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

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

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

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

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

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

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

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

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

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

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.

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

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

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

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

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.

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

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

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.

Question 20
The excess of issue price over par of common stock is termed a(n)
Answer
discount
income
deficit
premium

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

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

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

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

Question 25
Those most responsible for the major policy decisions of a corporation are the
Answer
management.
board of directors.
employees.
stockholders.