Question 1

Which of the following statements is not true about a 2-for-1 split?

Accepted Answer

A)   Par value per share is reduced to half of what it was before the split.
B)   Total contributed capital increases.
C)   The market price will probably decrease.
D)   A stockholder with ten shares before the split owns twenty shares after the split.E) B) and D)
F) B) and C)

Question 2

Match the following stockholders equity concepts to the most appropriate answer.

Accepted Answer

The answer of Match the following stockholders equity concepts to...

Question 3

The initial owners of stock of a newly formed corporation are called directors.

Accepted Answer

A) True 
 B)False

Question 4

The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.

Accepted Answer

A) True 
 B)False

Question 5

Retained earnings represents past net incomes less past dividends, therefore any balance in this account would be listed on the income statement.

Accepted Answer

A) True 
 B)False

Question 6

A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

A)   increase, $100,000
B)   increase, $350,000
C)   decrease, $100,000
D)   decrease, $350,000E) C) and D)
F) B) and D)

Question 7

When common stock is issued in exchange for land, the land should be recorded in the accounts at the par amount of the stock issued.

Accepted Answer

A) True 
 B)False

Question 8

The authorized stock of a corporation

Accepted Answer

A)   must be recorded in a formal accounting entry.
B)   only reflects the initial capital needs of the company.
C)   is indicated in its by-laws.
D)   is indicated in its charter.E) All of the above
F) A) and B)

Question 9

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

Accepted Answer

A)   the right to vote in the election of the board of directors
B)   the right to receive a minimum amount of dividends
C)   the right to sell their stock to anyone they choose
D)   the right to share in assets upon liquidationE) A) and B)
F) A) and D)

Question 10

The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.

Accepted Answer

A) True 
 B)False

Question 11

A corporation issues 2,500 shares of common stock for $ 45,000. 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

Accepted Answer

A)   $25,000
B)   $45,000
C)   $20,000
D)   $ 5,000E) B) and D)
F) None of the above

Question 12

The stock dividends distributable account is listed in the current liability section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.

Accepted Answer

A) True 
 B)False

Question 14

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 $2 per share dividend is declared?

Accepted Answer

A)   $ 60,000
B)   $ 20,000
C)   $120,000
D)   $100,000E) None of the above
F) A) and B)

Question 15

What is the total stockholders' equity based on the following data?

Accepted Answer

A)   $1,070,000
B)   $1,005,000
C)   $940,000
D)   $565,000E) All of the above
F) None of the above

Question 16

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

Accepted Answer

A)   liquidating dividend
B)   stock split
C)   stock option
D)   preferred dividendE) B) and D)
F) None of the above

Question 17

Which of the following is not a prerequisite to paying a cash dividend?

Accepted Answer

A)   formal action by the board of directors
B)   market value in excess of par value per share
C)   sufficient cash
D)   sufficient retained earningsE) None of the above
F) B) and D)

Question 18

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Accepted Answer

A)   decrease total liabilities and stockholders' equity.
B)   increase total expenses and total liabilities.
C)   increase total assets and stockholders' equity.
D)   decrease total assets and stockholders' equity.E) A) and C)
F) C) and D)

Question 19

Stockholders' equity

Accepted Answer

A)   is usually equal to cash on hand
B)   includes paid-in capital and liabilities
C)   includes retained earnings and paid-in capital
D)   is shown on the income statementE) A) and B)
F) All of the above

Question 20

If paid-in-capital in excess of par/preferred stock is $30,000, preferred stock is $200,000, paid-in-capital in excess of par/common stock is $20,000, common stock is $525,000, and retained earnings is $105,000 (deficit), the total stockholders' equity is $880,000.

Accepted Answer

A) True 
 B)False

Exam 13: Corporations: Organization, Stock Transactions, and Dividends

A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Correct AnswerverifiedShow Answer

Retained earnings represents past net incomes less past dividends, therefore any balance in this account would be listed on the income statement.

Correct AnswerverifiedShow Answer

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

Correct AnswerverifiedShow Answer

The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.

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The authorized stock of a corporation

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What is the total stockholders' equity based on the following data?

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If paid-in-capital in excess of par/preferred stock is $30,000, preferred stock is $200,000, paid-in-capital in excess of par/common stock is $20,000, common stock is $525,000, and retained earnings is $105,000 (deficit), the total stockholders' equity is $880,000.

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When common stock is issued in exchange for land, the land should be recorded in the accounts at the par amount of the stock issued.

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Which of the following is not a prerequisite to paying a cash dividend?

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The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.

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A corporation issues 2,500 shares of common stock for $ 45,000. 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

Correct AnswerverifiedShow Answer

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 $2 per share dividend is declared?

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The stock dividends distributable account is listed in the current liability section of the balance sheet.

Correct AnswerverifiedShow Answer

Stockholders' equity

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The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Correct AnswerverifiedShow Answer

Match the following stockholders equity concepts to the most appropriate answer.

Correct AnswerverifiedShow Answer

The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is not true about a 2-for-1 split?

Correct AnswerverifiedShow Answer

The initial owners of stock of a newly formed corporation are called directors.

Correct AnswerverifiedShow Answer

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