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Question 1 A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 a share. What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend? Answer $12,800 $19,200 $32,000 $48,800 2 points Question 2 A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $150. If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be approximately: Answer $25 $150 $5 $30 2 points Question 3 A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be: Answer $5 $60 $25 $24 2 points Question 4 A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for Answer $15,000 $32,000 $17,000 $2,000 2 points Question 5 A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale? Answer $0 $5,000 $2,500 $10,000 2 points Question 6 A disadvantage of the corporate form of business entity is Answer mutual agency for stockholders unlimited liability for stockholders corporations are subject to more governmental regulations the ease of transfer of ownership 2 points Question 7 A restriction/appropriation of retained earnings Answer decreases total assets increases total retained earnings decreases total retained earnings has no effect on total retained earnings 2 points Question 8 Characteristics of a corporation include Answer shareholders who are mutual agents direct management by the shareholders (owners) its inability to own property shareholders who have limited liability 2 points Question 9 Earnings per share Answer is the net income per common share must be reported by publicly traded companies helps compare companies of different sizes all of the above 2 points Question 10 How is treasury stock shown on the balance sheet? Answer as an asset as a decrease in stockholders’ equity as an increase in stockholders’ equity treasury stock is not shown on the balance sheet 2 points Question 11 If common stock is issued for an amount greater than par value, the excess should be credited to Answer Retained Earnings. Cash. Legal Capital. Paid-in Capital in Excess of Par Value. 2 points Question 12 Miriah Inc. has 6,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012. What is the annual dividend on the preferred stock? Answer $50 per share $30,000 in total $300 in total $0.50 per share 2 points Question 13 One of the main disadvantages of the corporate form is the Answer professional management double taxation of dividends charter corporation must issue stock 2 points Question 14 Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuels’ earnings per share for 2011 is Answer $4.00 $5.25 $6.50 $5.00 2 points Question 15 Stockholders’ equity Answer is usually equal to cash on hand includes paid-in capital and liabilities includes retained earnings and paid-in capital is shown on the income statement 2 points Question 16 The authorized stock of a corporation Answer must be recorded in a formal accounting entry. only reflects the initial capital needs of the company. is indicated in its by-laws. is indicated in its charter. 2 points Question 17 The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? Answer 5,000 45,000 40,000 50,000 2 points Question 18 The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared? Answer $60,000 $5,000 $100,000 $55,000 2 points Question 19 The date on which a cash dividend becomes a binding legal obligation is on the Answer declaration date. date of record. payment date. last day of the fiscal year end. 2 points Question 20 The excess of issue price over par of common stock is termed a(n) Answer discount income deficit premium 2 points Question 21 The liability for a dividend is recorded on which of the following dates? Answer the date of record the date of payment the date of announcement the date of declaration 2 points Question 22 The par value per share of common stock represents Answer the minimum selling price of the stock established by the articles of incorporation. the minimum amount the stockholder will receive when the corporation is liquidated an arbitrary amount established in the articles of incorporation the amount of dividends per share to be received each year 2 points Question 23 Which of the following is not a right possessed by common stockholders of a corporation? Answer the right to vote in the election of the board of directors the right to receive a minimum amount of dividends the right to sell their stock to anyone they choose the right to share in assets upon liquidation 2 points Question 24 What is the total stockholders’ equity based on the following account balances? Common Stock $450,000 Paid-In Capital in Excess of Par 90,000 Retained Earnings 190,000 Treasury Stock 10,000 Answer $740,000 $730,000 $720,000 $640,000 2 points Question 25 Those most responsible for the major policy decisions of a corporation are the Answer management. board of directors. employees. stockholders.

Question 1

A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 a share. What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend?
Answer

$12,800

$19,200

$32,000

$48,800
2 points
Question 2

A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $150. If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be approximately:
Answer

$25

$150

$5

$30
2 points
Question 3

A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be:
Answer

$5

$60

$25

$24
2 points
Question 4

A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
Answer

$15,000

$32,000

$17,000

$2,000
2 points
Question 5

A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?
Answer

$0

$5,000

$2,500

$10,000
2 points
Question 6

A disadvantage of the corporate form of business entity is
Answer

mutual agency for stockholders

unlimited liability for stockholders

corporations are subject to more governmental regulations

the ease of transfer of ownership
2 points
Question 7

A restriction/appropriation of retained earnings
Answer

decreases total assets

increases total retained earnings

decreases total retained earnings

has no effect on total retained earnings
2 points
Question 8

Characteristics of a corporation include
Answer

shareholders who are mutual agents

direct management by the shareholders (owners)

its inability to own property

shareholders who have limited liability
2 points
Question 9

Earnings per share
Answer

is the net income per common share

must be reported by publicly traded companies

helps compare companies of different sizes

all of the above
2 points
Question 10

How is treasury stock shown on the balance sheet?
Answer

as an asset

as a decrease in stockholders’ equity

as an increase in stockholders’ equity

treasury stock is not shown on the balance sheet
2 points
Question 11

If common stock is issued for an amount greater than par value, the excess should be credited to
Answer

Retained Earnings.

Cash.

Legal Capital.

Paid-in Capital in Excess of Par Value.
2 points
Question 12

Miriah Inc. has 6,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012. What is the annual dividend on the preferred stock?
Answer

$50 per share

$30,000 in total

$300 in total

$0.50 per share
2 points
Question 13

One of the main disadvantages of the corporate form is the
Answer

professional management

double taxation of dividends

charter

corporation must issue stock
2 points
Question 14

Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuels’ earnings per share for 2011 is
Answer

$4.00

$5.25

$6.50

$5.00
2 points
Question 15

Stockholders’ equity
Answer

is usually equal to cash on hand

includes paid-in capital and liabilities

includes retained earnings and paid-in capital

is shown on the income statement
2 points
Question 16

The authorized stock of a corporation
Answer

must be recorded in a formal accounting entry.

only reflects the initial capital needs of the company.

is indicated in its by-laws.

is indicated in its charter.
2 points
Question 17

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
Answer

5,000

45,000

40,000

50,000
2 points
Question 18

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
Answer

$60,000

$5,000

$100,000

$55,000
2 points
Question 19

The date on which a cash dividend becomes a binding legal obligation is on the
Answer

declaration date.

date of record.

payment date.

last day of the fiscal year end.
2 points
Question 20

The excess of issue price over par of common stock is termed a(n)
Answer

discount

income

deficit

premium
2 points
Question 21

The liability for a dividend is recorded on which of the following dates?
Answer

the date of record

the date of payment

the date of announcement

the date of declaration
2 points
Question 22

The par value per share of common stock represents
Answer

the minimum selling price of the stock established by the articles of incorporation.

the minimum amount the stockholder will receive when the corporation is liquidated

an arbitrary amount established in the articles of incorporation

the amount of dividends per share to be received each year
2 points
Question 23

Which of the following is not a right possessed by common stockholders of a corporation?
Answer

the right to vote in the election of the board of directors

the right to receive a minimum amount of dividends

the right to sell their stock to anyone they choose

the right to share in assets upon liquidation
2 points
Question 24

What is the total stockholders’ equity based on the following account balances?
Common Stock
$450,000
Paid-In Capital in Excess of Par
90,000
Retained Earnings
190,000
Treasury Stock
10,000
Answer

$740,000

$730,000

$720,000

$640,000
2 points
Question 25

Those most responsible for the major policy decisions of a corporation are the
Answer

management.

board of directors.

employees.

stockholders.

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