Question 1

When we reissue treasury stock,we report the difference between its cost and the cash received as an increase/decrease in additional paid-in capital.

Accepted Answer

A) True 
 B)False

Question 2

The Surf's Up issues 1,000 shares of 6%,$100 par value preferred stock at the beginning of 2011.All remaining shares are common stock.The company was not able to pay dividends in 2011,but plans to pay dividends of $18,000 in 2012.Assuming the preferred stock is cumulative,how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?

Accepted Answer

A)  $6,000 to preferred stockholders and $12,000 to common stockholders.
B)  $18,000 to preferred stockholders and $0 to common stockholders.
C)  $12,000 to preferred stockholders and $6,000 to common stockholders.
D)  $9,000 to preferred stockholders and $9,000 to common stockholders.E) A) and C)
F) B) and C)

Question 3

Limited liability means that even in the event of bankruptcy,stockholders in a corporation can lose no more than the amount they invested in the company.

Accepted Answer

A) True 
 B)False

Question 4

Donnie Hilfiger has the following balances in its stockholders' equity accounts on December 31,2012: Treasury Stock,$375,000; Common Stock,$350,000; Preferred Stock,$1,200,000; Retained Earnings,$1,675,000; and Additional Paid-in Capital,$3,150,000.Prepare the stockholders' equity section of the balance sheet for Donnie Hilfiger as of December 31,2012.

Accepted Answer

The answer of Donnie Hilfiger has the following balances in...

Question 5

The statement of stockholders' equity shows how each equity account changed during the year.

Accepted Answer

A) True 
 B)False

Question 6

Advantages of the corporate form that have led to the growth of this form of business ownership include all of the following except:

Accepted Answer

A)  Ease of raising capital.
B)  Low government regulation.
C)  Limited liability.
D)  Lack of mutual agency.E) C) and D)
F) A) and B)

Question 7

On February 22,Brett Corporation reacquired 200 shares of its $5 par value common stock for $25 each.On March 15,the company reissued 70 shares for $30 each.What is true of the journal entry for reissuing their shares?

Accepted Answer

A)  Credit Cash $1,750.
B)  Credit Additional Paid in Capital $350.
C)  Debit Treasury Stock $1,750.
D)  Credit Treasury Stock $2,100.E) B) and C)
F) A) and D)

Question 8

A company issued 1,000 shares of $1 par value preferred stock for $5 per share.What is true about the journal entry to record the issuance?

Accepted Answer

A)  Debit Preferred Stock $5,000.
B)  Credit Cash $5,000.
C)  Credit Preferred Stock $5,000.
D)  Credit Additional Paid-In Capital $4,000.E) A) and B)
F) All of the above

Question 9

The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should debit stock dividends for an amount equal to the

Accepted Answer

A)  Book value of the shares issued.
B)  Par or stated value of the shares issued.
C)  Market value of the shares issued.
D)  Minimum legal requirements.E) All of the above
F) C) and D)

Question 10

Preferred stock:

Accepted Answer

A)  is always recorded as a liability.
B)  is always recorded as part of stockholders' equity.
C)  can have features of both liabilities and stockholders' equity.
D)  is not included in either liabilities or stockholders' equity.E) None of the above
F) B) and C)

Question 11

California Adventures issues 5,000 shares of 8%,$100 par value preferred stock at the beginning of 2011.All remaining shares are common stock.The company was not able to pay dividends in 2011,but plans to pay dividends of $100,000 in 2012.Assuming the preferred stock is noncumulative,how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?

Accepted Answer

A)  $40,000 to preferred stockholders and $60,000 to common stockholders.
B)  $80,000 to preferred stockholders and $20,000 to common stockholders.
C)  $20,000 to preferred stockholders and $80,000 to common stockholders.
D)  $100,000 to preferred stockholders and $0 to common stockholders.E) A) and D)
F) All of the above

Question 12

Outstanding common stock is:

Accepted Answer

A)  Stock that is performing well on the New York Stock Exchange.
B)  Stock that has been authorized by the state for issue.
C)  Stock issued plus treasury stock.
D)  Stock in the hands of stockholders.E) None of the above
F) A) and D)

Question 13

Convertible preferred stock allows the stockholder to exchange shares of preferred stock for common stock at a specified conversion ratio.

Accepted Answer

A) True 
 B)False

Question 14

We record treasury stock at the cost of the shares reacquired.

Accepted Answer

A) True 
 B)False

Question 15

When treasury stock is purchased,what is the effect on total stockholders' equity?

Accepted Answer

A)  Decrease.
B)  Increase.
C)  No effect.
D)  Cannot tell from the given information.E) B) and C)
F) A) and D)

Question 16

If a company has expenses that are more than revenues,the net loss decreases retained earnings.

Accepted Answer

A) True 
 B)False

Question 17

The amount of retained earnings equals net income minus dividends for the current year..

Accepted Answer

A) True 
 B)False

Question 18

How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity?

Accepted Answer

A)  The stockholders' equity section is more detailed than the statement of stockholders' equity.
B)  The stockholders' equity section shows balances at a point in time,whereas the statement of stockholders' equity shows activity over a period of time.
C)  The stockholders' equity section shows activity over a period of time,whereas the statement of stockholders' equity is at a point time.
D)  There are no differences between them.E) A) and B)
F) A) and C)

Question 19

Treasury Stock:

Accepted Answer

A)  has a normal credit balance.
B)  decreases stockholders' equity.
C)  is recorded as an investment.
D)  increases stockholders' equity.E) B) and C)
F) B) and D)

Question 20

Diane's Designs has two classes of stock authorized: 8%,$10 par preferred and $1 par value common.The following transactions affect stockholders' equity during 2012,its first year of operations:
Record each of these transactions.

Accepted Answer

The answer of Diane's Designs has two classes of stock...

Exam 10: Stockholders Equity

Diane's Designs has two classes of stock authorized: 8%,$10 par preferred and $1 par value common.The following transactions affect stockholders' equity during 2012,its first year of operations: Record each of these transactions.

Correct Answer
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Correct Answer
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On February 22,Brett Corporation reacquired 200 shares of its $5 par value common stock for $25 each.On March 15,the company reissued 70 shares for $30 each.What is true of the journal entry for reissuing their shares?

Correct Answer
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If a company has expenses that are more than revenues,the net loss decreases retained earnings.

Correct Answer
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The statement of stockholders' equity shows how each equity account changed during the year.

Correct Answer
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Outstanding common stock is:

Correct Answer
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The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should debit stock dividends for an amount equal to the

Correct Answer
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When we reissue treasury stock,we report the difference between its cost and the cash received as an increase/decrease in additional paid-in capital.

Correct Answer
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When treasury stock is purchased,what is the effect on total stockholders' equity?

Correct Answer
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The amount of retained earnings equals net income minus dividends for the current year..

Correct Answer
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Advantages of the corporate form that have led to the growth of this form of business ownership include all of the following except:

Correct Answer
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A company issued 1,000 shares of $1 par value preferred stock for $5 per share.What is true about the journal entry to record the issuance?

Correct Answer
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How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity?

Correct Answer
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Treasury Stock:

Correct Answer
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Limited liability means that even in the event of bankruptcy,stockholders in a corporation can lose no more than the amount they invested in the company.

Correct Answer
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Preferred stock:

Correct Answer
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Convertible preferred stock allows the stockholder to exchange shares of preferred stock for common stock at a specified conversion ratio.

Correct Answer
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Correct Answer
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Correct Answer
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We record treasury stock at the cost of the shares reacquired.

Correct Answer
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Exam 10: Stockholders Equity

Diane's Designs has two classes of stock authorized: 8%,$10 par preferred and $1 par value common.The following transactions affect stockholders' equity during 2012,its first year of operations: Record each of these transactions.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On February 22,Brett Corporation reacquired 200 shares of its $5 par value common stock for $25 each.On March 15,the company reissued 70 shares for $30 each.What is true of the journal entry for reissuing their shares?

Correct AnswerverifiedShow Answer

If a company has expenses that are more than revenues,the net loss decreases retained earnings.

Correct AnswerverifiedShow Answer

The statement of stockholders' equity shows how each equity account changed during the year.

Correct AnswerverifiedShow Answer

Outstanding common stock is:

Correct AnswerverifiedShow Answer

The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should debit stock dividends for an amount equal to the

Correct AnswerverifiedShow Answer

When we reissue treasury stock,we report the difference between its cost and the cash received as an increase/decrease in additional paid-in capital.

Correct AnswerverifiedShow Answer

When treasury stock is purchased,what is the effect on total stockholders' equity?

Correct AnswerverifiedShow Answer

The amount of retained earnings equals net income minus dividends for the current year..

Correct AnswerverifiedShow Answer

Advantages of the corporate form that have led to the growth of this form of business ownership include all of the following except:

Correct AnswerverifiedShow Answer

A company issued 1,000 shares of $1 par value preferred stock for $5 per share.What is true about the journal entry to record the issuance?

Correct AnswerverifiedShow Answer

How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity?

Correct AnswerverifiedShow Answer

Treasury Stock:

Correct AnswerverifiedShow Answer

Limited liability means that even in the event of bankruptcy,stockholders in a corporation can lose no more than the amount they invested in the company.

Correct AnswerverifiedShow Answer

Preferred stock:

Correct AnswerverifiedShow Answer

Convertible preferred stock allows the stockholder to exchange shares of preferred stock for common stock at a specified conversion ratio.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

We record treasury stock at the cost of the shares reacquired.

Correct AnswerverifiedShow Answer

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