Multiple Questions Series 1(answers attached)

1. Investors who are most interested in the dividend yield are those who invest for

a. Current income flow

b. Market price appreciation

c. Both market price appreciation and current income flow

d. Neither market price appreciation or current income flow

2. Organization Costs is included on the balance sheet as a(n):

a. Plant asset

b. Investment

c. Current asset

d. Intangible asset

3. Retained earnings:

a. is the same as contributed capital

b. changes are summarized in the Retained Earnings Statement

c. cannot have a debit balance

d. over time will have a direct relationship with the amount of cash on hand if the

corporation is profitable.

4. The charter of a corporation provides for the issuance of 100,000 shares of common

stock. Assume that 20,000 shares were originally issued and 2,500 were subsequently

reacquired. What is the number of shares outstanding?

a. 22,500

b. 17,500

c. 20,000

d. 82,500

5. A Company acquired land in exchange for 5,000 shares of its $10 par common stock. The

fair market value of the land is $63,000, it is appraised at $60,000 and the stock is widely

traded and was selling for $12.50 per share when exchanged for the land. At what

amount should the land be recorded by A Company?

a. $50,000

b. $62,500

c. $63,000

d. $60,000

6. The excess of sales price of treasury stock over its cost should be credited to:

a. Treasury Stock Receivable

b. Premium on Capital Stock

c. Income fro Sale of Treasury Stock

d. Paid-In Capital from Sale of Treasury Stock

 

 

 

 

7. A corporation purchases 10,000 shares of its own $10 par common stock for $17.50 per

share, recording it at cost. What will be the effect on total stockholders’ equity?

a. Decrease, $175,000

b. Decrease, $100,000

c. Increase, $175,000

d. Increase, $100,000

8. A corporation has 25,000 shares of $100 par value stock outstanding. If the corporation

issues a 2-for-1 split or a 100% stock dividend, the number of shares outstanding after

the split or dividend will be:

a. 25,000 shares

b. 50,000 shares

c. 75,000 shares

d. 100,000 shares

9. 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 10,000 were subsequently

reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is

declared?

a. $50,000

b. $100,000

c. $70,000

d. $60,000

10. A company with 100,000 authorized shares of $5 par common stock issued 80,000

shares at $7. Subsequently, the company declared a 2% stock dividend on a date when

the market price was $10 a share. The effect of the declaration and issuance of the stock

dividend is to:

a. Decrease retained earnings, increase common stock, and decrease paid-in capital

b. Increase retained earnings, decrease common stock, and decrease paid-in capital

c. Increase retained earnings, decrease commons tock, and increase paid-in capital

d. Decrease retained earnings, increase common stock, and increase paid-in capital

11. Easy transfer of ownership is a characteristic of which form of business organization?

a. Sole proprietorship

b. Partnership

c. Corporation

d. All of the above

12. In which forms of business organization are the owners personally liable for all the debts

of the business?

a. Sole proprietorship and corporation

b. Sole proprietorship and partnerships

c. Partnership and corporation

d. All of them

13. Issuing stock to investors for cash at a price above par would result in

a. a debit to Common Stock and a credit to Cash

b. a debit to Cash and a credit to Common Stock

c. a debit to Cash and PIC-excess of par-CS and a credit to Common Stock

d. a debit to Cash and a credit to Common Stock and PIC-excess of par-CS

14. The par value of the shares issued represents a corporation’s legal capital.

a. True

b. False

15. When treasury stock is purchased, the number of outstanding shares decreases.

a. True

b. False

16. Dividends in arrears are reported as a current liability on the balance sheet.

a. True

b. False

17. No journal entry is required on the date of record.

a. True

b. False

18. Which of the following is not a characteristic of a corporation?

a. Separate legal existence

b. Unlimited liability for stockholders

c. Easy transferability of ownership interests

d. Ability to acquire capital easily

19. Which of the following is not a disadvantage of the corporate business form?

a. Organization Costs

b. Government regulation

c. Continuous life

d. Additional taxes

20. Which of the following is not a stockholder right?

a. The preemptive right

b. The right to share in dividends

c. The right to vote on the board of directors

d. The right to participate in management decisions

21. Which of the following represents the maximum number of shares that a corporation can

issue?

a. Outstanding shares

b. Issued shares

c. Authorized shares

d. Treasury shares

22. Which of the following decreases when a corporation purchases treasury stock?

a. Authorized shares

b. Issued shares

c. Treasury shares

d. Outstanding shares

23. Sting, Inc. issued 1,000 shares of common stock at $10 per share. If the stock has a

par value of $4 a share, the journal entry to record the issuance would include a

a. Credit to Common Stock for $4,000.

b. Debit to Cash for $4,000.

c. Credit to Paid-in-Capital in Excess of Par for $10,000

d. Debit to Retained Earnings for $6,000

24. Sting, Inc. issued 1,000 shares of common stock at $10 per share. If the stock was nopar

stock, the journal entry to record the issuance would include a

a. debit to Cash for $6,000

b. credit to Paid-in-Capital in Excess of Par for 6,000

c. credit to Common Stock for $10,000

d. debit to Paid-in-Capital in Excess of Par for $10,000

25. If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share,

total stockholders’ equity will be reduced by

a. $5,000

b. $12,000

c. $0

d. $7,000

26. Which of the following will increase the Paid-in-Capital section of the balance sheet?

a. Stock split

b. Stock dividend

c. Cash dividend

d. Property dividend

27. Buzz, Inc. has 8,000 shares of 5%, $50 par, cumulative preferred stock and 50,000

shares of $3 par common stock outstanding. No dividends were declared last year,

however, a dividend of $50,000 was declared and paid this year. What amount of the

total dividend was paid to common stockholders?

a. $10,000

b. $30,000

c. $15,000

d. $50,000

 

 

 

28. Scratch, Inc. has 2,000 shares of 5%, $100 par, cumulative preferred stock and 80,000

shares of $4 par common stock outstanding. Last year the board of directors declared

and paid an $8,000 dividend. This year the dividend declared and paid was $15,000.

What amount of this year’s total dividend was paid to preferred stockholders?

a. $15,000

b. $10,000

c. $0

d. $12,000

29. Visor, Inc. had 300,000 shares of $20 par common stock outstanding when a 3% stock

dividend was declared and paid. How many shares were outstanding after the stock

dividend?

a. 390,000

b. 330,000

c. 300,000

d. 309,000

30. Visor, Inc. had 300,000 shares of $20 par common stock outstanding when a 3% stock

dividend was declared. The market price of the stock at the time of the declaration was

$22 per share. The journal entry to record the dividend declaration would include a

credit to

a. Common Stock for $180,000

b. PIC-excess of par-CS for $198,000

c. Stock Dividends for $198,000

d. Stock Dividends Distributable for $180,000