Question 1

A net loss for the year decreases the balance in Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 2

Atlantis Corporation has 12,000 shares of 14%,$78 par noncumulative preferred stock outstanding and 29,000 shares of no-par common stock outstanding.At the end of the current year,the corporation declares a dividend of $188,000.How is the dividend allocated between preferred and common stockholders?

Accepted Answer

A)   The dividend is allocated $6023 to preferred stockholders and $132,976 to common stockholders.
B)   The dividend is allocated $131,040 to preferred stockholders and $56,960 to common stockholders.
C)   The dividend is allocated $55,024 to preferred stockholders and $132,976 to common stockholders.
D)   The dividend is allocated $316,680 to preferred stockholders and $128,680 to common stockholders.

Question 3

Megastar Corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $18.25 per share.   Common Stock, $14 Par, 129,000 shares authorized, 48,000 shares issued  and outstanding $672,000 Paid-in Capital in Excess of Par-Common 167,000 Retained Earnings 350,000 Total Stockholders’ Equity $1,189,000\begin{array} { | l | r | } \hline \begin{array} { l } 	ext { Common Stock, } \$ 14 	ext { Par, } 129,000 	ext { shares authorized, } 48,000 	ext { shares issued } \	ext { and outstanding }\end{array} & \$ 672,000 \\hline 	ext { Paid-in Capital in Excess of Par-Common } & 167,000 \\hline 	ext { Retained Earnings } & 350,000 \\hline 	ext { Total Stockholders&#x27; Equity } & \$ 1,189,000 \\hline\end{array} Common Stock, $14 Par, 129,000 shares authorized, 48,000 shares issued  and outstanding ​ Paid-in Capital in Excess of Par-Common  Retained Earnings  Total Stockholders’ Equity ​$672,000167,000350,000$1,189,000​​  What would be the balance in the Common Stock account after the issuance of a 10% stock dividend?

Accepted Answer

A)   $334,000
B)   $604,800
C)   $739,200
D)   $672,000

Question 4

These independent companies had the following transactions:
a.Long Corporation issued 4,500 shares of its $6 stated value common stock to Jack Smith Realty in exchange for land with a market value of $50,000
b.Short Corporation received $115,000 cash for 10,000 shares of its $10 par preferred stock
c.Middle Corporation issued 7,000 shares of its no-par common stock at $15 per share
Requirement:
Prepare the journal entries for these transactions.Use proper account titles and omit explanations.

Accepted Answer

None...

Question 5

Preferred stock is stock ________.

Accepted Answer

A)   that sells for a high price
B)   that is distributed to employees as annual bonuses
C)   that is distributed by corporations to avoid liquidation
D)   that gives its owners certain advantages over common stockholders

Question 6

Which of the following occurs when a corporation distributes a stock dividend?

Accepted Answer

A)   Total liabilities would increase.
B)   Total stockholders' equity would increase.
C)   Total assets would decrease.
D)   Total stockholders' equity would be unchanged.

Question 7

A company cannot report a gain or loss when buying or selling its own stock.

Accepted Answer

A) True 
 B)False

Question 8

When 1000 shares of $3 stated value common stock is issued at $18 per share,________.

Accepted Answer

A)   Common Stock - $3 Stated is credited for $18,000
B)   the account titled Paid-In Capital in Excess of Stated-Common is used to record the issue price of the stock
C)   the difference between the issue price and the stated value is credited to Paid-In Capital in Excess of Stated-Common
D)   the accounting is exactly the same as the accounting for par value stock

Question 9

Which of the following is a reason for a company to announce a stock split?

Accepted Answer

A)   to reward investors
B)   to increase total stockholders' equity
C)   to decrease the market price at which the stock is trading
D)   to provide the shareholders with something of value, when the company cannot afford a cash dividend

Question 10

If treasury stock is resold for more than cost,the difference is debited to the account Paid-In Capital from Treasury Stock Transactions.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements regarding the price/earnings ratio is incorrect?

Accepted Answer

A)   The price/earnings ratio represents the market price of one share of common stock.
B)   A price/earnings ratio of 9.2 implies that the company's stock is selling at 9.2 times one year's earnings per share.
C)   A higher price/earnings ratio signifies a higher return on investment.
D)   The price/earnings ratio is most useful when comparing one company to another.

Question 12

An underwriter usually assumes some of the risk of issuing stock by agreeing to buy all of the stock the firm cannot sell to its clients.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT a profitability measure that is used to compare companies of different sizes?

Accepted Answer

A)   earnings per share
B)   rate of return on common stockholders' equity
C)   price/earnings ratio
D)   outstanding common stock ratio

Question 14

A company that reports a discontinued operation must also report earnings per share for this item in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 15

A memorandum entry is an entry in the journal that notes a significant event but has no debit or credit amount.

Accepted Answer

A) True 
 B)False

Question 16

Most corporations set par value low and issue common stock at a premium.

Accepted Answer

A) True 
 B)False

Question 17

Cash dividends and treasury stock purchases ________.

Accepted Answer

A)   represent cash payments that are made to ensure higher reported profits
B)   may be limited by creditors to ensure that the company maintains a minimum level of stockholders' equity
C)   may be restricted as a way to lower federal income tax expense
D)   make more resources available to pay liabilities

Question 18

For accounting purposes,par value stock is treated the same as stated value stock except for the account names.

Accepted Answer

A) True 
 B)False

Question 19

In the event of a corporate liquidation,preferred stockholders ________.

Accepted Answer

A)   are guaranteed to receive a full refund of the stock purchase price
B)   have first claim on remaining corporate assets after debts are paid
C)   are guaranteed to receive the par value of the preferred stock
D)   may retain their proportionate share of voting rights

Question 20

Declaring and paying dividends causes an increase in both assets and stockholders' equity of the corporation.

Accepted Answer

A) True 
 B)False

Exam 13: Corporations

If treasury stock is resold for more than cost,the difference is debited to the account Paid-In Capital from Treasury Stock Transactions.

Correct Answer
verified

A net loss for the year decreases the balance in Retained Earnings.

Correct Answer
verified

A memorandum entry is an entry in the journal that notes a significant event but has no debit or credit amount.

Correct Answer
verified

Declaring and paying dividends causes an increase in both assets and stockholders' equity of the corporation.

Correct Answer
verified

In the event of a corporate liquidation,preferred stockholders ________.

Correct Answer
verified

When 1000 shares of $3 stated value common stock is issued at $18 per share,________.

Correct Answer
verified

Correct Answer
verified
None...
View Answer

Which of the following is a reason for a company to announce a stock split?

Correct Answer
verified

An underwriter usually assumes some of the risk of issuing stock by agreeing to buy all of the stock the firm cannot sell to its clients.

Correct Answer
verified

Preferred stock is stock ________.

Correct Answer
verified

Most corporations set par value low and issue common stock at a premium.

Correct Answer
verified

For accounting purposes,par value stock is treated the same as stated value stock except for the account names.

Correct Answer
verified

A company that reports a discontinued operation must also report earnings per share for this item in the notes to the financial statements.

Correct Answer
verified

Which of the following statements regarding the price/earnings ratio is incorrect?

Correct Answer
verified

Atlantis Corporation has 12,000 shares of 14%,$78 par noncumulative preferred stock outstanding and 29,000 shares of no-par common stock outstanding.At the end of the current year,the corporation declares a dividend of $188,000.How is the dividend allocated between preferred and common stockholders?

Correct Answer
verified

Cash dividends and treasury stock purchases ________.

Correct Answer
verified

A company cannot report a gain or loss when buying or selling its own stock.

Correct Answer
verified

Which of the following is NOT a profitability measure that is used to compare companies of different sizes?

Correct Answer
verified

Which of the following occurs when a corporation distributes a stock dividend?

Correct Answer
verified

Correct Answer
verified

Exam 13: Corporations

If treasury stock is resold for more than cost,the difference is debited to the account Paid-In Capital from Treasury Stock Transactions.

Correct AnswerverifiedShow Answer

A net loss for the year decreases the balance in Retained Earnings.

Correct AnswerverifiedShow Answer

A memorandum entry is an entry in the journal that notes a significant event but has no debit or credit amount.

Correct AnswerverifiedShow Answer

Declaring and paying dividends causes an increase in both assets and stockholders' equity of the corporation.

Correct AnswerverifiedShow Answer

In the event of a corporate liquidation,preferred stockholders ________.

Correct AnswerverifiedShow Answer

When 1000 shares of $3 stated value common stock is issued at $18 per share,________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Which of the following is a reason for a company to announce a stock split?

Correct AnswerverifiedShow Answer

An underwriter usually assumes some of the risk of issuing stock by agreeing to buy all of the stock the firm cannot sell to its clients.

Correct AnswerverifiedShow Answer

Preferred stock is stock ________.

Correct AnswerverifiedShow Answer

Most corporations set par value low and issue common stock at a premium.

Correct AnswerverifiedShow Answer

For accounting purposes,par value stock is treated the same as stated value stock except for the account names.

Correct AnswerverifiedShow Answer

A company that reports a discontinued operation must also report earnings per share for this item in the notes to the financial statements.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the price/earnings ratio is incorrect?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cash dividends and treasury stock purchases ________.

Correct AnswerverifiedShow Answer

A company cannot report a gain or loss when buying or selling its own stock.

Correct AnswerverifiedShow Answer

Which of the following is NOT a profitability measure that is used to compare companies of different sizes?

Correct AnswerverifiedShow Answer

Which of the following occurs when a corporation distributes a stock dividend?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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None...
View Answer

Correct Answer
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