Question 1

A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

Accepted Answer

A)  $7,500.
B)  $11,250.
C)  $14,625.
D)  $10,250.
E)  $7,125.F) C) and D)
G) B) and E)

Question 2

A debit balance in retained earnings is referred to as an accumulated deficit.

Accepted Answer

A) True 
 B)False

Question 3

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average)common stock.

Accepted Answer

A) True 
 B)False

Question 4

The term restricted retained earnings refers to statutory but not contractual restrictions.

Accepted Answer

A) True 
 B)False

Question 5

Preferred stock that allows preferred stockholders to share with common stockholders any dividends paid in excess of the percent or dollar amount stated on the preferred stock is called:

Accepted Answer

A)  Convertible preferred stock.
B)  Participating preferred stock.
C)  Cumulative preferred stock.
D)  Common stock.
E)  Premium stock.F) A) and E)
G) D) and E)

Question 6

The Paid-in Capital, Treasury Stock account can have a zero or credit balance.

Accepted Answer

A) True 
 B)False

Question 7

Wiggins Company has 1,000 shares of $10 par preferred stock, which were issued at par. It also has 25,000 shares of common stock outstanding, and its total stockholders' equity equals $500,000. The book value per common share is:

Accepted Answer

A)  $19.60.
B)  $10.00.
C)  $16.00.
D)  $20.00.
E)  $19.96.F) C) and D)
G) C) and E)

Question 8

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Accepted Answer

A)  Debit Common Dividends Payable $90,000; credit Cash $90,000.
B)  Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
C)  Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.
D)  Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.
E)  Debit Common Dividends Payable $95,000; credit Cash $95,000.F) B) and C)
G) A) and C)

Question 9

The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

Accepted Answer

A) True 
 B)False

Question 10

Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

Accepted Answer

A) True 
 B)False

Question 11

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Accepted Answer

A)  Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
B)  Debit Common Dividends Payable $104,500; credit Cash $104,500.
C)  Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
D)  Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
E)  Debit Common Dividends Payable $100,100; credit Cash $100,100.F) A) and B)
G) A) and C)

Question 12

Changes in accounting estimates are:

Accepted Answer

A)  Accounted for with a cumulative "catch-up" adjustment.
B)  Accounted for in current and future periods.
C)  Considered accounting errors.
D)  Extraordinary items.
E)  Reported as prior period adjustments.F) A) and E)
G) C) and D)

Question 13

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the dividend declaration is:

Accepted Answer

A)  Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
B)  Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
C)  Debit Common Dividends Payable $104,500; credit Cash $104,500.
D)  Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
E)  Debit Common Dividends Payable $100,100; credit Cash $100,100.F) C) and E)
G) A) and D)

Question 14

The main limitation in using book value per share for stock valuation models is the potential difference between recorded value and market value for both assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 15

Alto Company issued 7% preferred stock with a $100 par value. This means that:

Accepted Answer

A)  The market price per share will approximate $100 per share.
B)  The amount of the potential dividend is $7 per year per preferred share.
C)  Preferred shareholders are entitled to 7% of the annual income.
D)  Preferred shareholders have a guaranteed dividend.
E)  Only 7% of the total paid-in capital can be preferred stock.F) A) and E)
G) B) and E)

Question 16

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Accepted Answer

A) True 
 B)False

Question 17

A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

Accepted Answer

A)  $31.71.
B)  $33.17.
C)  $32.50.
D)  $60.00.
E)  $32.75.F) B) and E)
G) None of the above

Question 18

A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

Accepted Answer

A) True 
 B)False

Question 19

A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

Accepted Answer

A)  Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.
B)  Debit Cash $7,000; credit Common Stock $7,000.
C)  Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.
D)  Debit Investment in Common Stock $7,000; credit Cash $7,000.
E)  Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000.F) A) and C)
G) C) and E)

Question 20

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the dividend declaration is:

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The term restricted retained earnings refers to statutory but not contractual restrictions.

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The main limitation in using book value per share for stock valuation models is the potential difference between recorded value and market value for both assets and liabilities.

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Changes in accounting estimates are:

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Wiggins Company has 1,000 shares of $10 par preferred stock, which were issued at par. It also has 25,000 shares of common stock outstanding, and its total stockholders' equity equals $500,000. The book value per common share is:

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A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

Correct AnswerverifiedShow Answer

A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

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The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

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Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

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Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average)common stock.

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Preferred stock that allows preferred stockholders to share with common stockholders any dividends paid in excess of the percent or dollar amount stated on the preferred stock is called:

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The Paid-in Capital, Treasury Stock account can have a zero or credit balance.

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West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Correct AnswerverifiedShow Answer

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

Correct AnswerverifiedShow Answer

A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

Correct AnswerverifiedShow Answer

A debit balance in retained earnings is referred to as an accumulated deficit.

Correct AnswerverifiedShow Answer

Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

Correct AnswerverifiedShow Answer

A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

Correct AnswerverifiedShow Answer

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Correct AnswerverifiedShow Answer

Alto Company issued 7% preferred stock with a $100 par value. This means that:

Correct AnswerverifiedShow Answer

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