1) Retained earning is
a. Always equal to the amount of cash that the corporation has generated
from operations.
b. A part of the paid-in capital of the corporation.
c. A part of the stockholders’ claim on the total assets of the corporation.
d. Closed at the end of each accounting period.
2) When stock is issued for legal services, the transaction is recorded by debiting
Organization Expense for the
a. stated value of the stock.
b. par value of the stock.
c. market value of the stock.
d. book value of the stock.
3) If Vickers Company issues 4,000 shares of $5 par value common stock for $140,000,
a. Common Stock will be credited for $140,000.
b. Paid-In Capital in Excess of Par will be credited for $20,000.
c. Paid-In Capital in Excess of Par will be credited for $120,000.
d. Cash will be debited for $120,000.
4) If common stock is issued for an amount greater than par value, the excess should be
credited to
a. Cash.
b. Retained Earnings.
c. Paid-in Capital in Excess of Par.
d. Legal Capital.
5) If stock is issued for a noncash asset, the asset should be recorded on the books of the
corporation at
a. fair value.
b. cost.
c. zero.
d. a nominal amount
6) If stock is issued for less than par value, the account
a. Paid-In Capital in Excess of Par is credited.
b. Paid-In Capital in Excess of Par is debited if a debit balance exists in the account.
c. Paid-In Capital in Excess of Par is debited if a credit balance exists in the account.
d. Retained Earnings is credited.
7) Which of the following represents the largest number of common shares?
a. Treasury shares
b. Issued shares
c. Outstanding shares
d. Authorized shares
8) New Corp. issues 2,000 shares of $10 par value common stock at $14 per share.
When the transaction is recorded, credits are made to
a. Common Stock $20,000 and Paid-in Capital in Excess of Stated Value $8,000.
b. Common Stock $28,000.
c. Common Stock $20,000 and Paid-in Capital in Excess of Par $8,000.
d. Common Stock $20,000 and Retained Earnings $8,000.
9) If Keene Company issues 4,500 shares of $5 par value common stock for $80,000,
the account
a. Common Stock will be credited for $22,500.
b. Paid-in Capital in Excess of Par will be credited for $22,500.
c. Paid-in Capital in Excess of Par will be credited for $80,000.
d. Cash will be debited for $57,500.
10) Carson Packaging Corporation began business in 2013 by issuing 25,000 shares of $3
par common stock for $8 per share and 10,000 shares of 6%, $10 par preferred stock
for par. At year-end, the common stock had a market value of $12. On its December
31, 2013 balance sheet, Carson Packaging would report
a. Common Stock of $300,000.
b. Common Stock of $75,000.
c. Common Stock of $200,000.
d. Paid-In Capital of $75,000.
11) Hsu, Inc. issued 7,500 shares of stock at a stated value of $8/share. The total issue of
stock sold for $15 per share. The journal entry to record this transaction would include a
a. debit to Cash for $60,000.
b. credit to Common Stock for $60,000.
c. credit to Paid-in Capital in Excess of Par for $112,500.
d. credit to Common Stock for $112,500.
12) Ralston Company is authorized to issue 10,000 shares of 8%, $100 par value
preferred
stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If
Ralston issues 6,000 shares of common stock to pay its recent attorney’s bill of $25,000
for legal services on a land access dispute, which of the following would be the journal
entry for Ralston to record?
a. Legal Expense
6,000
Common Stock
6,000
b. Legal Expense
25,000
Common Stock
25,000
c. Legal Expense
25,000
Common Stock
6,000
Paid-in Capital in Excess of Stated Value – Common
19,000
d. Legal Expense
25,000
Common Stock
6,000
Paid-in Capital in Excess of Par –Preferred
19,000
13) The following data is available for Blaine Corporation at December 31, 2013:
Common stock, par $10 (authorized 25,000 shares) $200,000
Treasury Stock (at cost $15 per share)
900
Based on the data, how many shares of common stock are outstanding?
a. 25,000
b. 20,000
c. 24,940
d. 19,940
14) The following data is available for Blaine Corporation at December 31, 2013:
Common stock, par $10 (authorized 25,000 shares) $200,000
Treasury Stock (at cost $15 per share)
900
Based on the data, how many shares of common stock have been issued?
a. 25,000
b. 20,000
c. 24,940
d. 19,940
15) On the dividend record date,
a. a dividend becomes a current obligation.
b. no entry is required.
c. an entry may be required if it is a stock dividend.
d. Dividends Payable is debited.
16) Which of the following statements regarding the date of a cash dividend declaration is
not accurate?
a. The dividend can be rescinded once it has been declared.
b. The corporation is committed to a legal, binding obligation.
c. The board of directors formally authorizes the cash dividend.
d. A liability account must be increased.
17) Dividends Payable is classified as a
a. long-term liability.
b. contra stockholders' equity account to Retained Earnings.
c. current liability.
d. stockholders' equity account.
18) Indicate the respective effects of the declaration of a cash dividend on the following
balance sheet sections:
Total Assets
Total Liabilities
Total Stockholders' Equity
a. Increase
Decrease
No change
b. No change
Increase
Decrease
c. Decrease
Increase
Decrease
d. Decrease
No change
Increase
19) Which of the following statements about dividends is not accurate?
a. Many companies declare and pay cash quarterly dividends.
b. Low dividends may mean high stock returns.
c. The board of directors is obligated to declare dividends.
d. A legal dividend may not be a feasible one.
20) The cumulative effect of the declaration and payment of a cash dividend on a
company's balance sheet is to
a. decrease current liabilities and stockholders' equity.
b. increase total assets and stockholders' equity.
c. increase current liabilities and stockholders' equity.
d. decrease stockholders' equity and total assets.
21) The declaration and distribution of a stock dividend will
a. increase total stockholders' equity.
b. increase total assets.
c. decrease total assets.
d. have no effect on total assets.
22) Xeris, Inc. has 1,000 shares of 5%, $10 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2013.
What is the annual dividend on the preferred stock?
a. $5 per share
b. $500 in total
c. $5,000 in total
d. $.05 per share
23) Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at December 31, 2013. If the
board of directors declares a $60,000 dividend, the
a. preferred shareholders will receive 1/10th of what the common shareholders will
receive.
b. preferred shareholders will receive the entire $60,000.
c. $60,000 will be held as restricted retained earnings and paid out at some future date.
d. preferred shareholders will receive $30,000 and the common shareholders will receive
$30,000.
24) Marion, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock
and 20,000 shares of $1 par value common stock outstanding at December 31, 2013.
There were no dividends declared in 2012. The board of directors declares and pays a
$55,000 dividend in 2013. What is the amount of dividends received by the common
stockholders in 2013?
a. $0
b. $25,000
c. $55,000
d. $30,000
25) Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2012, and
December 31, 2013. The board of directors declared and paid a $4,000 dividend in 2012.
In 2013, $15,000 of dividends are declared and paid. What are the dividends received by
the preferred and common shareholders in 2013?
Preferred
Common
a. $9,000
$6,000
b. $7,500
$7,500
c. $6,000
$9,000
d. $5,000
$10,000