4.01 Prototype Assessment Items – Page 1
These prototype assessment items illustrate the types of items used in the item bank for
this objective. All items have been written to match the cognitive process of the apply verb
in the objective. These exact questions will not be used on the secure postassessment, but
questions in similar formats will be used.
Issuing Par Value Stock
1. Saxon Corporation received cash from Rob Huggins for 60 shares of $100.00 par value
preferred stock at $100 per share. What is the journal entry to record the transaction?
A.
B.
C.
D.
Debit Capital Stock – Preferred $6,000 and credit Cash $6,000
Debit Cash $6,000 and credit Capital Stock – Preferred $6,000
Debit Cash $60 and credit Capital Stock – Preferred $60
Debit Cash $100 and Credit Capital Stock – Preferred $100
Answer:
Issuing Par Value Stock for Noncash Assets
2. Saxon Corporation received computer equipment at an agreed-upon value of $4,000 for
40 shares of $100 par value common stock. What is the journal entry to record this
transaction?
A.
B.
C.
D.
Debit Office Equipment $,4000 and credit Capital Stock – Common $4,000
Debit Capital Stock – Common $4,000 and credit Office Equipment $4,000
Debit Cash $4,000 and credit Capital Stock – Common $4,000
Debit Office Equipment $100 and credit Capital Stock – Common $100
Answer:
4.01 Prototype Assessment Items – Page 2
Issuing Stock in Excess of Par Value
3. Canipe Corporation received cash from Joyce Harris for 250 shares of $50 par value
preferred stock at $60 per share, $15,000. What is the journal entry to record this
transaction?
A. Debit Capital Stock – Preferred $15,000 and credit Cash $15,000
B. Debit Cash $15,000 and credit Capital Stock – Preferred $15,000
C. Debit Cash $15,000 and credit Capital Stock – Preferred $12,500 and Paid in
Capital in Excess of Par Value – Preferred $2,500
D. Debit Capital Stock – Preferred $12,500 and Paid in Capital in Excess of Par Value
– Preferred $2,500 and credit Cash $15,000
Answer:
Issuing Stock for Less than Par Value
4. Keeney Corporation received cash from Marie Xiong for 150 shares of $50 par value
preferred stock at $42 per share, $6,300. What is the journal entry to record this
transaction?
A. Debit Cash $7,500 and credit Capital Stock - Preferred $7,500
B. Debit Capital Stock - Preferred $7,500 and credit Cash $7,500
C. Debit Cash $6,300 and Discount on Sale of Preferred Stock $1,200 and credit
Capital Stock Preferred $7,500
D. Debit Capital Stock - Preferred $7,500 and credit Cash $6,300 and Discount on Sale
of Preferred Stock $1,200
Answer:
Issuing No Par Stock
5. Johnson Corporation received cash from James Taylor for 500 shares of no-par value
common stock at $15 per share, $7,500. What is the correct entry to record this
transaction?
A.
B.
C.
D.
Debit Cash $500 and credit Capital Stock – Common $500
Debit Cash $7,500 and credit Capital Stock – Common $7,500
Debit Capital Stock – Common $7,500 and credit Cash $7,500
Debit Capital Stock – Common $500 and credit Cash $500
Answer:
4.01 Prototype Assessment Items – Page 3
Issuing No Par Stock with Stated Value
6. Larry’s Corporation received from Chris Wilson for 70 shares of $10 stated value
common stock at $17 per share, $1,190. What is the correct entry to record this
transaction?
A. Debit Cash $1,190 and credit Capital Stock – Common $700 and Paid in Capital in
Excess of Stated Value – Common $490
B. Debit Capital Stock – Common $700 and Paid in Capital in Excess of Stated Value –
Common $490 and credit Cash $1,190
C. Debit Cash $700 and credit Capital Stock – Common $700
D. Debit Capital Stock – Common $700 and credit Cash $700
Answer:
Issuing Stock Subscriptions
Figure 4.01-A
On March 14, Morgan Smith subscribed for 6,000 shares of BB’s
Corporation’s common stock at $10 per share. She agreed to pay
$30,000 on June 14 and $30,000 on September 14.
7. Using Figure 4.01-A, determine the correct journal entry for receiving a stock
subscription from Morgan Smith for 6,000 shares of $10 stated-value common stock
$60,000 on March14.
A. Debit Stock Subscribed – Common $60,000 and debit Subscriptions Receivable
$60,000
B. Debit Subscriptions Receivable $60,000 and credit Stock Subscribed – Common
$60,000
C. Debit Cash $30,000 and credit Stock Subscribed – Common $30,000
D. Debit Stock Subscribed – Common $30,000 and credit Cash $30,000
Answer:
4.01 Prototype Assessment Items – Page 4
8. Using Figure 4.01-A, determine the correct journal entry for receiving cash from
Morgan Smith in payment of stock subscription, $30,000 on June14.
A. Debit Cash $30,000 and credit Stock Subscribed - Common $30,000
B. Debit Subscriptions Receivable $30,000 and credit Stock Subscribed – Common
$30,000
C. Debit Cash $30,000 and credit Subscriptions Receivable $30,000
D. Debit Subscriptions Receivable $30,000 and credit Cash $30,000
Answer:
9. Using Figure 4.01-A, determine the correct journal entry for issuing Stock Certificate
No. 12 to Morgan Smith for 6,000 shares of $10 stated-value common stock on
September 14 for issuance of stock previously subscribed.
A. Debit Stock Subscribed – Common $60,000 and credit Capital Stock – Common
$60,000
B. Debit Capital Stock – Common $60,000 and credit Stock Subscribed – Common
$60,000
C. Debit Cash $30,000 and credit Stock Subscribed – Common $30,000
D. Debit Stock Subscribed – Common $30,000 and credit Cash $30,000
Answer:
Journal Entry for Declaration of Dividends
Figure 4.01-B
On January 15, Dixon Corporation declared an annual dividend of $30,000.
On the date of record, the corporation had issued 6,000 shares of 5% $100
par-value preferred stock and 15,000 shares of $20 stated value common
stock.
No. of Preferred Shares x Par Value = Value of Preferred Stock
No. of Common Shares x Stated Value = Value of Common Stock
Value of Preferred Stock x Preferred Dividend Rate=Preferred Dividend Amount
Total Amount Available for Dividends – Preferred Dividend Amount=Amount
Available for Common Dividends
4.01 Prototype Assessment Items – Page 5
10. Using Figure 4.01-B, what is the correct journal entry to record the declaration of a
dividend on January 15?
A. Debit Dividends - Preferred $5,000 and credit Cash $5,000
B. Debit Cash $5,000 and credit Dividends - Preferred $5,000
C. Debit Dividends - Dividends - Preferred $30,000 and credit Dividends Payable
$30,000
D. Debit Dividends Payable $30,000 and credit Dividends - Common $5,000 and
Dividends - Preferred $25,000
Answer:
11. Using Figure 4.01-B, what is the correct journal entry to record the payment of the
dividend on January 30?
A.
B.
C.
D.
Debit Cash $5,000 and credit Dividends Payable $5,000
Debit Dividends Payable $5,000 and credit Cash $5,000
Debit Cash $30,000 and credit Dividends Payable $30,000
Debit Dividends Payable $30,000 and credit Cash $30,000
Answer:
Journal Entries for Treasury Stock
12. On June 10, Sandy’s Corporation paid cash to Farmer Kane for the reacquisition of 300
shares of $10 stated value common stock at $13 per share $3,900. What is the correct
entry to record this transaction?
A.
B.
C.
D.
Debit Cash $3,000 and credit Treasury Stock $3,000
Debit Treasury Stock $3,000 and credit Treasury Stock $3,000
Debit Treasury Stock $3,900 and credit Cash $3,900
Debit Cash $3,900 and credit Treasury Stock $3,900
Answer:
4.01 Prototype Assessment Items – Page 6
Selling Treasury Stock
13. On February 10, Stacey’s Corporation received cash from June East for 300 shares of
Treasury Stock at $12 per share, $3,600. Treasury Stock was originally bought by
Stacey’s Corporation on January 12 at $12 per share. What is the correct entry to
record this transaction?
A.
B.
C.
D.
Debit Dividends – Preferred $3,600 and credit Cash $3,600
Debit Cash $3,600 and credit Dividends Payable $3,600
Debit Cash $3,600 and credit Treasury Stock $3,600
Debit Treasury Stock $3,600 and credit Cash $3,600
Answer:
Selling Treasury Stock for More than the Original Cost
14. On September 15, Brewster Corporation received cash from Stanley Jones for 200
shares of Treasury Stock at $12 per share, $2,400. Treasury Stock was bought on
August 12 at $10 per share. What is the correct entry to record this transaction?
A.
B.
C.
D.
Debit Treasury Stock $2,400 and credit Cash $2,400
Debit Cash $2,400 and credit Treasury Stock $2,400
Debit Treasury Stock $2,000 and Paid-in Capital from Sale of Treasury Stock $400
Debit Cash $2,400 and credit Treasury Stock $2,000 and Paid-in Capital from Sale
of Treasury Stock $400
Answer:
4.01 Prototype Assessment Items – Page 7
Selling Treasury Stock for Less than Original Cost
15. On March 7 James Corporation received cash from Mike Martin for 75 shares of
Treasury Stock at $14 per share, $1,050. Treasury Stock was originally bought for $18
per share. What is the correct entry to record this transaction?
A. Debit Cash $1,050 and Paid-in Capital from Sale of Treasury Stock $300 and credit
Treasury Stock $1,350
B. Debit Treasury Stock $1,350 and credit Cash $1,050 and Paid-in Capital from Sale
of Treasury Stock $300
C. Debit Treasury Stock $1,350 and credit Cash $1,350
D. Debit Cash $1,350 and debit Treasury Stock $1,350
Answer:
Issuing Bonds
16. On June 10 Davis Corporation received cash for the face value of a five-year, 12%
$1,000 par value bond issue, $250,000. What is the correct entry to record issuing this
bond?
A.
B.
C.
D.
Debit Bonds Payable $250,000 and credit Cash $250,000
Debit Cash $250,000 and credit Bonds Payable $250,000
Debit Cash $25,000 and credit Bonds Payable $25,000
Debit Bonds Payable $25,000 and credit Cash $25,000
Answer:
17. On October 1 Sloan Corporation paid cash to bond trustee for annual interest on bond
issue, $6,000. What is the correct transaction to record paying interest on a bond?
A.
B.
C.
D.
Debit Cash $6,000 and credit Interest Expense $6,000
Debit Interest Expense $6,000 and credit Cash $6,000
Debit Bond Payable $6,000 and credit Cash $6,000
Debit Cash $6,000 and credit Bond Payable $6,000
Answer:
4.01 Prototype Assessment Items – Page 8
Depositing Cash in a Bond Sinking Fund
18. On January 17, paid cash to bond trustee for annual deposit to bond sinking fund,
$37,000. What is the correct journal entry to record this transaction?
A.
B.
C.
D.
Debit Interest Expense $37,000 and credit Cash $37,000
Debit Interest Bond $37,000 and credit Cash $37,000
Debit Cash $37,000 and credit Bond Sinking Fund $37,000
Debit Bond Sinking Fund $37,000 and credit Cash $37,000
Answer:
Depositing Cash to Sinking Fund and Recording Income Earned
19. On September 15, Denton Corporation paid cash to bond trustee for annual deposit to
bond sinking fund $36,000 and recorded interest earned on bond sinking fund $2,000.
What is the correct entry to record this transaction?
A. Debit Bond Sinking Fund $38,000 and credit Cash $36,000 and Interest Income
$2,000
B. Debit Cash $36,000 and Interest Income $2,000 and debit Bond Sinking Fund
$38,000
C. Debit Bond Payable $38,000 and credit Bond Sinking Fund $38,000
D. Debit Bond Sinking Fund $38,000 and credit Bond Payable $38,000
Answer:
Retiring a Bond Issue
20. On August 31, received notice from bond trustee that $120,000 of Bonds Payable were
retired using the bond sinking fund. What is the correct journal entry to record this
transaction?
A.
B.
C.
D.
Debit Bonds Sinking Fund $120,000 and credit Cash $120,000
Debit Cash $120,000 and credit Bonds Sinking Fund $120,000
Debit Bonds Sinking Fund $120,000 and credit Bonds Payable $120,000
Debit Bonds Payable $120,000 and credit Bonds Sinking Fund $120,000
Answer: