of treasury stock over its cost should be credited to: Answer A. Retained Earnings B. Paid-in Capital from Treasury Stock C. Treasury Stock D. Extraordinary Gain E. None of the above 1 points Question 20 1. Larkspur Corporation purchased 300 shares of its own $10 par value common stock for $7,500. Later, these shares are sold for $7,800 cash. The journal entry to record the sale includes a: Answer A. $ 300 credit to Paid-in Capital from Treasury Stock B. $4,800 credit to Paid-in Capital from Treasury Stock C. $ 300 credit to Gain on Sale of Treasury Stock D. $7,800 credit to Treasury Stock E. None of the above 1 points Question 21 1. During 2011, Crockett, Inc.'s net income was $100,000. Its common stockholders' equity was $700,000 at January 1, 2011 and $800,000 at December 31, 2011. During December, 2011, Crockett's board of directors declared a $25,000 preferred stock dividend and a $60,000 common stock dividend. What is Crockett's 2011 return on common stockholders' equity? Answer A. 15.6% B. 10.0% C. 2.0% D. 16.7% E. None of the above 1 points Question 22 1. Draper Company is authorized to issue 600,000 shares of $5 par value common stock. By March 15, 2011, the company had issued 180,000 shares at $17 per share. On March 15, 2011, the company declared a 10% stock dividend when the market price was $20 per share. What amount is transferred from retained earnings to paid-in capital as a result of the stock dividend? Answer A. $ 300,000 B. $ 90,000 C. $ 360,000 D. $1,200,000 E. None of the above 1 points Question 23 1. Haven Company is authorized to issue 200,000 shares of $20 par value common stock. By November 15, 2011, the company had issued 30,000 shares at $25 per share. On November 15, 2011, the company declared a 30% stock dividend when the market price was $26 per share. What amount is transferred from retained earnings to paid-in capital as a result of the stock dividend? Answer A. $ 180,000 B. $ 234,000 C. $1,200,000 D. $1,560,000 E. None of the above 1 points Question 24 1. Which of the following items is disclosed in a statement of retained earnings? Answer A. Retained earnings balance at the beginning of the period B. Common stock issued during the period C. Treasury shares sold during the period D. Paid-in capital balance at the beginning of the period E. None of the above 1 points Question 25 1. The following selected list of accounts with their normal balances was taken from the general ledger of Tudor Company as of December 31, 2011: Common stock, $1 par $ 190,000 Retained earnings 131,000 Paid-in capital in excess of par - preferred 35,000 Treasury Stock 165,000 Preferred stock, $100 par 300,000 Paid-in capital in excess of par -common 380,000 Given above information, at the end of 2011: Answer A. Total Paid in Capital is $1,070,000, and Total Stockholders' equity is $1,201,000 B. Total Paid in Capital is $905,000, and Total Stockholders' equity is $871,000 C. Total Paid in Capital is $740,000, and Total Stockholders' equity is $871,000 D. Total Paid in Capital is $740,000, and Total Stockholders' equity is $609,000 1 points Question 26 1. Dennis Company issued 25,000 shares of $10 par value common stock at $15 per share. As a result of this transaction, Dennis Company's: Answer A. Paid in Capital increased by $125,000 B. Common Stock increased by $125,000 C. Common Stock increased by $375,000 D. Paid in Capital increased by $375,000 1 points Question 27 1. Using the following information, the journal entry to record the January 1 transaction will be: January 1: Atlantic Corporation reacquires 2,000 shares of its $5 par common stock for $22 per share. March 5: Atlantic reissues 1,000 of the above mentioned shares for $25 per share. Answer A. Treasury Stock, Common 44,000 Cash 44,000 B. Investment in Treasury Stock 44,000 Cash 44,000 C. Cash 44,000 Treasury Stock, Common 44,000 D. Treasury Stock, Common 10,000 Paid-in-capital, Treasury Stock 34,000 Cash 44,000 1 points Question 28 1. Jones Company has never had any treasury stock transactions. On June 1 of the current year, they purchased 100 shares of its common stock (which has a par value of $10) for $5,000. On July 1, they reissued 50 of these shares at $52 per share. What is the balance in the Paid in Capital, Treasury Stock account on July 1? Answer A. $ 200 B. $ 100 C. $1,350 D. $ 150 1 points Question 29 1. Hampton Company has 200,000 shares of $10 par value common stock outstanding. On April 15, the company declared a 40% stock dividend. The current market value of the stock was $15 per common share. The journal entry on April 15 will include: Answer A. A credit to Paid in Capital in excess of par value, Common Stock for $400,000 B. A debit to Retained Earnings for $1,200,000 C. A credit to Common Stock Dividend Distributable for $800,000 D. A credit to Common Stock Dividends Distributable for $1,200,000 1 points Question 30 1. Hudson Company had 50,000 shares of $20 par value common stock outstanding on June 30. On July 1, the board of directors declared a 10% stock dividend when the market value of each share was $27. The journal entry on July 1 will include: Answer A. A credit to Common Stock Dividend Distributable for $135,000 B. A credit to Common Stock Dividend Distributable for $100,000 C. A debit to Retained Earnings for $100,000 D. A credit to Paid in capital in excess of par value $135,000. 1 points Question 31 1. Pamela Company has the following stock outstanding on December 31, 2011: (a) Preferred Stock (8 percent cumulative, $10 par, 25,000 shares authorized; 10,000 shares issued and outstanding) $100,000 (b) Common Stock ($7 par, 250,000 shares authorized, 120,000 shares issued and outstanding) 840,000 Pamela did not pay any dividends in 2009. In 2010, they paid total dividends of $10,000, and in 2011, they paid total dividends of $20,000. How much dividends will be paid to common stockholders in 2011? Answer A. $10,000 B. $ 6,000 C. $ 8,000 D. $14,000