Question 1

Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.

Accepted Answer

A) True 
 B)False

Question 2

A corporation is responsible for its own acts and debts because it is considered a__________ .

Accepted Answer

separate l...

Question 3

Retained earnings:

Accepted Answer

A)   Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
B)   Represents the amount shareholders are guaranteed to receive upon company liquidation.
C)   Represent an amount of cash available to pay shareholders.
D)   Are never adjusted for anything other than net income or dividends.
E)   Can only be appropriated by setting aside a cash fund.F) C) and E)
G) C) and D)

Question 4

A liability for a dividend does not exist until the directors declare a dividend.

Accepted Answer

A) True 
 B)False

Question 5

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) B) and C)

Question 6

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Accepted Answer

A) True 
 B)False

Question 7

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) C) and D)
G) A) and D)

Question 8

A company reported the following stockholders' equity on January 1 of the current year:
 $\begin{array}{|l|c|}
\hline \begin{array}{l}
\text { Common stock, } \$ 10 \text { par, } 1,000,000 \text { shares } \
\text { authorized, } 250,000 \text { shares issued } \ldots \ldots . .
\end{array} & \$ 2,500,000 \
\hline \text { Paid-in capital in excess of par, common } & 1,260,000 \
\hline \text { Retained earnings } & 1,675,000 \
\hline\text { Total stockholders' equity }&\$5,435,000
\end{array}$
 Prepare journal entries for the following selected transactions related to this company's stock during
the current year:
Mar. 1 Purchased 10,000 shares of treasury stock for $18 per share. May 5 Sold 4,000 shares of treasury stock for $16 per share.
Oct. 12 Sold 2,000 shares of treasury stock for $19 per share.

Accepted Answer

None...

Question 9

The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.

Accepted Answer

A) True 
 B)False

Question 10

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Accepted Answer

A) True 
 B)False

Question 11

A stock dividend, declared by a corporations's directors, is a distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

Accepted Answer

A) True 
 B)False

Question 14

Boron Company is authorized to issue 50,000 shares of $50 par value, 8%, cumulative, fully participating preferred stock, and 750,000 shares of $5 par value common stock. Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:

May 5 Exchanged 2,200 shares of preferred stock for a building with a market value of $135,000.
July 20 Sold 1,550 shares of preferred stock for $50 cash per share. 
Dec. 20 Sold 1,000 shares of preferred stock at $52 cash per share.

Accepted Answer

The answer of Boron Company is authorized to issue 50,000...

Question 15

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Accepted Answer

A)   Debit Common Dividends Payable $4,000; credit Cash $4,000.
B)   Debit Common Dividends Payable $4,500; credit Cash $4,500.
C)   Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.
D)   Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.
E)   Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.F) All of the above
G) C) and D)

Question 16

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 E)
G) D) and E)

Question 17

Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.

Accepted Answer

A) True 
 B)False

Question 18

A liability for dividends exists:

Accepted Answer

A)   On the date of payment.
B)   When cumulative preferred stock is sold.
C)   On the date of record.
D)   For dividends in arrears on cumulative preferred stock.
E)   On the date of declaration.F) A) and D)
G) B) and E)

Question 19

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Accepted Answer

A)   Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000.
B)   Debit Common Stock $26,000; credit Cash $26,000.
C)   Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value, Common Stock $286,000.
D)   Debit Common Stock $26,000; debit Paid-in Capital in Excess of Par Value, Common Stock $286,000; credit Cash $312,000.
E)   Debit Cash for $312,000; credit Common Stock $312,000.F) B) and E)
G) C) and E)

Question 20

The price at which a share of stock is bought or sold is known as par value.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

A stock dividend, declared by a corporations's directors, is a distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return.

Correct Answer
verified

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

Correct Answer
verified

Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.

Correct Answer
verified

Correct Answer
verified

A liability for dividends exists:

Correct Answer
verified

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Correct Answer
verified

Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.

Correct Answer
verified

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

Correct Answer
verified

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:

Correct Answer
verified

Correct Answer
verified
None...
View Answer

A corporation is responsible for its own acts and debts because it is considered a__________ .

Correct Answer
verified
separate l...
View Answer

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Correct Answer
verified

Retained earnings:

Correct Answer
verified

The price at which a share of stock is bought or sold is known as par value.

Correct Answer
verified

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Correct Answer
verified

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Correct Answer
verified

The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.

Correct Answer
verified

A liability for a dividend does not exist until the directors declare a dividend.

Correct Answer
verified

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

Correct Answer
verified

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:

Correct Answer
verified

Exam 13: Accounting for Corporations

A stock dividend, declared by a corporations's directors, is a distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A liability for dividends exists:

Correct AnswerverifiedShow Answer

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Correct AnswerverifiedShow Answer

Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

A corporation is responsible for its own acts and debts because it is considered a__________ .

Correct Answerverifiedseparate l...View AnswerShow Answer

A corporation may not legally give shares of its stock to promoters in exchange for their services in organizing the corporation.

Correct AnswerverifiedShow Answer

Retained earnings:

Correct AnswerverifiedShow Answer

The price at which a share of stock is bought or sold is known as par value.

Correct AnswerverifiedShow Answer

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Correct AnswerverifiedShow Answer

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend payment is:

Correct AnswerverifiedShow Answer

The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.

Correct AnswerverifiedShow Answer

A liability for a dividend does not exist until the directors declare a dividend.

Correct AnswerverifiedShow Answer

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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None...
View Answer

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separate l...
View Answer

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