Equity Analysis – Test Bank | 10th Edition

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Student name:__________

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) A corporation is an entity that is separate from its owners and has many of the same rights as a person.

⊚ true
⊚ false

2) Corporations avoid many of the government regulations that proprietorships and partnerships must follow.

⊚ true
⊚ false

3) Organization expenses of a corporation often include legal fees and promoter fees.

⊚ true
⊚ false

4) Stockholders (who are not officers or managers) are able to bind the corporation to contracts.

⊚ true
⊚ false

5) A proxy is a document that gives a designated agent the right to vote a stockholder's stock.

⊚ true
⊚ false

6) Common stockholders always share equally with all other stockholders (including preferred stockholders) in dividends.

⊚ true
⊚ false

7) The preemptive right protects stockholders’ proportionate interest by allowing stockholders to purchase their proportional share of any common stock later issued by a corporation.

⊚ true
⊚ false

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

⊚ true
⊚ false

9) A registrar keeps a list of stockholders for stockholder meetings and dividend payments.

⊚ true
⊚ false

10) Stockholders' equity consists of paid-in capital and retained earnings.

⊚ true
⊚ false

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

⊚ true
⊚ false

12) Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock.

⊚ true
⊚ false

13) The total number of shares outstanding is always equal to the number of shares authorized.

⊚ true
⊚ false

14) If a corporation is authorized to issue 1,000 shares of $5 common stock, it is said to have $5,000 of common stock outstanding.

⊚ true
⊚ false

15) Minimum legal capital is the least amount that the buyers of stock must contribute to the corporation or be at risk to pay creditors at a future date.

⊚ true
⊚ false

16) Stated value stock is no-par stock that has an assigned “stated” value per share.

⊚ true
⊚ false

17) A corporation sometimes issues more than one class of stock, including preferred stock and different classes of common stock.

⊚ true
⊚ false

18) Common stock always carries a preference for receiving dividends over preferred stock.

⊚ true
⊚ false

19) A special right often granted to preferred stock is additional voting privileges.

⊚ true
⊚ false

20) Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods’ unpaid dividends before any dividend is paid to common stockholders.

⊚ true
⊚ false

21) Retained earnings generally consists of a company's cumulative net income minus any net losses and dividends declared.

⊚ true
⊚ false

22) Prior period adjustments are corrections of material errors in past financial statements.

⊚ true
⊚ false

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

⊚ true
⊚ false

24) A common contractual restriction is a loan agreement that restricts paying dividends beyond a specified amount of retained earnings.

⊚ true
⊚ false

25) Cash dividends reduce Retained Earnings.

⊚ true
⊚ false

26) A company made a material error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

⊚ true
⊚ false

27) Changes in accounting estimates are accounted for in current and future periods.

⊚ true
⊚ false

28) Earnings per share is the income earned per share of outstanding common stock.

⊚ true
⊚ false

29) 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.

⊚ true
⊚ false

30) If a company has noncumulative preferred stock, basic earnings per share is equal to net income less preferred dividends declared divided by the number of weighted average common shares outstanding.

⊚ true
⊚ false

31) Lewis Company had net income of $67,050. The company had 9,000 weighted average common shares outstanding. The basic earnings per share equals $7.45 per share.

⊚ true
⊚ false

32) The price-earnings ratio can be interpreted as what price the market is willing to pay for a company’s current earnings stream.

⊚ true
⊚ false

33) Price-earnings ratio is computed by dividing annual dividends by average market value per share.

⊚ true
⊚ false

34) The price-earnings ratio is computed by dividing earnings per share by the par value per share.

⊚ true
⊚ false

35) A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market value (price) per share is $80. Its price-earnings ratio equals 13.

⊚ true
⊚ false

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

⊚ true
⊚ false

37) Dividend yield is defined as the annual cash dividends per share divided by the market value (price) per share of a company's stock.

⊚ true
⊚ false

38) Growth stocks generally pay large dividends on a regular basis.

⊚ true
⊚ false

39) Dividend yield is computed by dividing earnings per share by the market value per share.

⊚ true
⊚ false

40) Organization expenses are the costs to start a corporation, such as legal fees, promoters’ fees, and payments for a charter.

⊚ true
⊚ false

41) When a corporation issues par value stock at par, the journal entry consists of a debit to Cash and a credit to Common Stock.

⊚ true
⊚ false

42) Helpful Hardware Company reported 150,000 shares authorized, 42,000 shares issued, and 2,500 shares of treasury stock. Thus, we calculate Helpful Hardware as having 44,500 shares outstanding.

⊚ true
⊚ false

43) If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the transaction date.

⊚ true
⊚ false

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

⊚ true
⊚ false

45) When no-par stock is not assigned a stated value, the total amount received is recorded in the Common Stock, No-Par Value account.

⊚ true
⊚ false

46) The date of record is the date that directors vote to pay a cash dividend to shareholders.

⊚ true
⊚ false

47) A premium on stock occurs when a corporation sells its stock for more than par (or stated) value.

⊚ true
⊚ false

48) When a corporation issues par value stock at a premium, the corresponding journal entry consists of a debit to Common Stock and a credit to Cash.

⊚ true
⊚ false

49) 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.

⊚ true
⊚ false

50) A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.

⊚ true
⊚ false

51) A stock dividend does not reduce a corporation's assets or its stockholders' equity.

⊚ true
⊚ false

52) A large stock dividend is a distribution of more than 25% of previously outstanding shares and is recorded by capitalizing retained earnings for the par or stated value of the stock.

⊚ true
⊚ false

53) Common Stock Dividend Distributable is a liability account.

⊚ true
⊚ false

54) Common Stock Dividend Distributable is an equity account.

⊚ true
⊚ false

55) Small stock dividends are recorded by capitalizing retained earnings for an amount equal to the par value of the shares to be distributed.

⊚ true
⊚ false

56) A small stock dividend is a distribution of 25% or less of previously outstanding shares and is recorded by capitalizing retained earnings for an amount equal to the market value of the shares to be distributed.

⊚ true
⊚ false

57) A stock split can be done in any ratio.

⊚ true
⊚ false

58) Declaration of a stock dividend results in a liability being recorded.

⊚ true
⊚ false

59) A stock split increases total stockholders' equity.

⊚ true
⊚ false

60) A large stock dividend only occurs when a distribution of more than 100% of previously outstanding shares is issued.

⊚ true
⊚ false

61) When a corporation does a stock dividend, it increases the number of outstanding shares, which lowers the per share stock price.

⊚ true
⊚ false

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

⊚ true
⊚ false

63) All stock dividends are recorded at par value so there would never be a credit to the paid-in capital in excess of par value account.

⊚ true
⊚ false

64) Paid and declared preferred dividends are called dividends in arrears.

⊚ true
⊚ false

65) Accumulation of dividends in arrears on cumulative preferred stock does not guarantee the dividends will be paid.

⊚ true
⊚ false

66) The date of declaration is the date the directors vote to declare and pay a dividend, which creates a legal liability of a corporation to its stockholders.

⊚ true
⊚ false

67) Participating preferred stock allows preferred stockholders to share with common stockholders any dividends paid in excess of the amount stated on the preferred stock.

⊚ true
⊚ false

68) Corporations issue preferred stock to raise money without giving up control of the corporation and/or to boost the return earned by common stockholders.

⊚ true
⊚ false

69) Treasury stock is stock that has been authorized, issued, and is outstanding.

⊚ true
⊚ false

70) Purchasing treasury stock reduces the corporation's assets and equity by unequal amounts.

⊚ true
⊚ false

71) The Paid-in Capital, Treasury Stock account can never have a debit balance.

⊚ true
⊚ false

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

⊚ true
⊚ false

73) If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock is recorded.

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
74) The costs to start a corporation, including legal fees, promoters’ fees, and payments for a charter, are called:

A) Minimum legal capital.
B) Stock subscriptions.
C) Organization expenses.
D) Selling expenses.
E) Prepaid fees.

75) The right of common stockholders to purchase their proportional share of any common stock later issued by a corporation is called the:

A) Preemptive right.
B) Proxy right.
C) Right to call.
D) Financial leverage.
E) Voting right.

76) Market value per share is:

A) The price at which a stock is bought and sold.
B) A contractual commitment by an investor to purchase unissued shares of stock.
C) Stock not assigned a value per share.
D) The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation.
E) An amount assigned to no-par stock.

77) The board of directors of a corporation:

A) Is elected by the corporate registrar.
B) Are responsible for day-to-day operations of the business.
C) Does not have the power to bind the corporation to contracts, due to lack of mutual agency.
D) May not also be executive officers of the corporation, due to the separate entity principle.
E) Is responsible for overseeing corporate activities.

78) The number of shares that a corporation's charter allows it to sell is referred to as:

A) Issued stock.
B) Outstanding stock.
C) Common stock.
D) Preferred stock.
E) Authorized stock.

79) Par value of a stock refers to the:

A) Issue price of the stock.
B) Amount assigned per share by the corporation in its charter.
C) Market value of the stock on the date of the financial statements.
D) Maximum selling price of the stock.
E) Dividend value of the stock.

80) When all authorized shares of a corporation’s stock have the same rights and characteristics, the stock is called:

A) Preferred stock.
B) Common stock.
C) Par value stock.
D) Stated value stock.
E) No-par value stock.

81) The least amount that the buyers of stock must contribute to the corporation or be at risk to pay creditors at a future date is called the:

A) Par value of preferred.
B) Minimum legal capital.
C) Premium capital.
D) Stated value.
E) Working capital.

82) The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

A) Always equal to its par value.
B) Always equal to its stated value.
C) Referred to as paid-in capital.
D) Referred to as retained earnings.
E) Always below its stated value.

83) Stated value stock is:

A) Another name for redemption value.
B) An amount assigned to par value stock by the state of incorporation.
C) The market value of the stock on the date of issuance.
D) The difference between the par value of stock and the amount below or above par value paid-in by the stockholder.
E) No-par stock that has an assigned “stated” value per share.

84) Stockholders' equity consists of which of the following?

A) Long-term assets.
B) Paid-in (or contributed) capital and retained earnings.
C) Paid-in (or contributed) capital and par value.
D) Retained earnings and cash.
E) Premiums and discounts.

85) A class of stock for which there is no minimum legal capital is called:

A) Convertible stock.
B) No-par stock.
C) Callable stock.
D) Noncumulative stock.
E) Discounted stock.

86) A registrar:

A) Assists with purchases and sales of stock shares.
B) Keeps a list of stockholders for stockholder meetings and dividend payments.
C) Establishes market value per share.
D) Is never a large bank or trust company.
E) Is none of the above.

87) Retained earnings:

A) Is the cumulative net income (and loss) not distributed as dividends to its stockholders.
B) Can only be appropriated by setting aside a cash fund.
C) Represent an amount of cash available to pay shareholders.
D) Are never adjusted for anything other than net income or dividends.
E) Represents the amount shareholders are guaranteed to receive upon company liquidation.

88) Prior period adjustments to financial statements can result from:

A) Changes in estimates of salvage value.
B) Unacceptable accounting practices.
C) Discontinued operations.
D) Changes in tax law.
E) Changes in estimates of useful life.

89) Prior period adjustments are reported in the:

A) Multiple-step income statement.
B) Balance sheet.
C) Statement of retained earnings.
D) Statement of cash flows.
E) Single-step income statement.

90) Changes in accounting estimates are:

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

91) A company had a beginning balance in retained earnings of $43,400. It had net income of $6,400 and declared and paid cash dividends of $5,725 in the current period. The ending balance in retained earnings equals:

A) $44,075.
B) $55,525.
C) $5,725.
D) $12,125.
E) $42,725.

92) A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and declared and paid cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

A) $546,250.
B) $426,250.
C) $116,250.
D) $433,750.
E) $490,000.

93) A company had a beginning balance in retained earnings of $440,000. It had net income of $70,000 and declared and paid cash dividends of $75,000 in the current period. The ending balance in retained earnings equals:

A) $585,000.
B) $445,000.
C) $435,000.
D) $515,000.
E) $370,000.

94) A company had a beginning balance in retained earnings of $400,000. It had net income of $50,000 and declared and paid cash dividends of $55,000 in the current period. The ending balance in retained earnings equals:

A) $505,000.
B) $405,000.
C) $395,000.
D) $455,000.
E) $350,000.

95) Companies report prior period adjustments, net of any income tax effects in the:

A) Statement of cash flows.
B) Balance sheet.
C) Statement of retained earnings.
D) Income statement.
E) No disclosure is required.

96) Changes in retained earnings are commonly reported in the:

A) Statement of cash flows.
B) Balance sheet.
C) Statement of stockholders' equity.
D) Multiple-step income statement.
E) Single-step income statement.

97) A company made a material error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

A) on the Year 1 statement of retained earnings.
B) on the Year 1 income statement.
C) on the Year 2 statement of retained earnings.
D) on the Year 2 income statement.
E) accounted for with a cumulative "catch-up" adjustment in Year 2.

98) The distribution of additional shares to stockholders according to their percent ownership is known as a(n):

A) Cash dividend.
B) Treasury stock buyout.
C) Stock split.
D) Cumulative dividend.
E) Participating dividend.

99) The amount of income earned per share of outstanding common stock is known as:

A) Restricted retained earnings per share.
B) Earnings per share.
C) Continuing operations per share.
D) Dividends per share.
E) Return on assets per share.

100) Mayan Company had net income of $32,980. The weighted-average common shares outstanding were 9,700. The company has no preferred stock. The company's basic earnings per share is:

A) $7.02.
B) $32.98.
C) $2.29.
D) $3.40.
E) $6.60.

101) Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company has no preferred stock. The company's basic earnings per share is:

A) $1.65.
B) $1.59.
C) $44.00.
D) $26.67.
E) $1.71.

102) Mayan Company had net income of $36,520. The weighted-average common shares outstanding were 8,800. The company declared a $3,500 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

A) $4.30.
B) $4.55.
C) $4.15.
D) $3.75.
E) $3.50.

103) Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company declared a $27,200 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

A) $1.65.
B) $1.99.
C) $1.31.
D) $0.34.
E) $4.89.

104) The price-earnings ratio is calculated by dividing:

A) Market value (price) per share by earnings per share.
B) Earnings per share by par value per share.
C) Dividends per share by earnings per share.
D) Dividends per share by market value (price) per share.
E) Market value (price) per share by dividends per share.

105) A company has net income of $950,000; its weighted-average common shares outstanding are 190,000. Its dividend per share is $0.95 and its market price per share is $98. Its price-earnings ratio equals:

A) 18.20.
B) 7.95.
C) 7.00.
D) 19.60.
E) 6.05.

106) A company has net income of $90,000; its weighted-average common shares outstanding are 18,000. Its dividend per share is $0.45 and its market price per share is $88. Its price-earnings ratio equals:

A) 9.0.
B) 17.6.
C) 12.5.
D) 15.2.
E) 16.9.

107) A company has earnings per share of $9.50. Its dividend per share is $1.10 and its market price per share is $117.80. Its price-earnings ratio equals:

A) 8.40.
B) 12.40.
C) 8.64.
D) 9.89.
E) 9.50.

108) A company has earnings per share of $9.60. Its dividend per share is $0.50 and its market price per share is $113.28. Its price-earnings ratio equals:

A) 1.15.
B) 0.85.
C) 19.20.
D) 10.00.
E) 11.80.

109) The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

A) Return on assets.
B) Dividend yield.
C) Price-earnings ratio.
D) Current yield.
E) Earnings per share.

110) The dividend yield is computed by dividing:

A) Annual cash dividends per share by earnings per share.
B) Earnings per share by cash dividends per share.
C) Annual cash dividends per share by the market value (price) per share.
D) Par value per share by cash dividends per share.
E) Cash dividends per share by retained earnings.

111) Stocks that pay large cash dividends on a regular basis are called:

A) Small capital stocks.
B) Mid capital stocks.
C) Growth stocks.
D) Large capital stocks.
E) Income stocks.

112) Stocks that pay little or no cash dividends but are attractive to investors because of expected stock price increases are known as:

A) Small capital stocks.
B) Mid capital stocks.
C) Growth stocks.
D) Large capital stocks.
E) Income stocks.

113) A company paid $0.88 in cash dividends per share. Its earnings per share is $4.60 and its market price per share is $25.00. Its dividend yield equals:

A) 3.52%.
B) 2.84%.
C) 18.40%.
D) 5.23%.
E) 19.13%.

114) A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

A) 2.4%.
B) 6.25%.
C) 6.4%.
D) 6.67%.
E) 15.00%.

115) A company paid $0.60 in cash dividends per share. Its earnings per share is $2.60, and its market price per share is $26.50. Its dividend yield equals:

A) 23.1%.
B) 9.8%.
C) 43.3%.
D) 4.3%.
E) 2.3%.

116) A company paid $0.71 in cash dividends per share. Its earnings per share is $3.50, and its market price per share is $35.50. Its dividend yield equals:

A) 2.0%.
B) 4.4%.
C) 9.9%.
D) 21.4%.
E) 24.2%.

117) National Insurance Company has 200,000 shares authorized, 180,000 shares issued, and 40,000 shares of treasury stock. The number of shares outstanding is:

A) 200,000.
B) 180,000.
C) 160,000.
D) 140,000.
E) 20,000.

118) Giannis Company has 100,000 shares of $10 par value common stock outstanding. Giannis declares a 10% stock dividend on July 1 when the stock’s market value is $40 per share. The stock dividend is distributed on July 20. The journal entry for the declaration of the stock dividend is:

A)

B)

C)

D)

E)

119) Aviation Incorporated has 140,000 shares authorized, 130,000 shares issued and no treasury stock. Determine the number of shares outstanding:

A) 140,000.
B) 130,000.
C) 10,000.
D) 0.
E) None of the above.

120) Aviation Incorporated has 125,000 shares authorized, 115,000 shares issued and no treasury stock. Determine the number of shares outstanding:

A) 125,000.
B) 115,000.
C) 10,000.
D) 0.
E) None of the above.

121) On January 1, James Incorporated had a retained earnings balance of $134,000. During the year, James reported net income of $178,000 and paid cash dividends of $58,000. Calculate the retained earnings balance at its December 31 year-end.

A) $134,000.
B) $254,000.
C) $178,000.
D) $68,000.
E) $312,000.

122) On January 1, James Incorporated had a retained earnings balance of $120,000. During the year, James reported net income of $150,000 and paid cash dividends of $51,000. Calculate the retained earnings balance at its December 31 year-end.

A) $120,000.
B) $219,000.
C) $150,000.
D) $61,000.
E) $270,000.

123) Solar Components Incorporated has 50,000 shares of $2 par value common stock outstanding. Solar Components declares a 5% stock dividend on July 1 when the stock’s market value is $12 per share. The stock dividend is distributed on July 20. The journal entry for the distribution of the stock dividend is:

A)

B)

C)

D)

E)

124) Davis Enterprises has 254,000 shares of $5 par value common stock outstanding. Davis declares a 40% stock dividend on March 2 when the stock’s market value is $66 per share. The journal entry for the declaration of the stock dividend is:

A)

B)

C)

D)

E) No journal entry is required for the declaration of a stock dividend.

125) Davis Enterprises has 250,000 shares of $5 par value common stock outstanding. Davis declares a 40% stock dividend on March 2 when the stock’s market value is $64 per share. The journal entry for the declaration of the stock dividend is:

A)

B)

C)

D)

E) No journal entry is required for the declaration of a stock dividend.

126) The Common Stock Dividend Distributable account is a(n):

A) Asset account.
B) Liability account.
C) Equity account.
D) Contra asset account.
E) Income statement account.

127) Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 320 shares to its attorneys in payment of a $5,200 charge for drawing up the articles of incorporation. The entry to record this transaction would include:

A) A debit to Organization Expenses for $3,200.
B) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,200.
C) A credit to Common Stock for $5,200.
D) A debit to Organization Expenses for $5,200.
E) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.

128) Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include:

A) A debit to Organization Expenses for $4,000.
B) A debit to Organization Expenses for $5,000.
C) A credit to Common Stock for $5,000.
D) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000.
E) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.

129) A corporation sold 18,500 shares of its $10 par value common stock at a cash price of $11 per share. The entry to record this transaction would include:

A) A debit to Cash for $185,000.
B) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $203,500.
C) A credit to Common Stock for $203,500.
D) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $388,500.
E) A credit to Common Stock for $185,000.

130) A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13 per share. The entry to record this transaction would include:

A) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $182,000.
B) A debit to Cash for $14,000.
C) A credit to Common Stock for $182,000.
D) A credit to Common Stock for $14,000.
E) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $196,000.

131) Comfort Mattresses, Incorporated 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:

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

132) A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

A) A debit to Common Stock for $12,000.
B) A debit to Land for $12,000.
C) A credit to Land for $12,000.
D) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $72,000.
E) A credit to Common Stock for $84,000.

133) A corporation issued 110 shares of its $5 par value common stock in payment of a $1,900 charge from its accountant for assistance in filing its charter with the state. The entry to record this transaction will include:

A) A $1,350 credit to Paid-in Capital in Excess of Par Value, Common Stock.
B) A $1,900 debit to Common Stock.
C) A $1,900 credit to Cash.
D) A $1,900 credit to Common Stock.
E) A $550 debit to Organization Expenses.

134) A corporation issued 100 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state. The entry to record this transaction will include:

A) A $1,800 credit to Common Stock.
B) A $300 debit to Organization Expenses.
C) A $1,300 credit to Paid-in Capital in Excess of Par Value, Common Stock.
D) A $1,800 debit to Common Stock.
E) A $1,800 credit to Cash.

135) A company issued 110 shares of $100 par value common stock for $12,000 cash. The total amount of paid-in capital is:

A) $1,000.
B) $12,000.
C) $100.
D) $11,000.
E) $1,100.

136) A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital is:

A) $100.
B) $600.
C) $1,000.
D) $6,000.
E) $7,000.

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

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

138) A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:

A) Debit Cash $2,100; credit Preferred Stock $2,100.
B) Debit Investment in Preferred Stock $2,100; credit Cash $2,100.
C) Debit Cash $4,000; credit Preferred Stock $4,000.
D) Debit Preferred Stock $2,100, debit Investment in Preferred Stock $1,900; credit Cash $4,000.
E) Debit Cash $4,000; credit Paid-in Capital in Excess of Par Value, Preferred Stock $1,900, credit Preferred Stock $2,100.

139) A company issued 260 shares of $100 par value common stock for $31,000 cash. The total amount of paid-in capital in excess of par is:

A) $100.
B) $2,600.
C) $5,000.
D) $26,000.
E) $31,000.

140) A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

A) $100.
B) $600.
C) $1,000.
D) $6,000.
E) $7,000.

141) A corporation issued 5,500 shares of $10 par value common stock in exchange for some land with a market value of $80,000. The entry to record this exchange is:

A) Debit Land $80,000; credit Common Stock $55,000; credit Paid-In Capital in Excess of Par Value, Common Stock $25,000.
B) Debit Land $80,000; credit Common Stock $80,000.
C) Debit Land $55,000; credit Common Stock $55,000.
D) Debit Common Stock $55,000; debit Paid-In Capital in Excess of Par Value, Common Stock $25,000; credit Land $80,000.
E) Debit Common Stock $80,000; credit Land $80,000.

142) A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $70,000. The entry to record this exchange is:

A) Debit Land $70,000; credit Common Stock $50,000; credit Paid-In Capital in Excess of Par Value, Common Stock $20,000.
B) Debit Land $70,000; credit Common Stock $70,000.
C) Debit Land $50,000; credit Common Stock $50,000.
D) Debit Common Stock $50,000; debit Paid-In Capital in Excess of Par Value, Common Stock $20,000; credit Land $70,000.
E) Debit Common Stock $70,000; credit Land $70,000.

143) A premium on stock:

A) Occurs when a corporation sells its stock for more than par or stated value.
B) Is the difference between par value and issue price when the amount paid is below par.
C) Represents revenue from issuing stock.
D) Is listed as a gain on the income statement.
E) Is prohibited in most states.

144) The date the directors vote to declare and pay a dividend is called the:

A) Date of stockholders' meeting.
B) Date of declaration.
C) Date of record.
D) Date of payment.
E) Liquidating date.

145) The date that identifies the stockholders to receive dividends is called the:

A) Date of stockholders’ meeting.
B) Date of declaration.
C) Date of record.
D) Date of payment.
E) Liquidating date.

146) A liability for cash dividends is recorded:

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

147) A company's board of directors votes to declare a cash dividend of $1.30 per share of common stock. The company has 26,000 shares authorized, 21,000 issued, and 20,500 shares outstanding. The total amount of the cash dividend is:

A) $53,950.
B) $33,800.
C) $26,650.
D) $27,300.
E) $32,800.

148) 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:

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

149) A corporation with $10 par common stock issues a small stock dividend. The capitalization of retained earnings is equal to:

A) The par value of the shares to be distributed.
B) The par value of the shares outstanding.
C) The market value of the shares to be distributed.
D) The market value of the shares outstanding.
E) There is no capitalization of retained earnings in the case of a small stock dividend.

150) A corporation with $10 par common stock issues a large stock dividend. The capitalization of retained earnings is equal to:

A) The par value of the shares to be distributed.
B) The par value of the shares outstanding.
C) The market value of the shares to be distributed.
D) The market value of the shares outstanding.
E) There is no capitalization of retained earnings in the case of a large stock dividend.

151) A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the declaration of the cash dividend is:

A) Debit Dividend Expense $12,000; credit Cash $12,000.
B) Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C) Debit Common Dividend Payable $12,000; credit Cash $12,000.
D) Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E) Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

152) A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the payment of the cash dividend is:

A) Debit Dividend Expense $12,000; credit Cash $12,000.
B) Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C) Debit Common Dividend Payable $12,000; credit Cash $12,000.
D) Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E) Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

153) Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 41,000 shares authorized, 21,600 shares issued, and 16,400 shares of common stock outstanding. The journal entry to record the dividend declaration is:

A) Debit Retained Earnings $8,200; credit Common Dividends Payable $8,200.
B) Debit Retained Earnings $20,500; credit Common Dividends Payable $20,500.
C) Debit Common Dividends Payable $8,200; credit Cash $8,200.
D) Debit Common Dividends Payable $10,800; credit Cash $10,800.
E) Debit Retained Earnings $10,800; credit Common Dividends Payable $10,800.

154) 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 declaration is:

A) Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.
B) Debit Common Dividends Payable $4,000; credit Cash $4,000.
C) Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.
D) Debit Common Dividends Payable $4,500; credit Cash $4,500.
E) Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

155) 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:

A) Debit Retained Earnings $4,000; credit Common Dividend Payable $4,000.
B) Debit Common Dividend Payable $4,000; credit Cash $4,000.
C) Debit Retained Earnings $4,500; credit Common Dividend Payable $4,500.
D) Debit Common Dividend Payable $4,500; credit Cash $4,500.
E) Debit Retained Earnings $10,000; credit Common Dividend Payable $10,000.

156) A corporation's distribution of additional shares of its own stock to its stockholders without any payment in return is called a:

A) Stock dividend.
B) Stock subscription.
C) Premium on stock.
D) Discount on stock.
E) Treasury stock.

157) Which of the following is true of a stock dividend?

A) It is a liability on the balance sheet.
B) The decision to declare a stock dividend resides with the shareholders.
C) Transfers a portion of equity from retained earnings to a cash reserve account.
D) Does not affect total equity, but transfers amounts between the components of equity.
E) Reduces a corporation's assets and stockholders' equity.

158) On September 1, Ziegler Corporation had 66,000 shares of $5 par value common stock, and $198,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

A) No entry is made for this transaction.
B) Debit Retained Earnings $330,000; credit Common Stock $330,000.
C) Debit Retained Earnings $990,000; credit Common Stock $990,000.
D) Debit Retained Earnings $330,000; credit Stock Split Payable $330,000.
E) Debit Retained Earnings $990,000; credit Common Stock Split Distributable $990,000.

159) On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

A) Debit Retained Earnings $750,000; credit Common Stock Split Distributable $750,000.
B) Debit Retained Earnings $750,000; credit Common Stock $750,000.
C) Debit Retained Earnings $250,000; credit Common Stock $250,000.
D) Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.
E) No entry is made for this transaction.

160) Which of the following statements regarding stock dividends is false?

A) Directors can use stock dividends to keep the market price of the stock affordable.
B) Stock dividends provide evidence of management's confidence that the company is doing well.
C) Stock dividends do not reduce assets or equity.
D) Stock dividends decrease the number of shares outstanding.
E) Stock dividends transfer a portion of equity from retained earnings to contributed capital.

161) A stock dividend is recorded with a transfer from:

A) Contributed capital to retained earnings.
B) Retained earnings to paid-in capital.
C) Retained earnings to assets.
D) Contributed capital to assets.
E) Assets to contributed capital.

162) A corporation declared and issued a 5% stock dividend on October 1. The following information was available immediately prior to the dividend:

The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

A) $(14,000).
B) $53,200.
C) $0.
D) $(53,200).
E) $14,000.

163) A corporation declared and issued a 15% stock dividend on October 1. The following information was available immediately prior to the dividend:

The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

A) $45,000.
B) $135,000.
C) $(45,000).
D) $(135,000).
E) $0.

164) Global Corporation had 49,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 5% stock dividend when the market value of each share was $26. The entry to record the dividend declaration is:

A) Debit Retained Earnings $63,700; credit Common Stock Dividend Distributable $63,700.
B) Debit Retained Earnings $63,700; credit Cash $63,700.
C) Debit Retained Earnings $49,000; credit Common Stock Dividend Distributable $49,000.
D) Debit Retained Earnings $63,700; credit Common Stock Dividend Distributable $49,000; credit Paid-In Capital in Excess of Par Value, Common Stock $14,700.
E) No entry is made until the stock is issued.

165) Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record the dividend declaration is:

A) Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000.
B) Debit Retained Earnings $135,000; credit Cash $135,000.
C) Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.
D) Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000.
E) No entry is made until the stock is issued.

166) Eastline Corporation had 18,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 6,480 shares. At the time of the stock dividend, the market value per share was $18. The entry to record the declaration of this dividend is:

A) Debit Retained Earnings $116,640; credit Common Stock Dividend Distributable $64,800; credit Paid-In Capital in Excess of Par Value, Common Stock $51,840.
B) Debit Common Stock Dividend Distributable $116,640; credit Retained Earnings $116,640.
C) No entry is needed.
D) Debit Retained Earnings $116,640; credit Common Stock Dividend Distributable $116,640.
E) Debit Retained Earnings $64,800; credit Common Stock Dividend Distributable $64,800.

167) Eastline Corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record the declaration of this dividend is:

A) Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $36,000.
B) Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $30,000; credit Paid-In Capital in Excess of Par Value, Common Stock $6,000.
C) Debit Common Stock Dividend Distributable $36,000; credit Retained Earnings $36,000.
D) Debit Retained Earnings $30,000; credit Common Stock Dividend Distributable $30,000.
E) No entry is needed.

168) Preferred stock that gives its owners the right to be paid both the current and all prior periods’ unpaid dividends before any dividend is paid to common stockholders is called:

A) Noncumulative preferred stock.
B) Participating preferred stock.
C) Callable preferred stock.
D) Cumulative preferred stock.
E) Convertible preferred stock.

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

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

170) Use of preferred stock to increase return to common stockholders is an example of:

A) Financial leverage.
B) Discount on stock.
C) Premium on stock.
D) Preemptive right.
E) Capital gain.

171) Preferred stock that limits stockholders to receiving only the stated amount as a dividend is called:

A) Cumulative preferred stock.
B) Callable preferred stock.
C) Nonparticipating preferred stock.
D) Convertible preferred stock.
E) Participating preferred stock.

172) Ultimate Sportswear has $140,000 of 6% noncumulative, nonparticipating, preferred stock outstanding. Ultimate Sportswear also has $540,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, the company paid cash dividends of $34,000. This dividend should be distributed as follows:

A) $8,500 preferred; $25,500 common.
B) $8,400 preferred; $25,600 common.
C) $17,000 preferred; $17,000 common.
D) $18,000 preferred; $16,000 common.
E) $0 preferred; $34,000 common.

173) Ultimate Sportswear has $100,000 of 8% noncumulative, nonparticipating, preferred stock outstanding. Ultimate Sportswear also has $500,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, the company paid cash dividends of $30,000. This dividend should be distributed as follows:

A) $8,000 preferred; $22,000 common.
B) $16,000 preferred; $14,000 common.
C) $7,500 preferred; $22,500 common.
D) $15,000 preferred; $15,000 common.
E) $0 preferred; $30,000 common.

174) Gracey's Department Stores has $200,000 of 6% noncumulative, nonparticipating, preferred stock outstanding. Gracey's also has $600,000 of common stock outstanding. During its first year, the company paid cash dividends of $30,000. This dividend should be distributed as follows:

A) $15,000 preferred; $15,000 common.
B) $6,000 preferred; $24,000 common.
C) $30,000 preferred; $0 common.
D) $12,000 preferred; $18,000 common.
E) $0 preferred; $30,000 common.

175) Torino Company has 1,800 shares of $10 par value, 5.0% cumulative and nonparticipating preferred stock and 18,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $500 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

A) $400.
B) $900.
C) $1,800.
D) $1,300.
E) $500.

176) Torino Company has 10,000 shares of $5 par value, 4% cumulative and nonparticipating preferred stock and 100,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $1,000 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

A) $1,000.
B) $2,000.
C) $3,000.
D) $4,000.
E) $0.

177) Preferred stock that does not have rights to prior periods’ unpaid dividends if they were not declared in those prior periods is referred to as:

A) Participating preferred stock.
B) Callable preferred stock.
C) Cumulative preferred stock.
D) Convertible preferred stock.
E) Noncumulative preferred stock.

178) A dividend preference for preferred stock means that:

A) Preferred stockholders are paid their dividends before any dividends are paid to common stockholders.
B) Preferred shareholders are guaranteed dividends.
C) Dividends are paid quarterly.
D) Common stockholders receive dividends more frequently than preferred stockholders.
E) Dividends must be declared on preferred stock.

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

A) Preferred shareholders have a guaranteed dividend.
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) The market price per share will approximate $100 per share.
E) Only 7% of the total paid-in capital can be preferred stock.

180) Stock shares that are reacquired by the issuing corporation are called:

A) Capital stock.
B) Treasury stock.
C) Redeemed stock.
D) Preferred stock.
E) Callable stock.

181) Treasury stock is classified as:

A) An asset account.
B) A contra asset account.
C) A revenue account.
D) A contra equity account.
E) A liability account.

182) The following data were reported by a corporation:

The number of outstanding shares is:

A) 34,000.
B) 52,000.
C) 39,000.
D) 21,000.
E) 26,000.

183) The following data were reported by a corporation:

The number of outstanding shares is:

A) 12,000.
B) 15,000.
C) 17,000.
D) 20,000.
E) 23,000.

184) Which of the following is not a reason that a company buys back its own stock?

A) To avoid a take-over.
B) To have shares available to acquire another company.
C) To give it to employees as compensation.
D) To maintain a strong market for their stock.
E) To allow management to assume the shares’ voting rights.

185) The following data has been collected about Keller Company's stockholders' equity accounts:

Assuming the treasury shares were all purchased at the same price, the cost per share of the treasury stock is:

A) $1.15.
B) $1.28.
C) $11.50.
D) $10.50.
E) $10.00.

186) The following data has been collected about Keller Company's stockholders' equity accounts:

Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:

A) 13,600.
B) 2,664.
C) 21,600.
D) 1,332.
E) 5,600.

187) The following data has been collected about Keller Company's stockholders' equity accounts:

Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:

A) 1,150.
B) 1,000.
C) 575.
D) 11,000.
E) 21,000.

188) Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

A) $5,050.
B) $2,600.
C) $100.
D) $1,200.
E) $0.

189) Prior to May 1, Fortune Company has never had any treasury stock transactions. The company repurchased 230 shares of its common stock on May 1 for $11,500. On July 1, it reissued 115 of these shares at $53 per share. On August 1, it reissued the remaining treasury shares at $48 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?

A) $11,615.
B) $6,095.
C) $15,410.
D) $115.
E) $0.

190) Prior to May 1, Fortune Company has never had any treasury stock transactions. The company repurchased 100 shares of its common stock on May 1 for $5,000. On July 1, it reissued 50 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?

A) $5,050.
B) $2,600.
C) $100.
D) $50.
E) $0.

191) Which of the following statements regarding Treasury Stock is false?

A) Corporations do not record gains or losses on transactions involving their own stock.
B) Treasury Stock receives cash dividends but not stock dividends.
C) Purchasing Treasury Stock reduces the corporation’s assets and equity by equal amounts.
D) Treasury Stock is presented on the balance sheet as a contra equity account.
E) Treasury Stock does not have voting rights.

192) Fetzer Company declared a $0.30 per share cash dividend. The company has 380,000 shares authorized, 361,000 shares issued, and 15,200 shares in treasury stock. The journal entry to record the dividend declaration is:

A) Debit Retained Earnings $103,740; credit Common Dividend Payable $103,740.
B) Debit Retained Earnings $108,300; credit Common Dividend Payable $108,300.
C) Debit Common Dividend Payable $108,300; credit Cash $108,300.
D) Debit Retained Earnings $114,000; credit Common Dividend Payable $114,000.
E) Debit Common Dividend Payable $103,740; credit Cash $103,740.

193) 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:

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

194) 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 dividend declaration is:

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

195) 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:

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

196) Fetzer Company declared a $0.30 per share cash dividend. The company has 180,000 shares authorized, 171,000 shares issued, and 7,200 shares in treasury stock. The journal entry to record the payment of the dividend is:

A) Debit Retained Earnings $54,000; credit Common Dividend Payable $54,000.
B) Debit Retained Earnings $49,140; credit Common Dividend Payable $49,140.
C) Debit Retained Earnings $51,300; credit Common Dividend Payable $51,300.
D) Debit Common Dividend Payable $51,300; credit Cash $51,300.
E) Debit Common Dividend Payable $49,140; credit Cash $49,140.

197) 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:

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

198) Fargo Company's outstanding stock consists of 500 shares of noncumulative 4% preferred stock with a $10 par value and 3,100 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in Year 1 is:

A) $200 preferred; $20,800 common.
B) $5,000 preferred; $16,000 common.
C) $14,4000 preferred; $6,600 common.
D) $10,500 preferred; $10,500 common.
E) $21,000 preferred; $0 common.

199) Fargo Company's outstanding stock consists of 400 shares of noncumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in Year 1 is:

A) $200 preferred; $19,800 common.
B) $4,000 preferred; $16,000 common.
C) $17,000 preferred; $3,000 common.
D) $10,000 preferred; $10,000 common.
E) $20,000 preferred; $0 common.

200) Sweet Company’s outstanding stock consists of 1,200 shares of cumulative 4% preferred stock with a $100 par value and 11,200 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in Year 3 is:

A) $4,000 preferred; $34,000 common.
B) $4,800 preferred; $33,200 common.
C) $14,400 preferred; $23,600 common.
D) $38,000 preferred; $0 common.
E) $0 preferred; $38,000 common.

201) Sweet Company’s outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in Year 3 is:

A) $7,000 preferred; $25,000 common.
B) $5,000 preferred; $27,000 common.
C) $15,000 preferred; $17,000 common.
D) $32,000 preferred; $0 common.
E) $0 preferred; $32,000 common.

202) Sweet Company’s outstanding stock consists of 1,200 shares of noncumulative 4% preferred stock with a $100 par value and 11,200 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

A) $14,400 preferred; $35,200 common.
B) $13,200 preferred; $36,400 common.
C) $4,800 preferred; $44,800 common.
D) $12,800 preferred; $36,800 common.
E) $9,600 preferred; $40,000 common.

203) Sweet Company’s outstanding stock consists of 1,000 shares of noncumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

A) $15,000 preferred; $25,000 common.
B) $11,000 preferred; $29,000 common.
C) $5,000 preferred; $35,000 common.
D) $12,000 preferred; $28,000 common.
E) $10,000 preferred; $30,000 common.

204) Sweet Company’s outstanding stock consists of 1,300 shares of cumulative 5% preferred stock with a $100 par value and 10,300 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

A) $19,500 preferred; $22,600 common.
B) $12,800 preferred; $29,300 common.
C) $6,500 preferred; $35,600 common.
D) $15,300 preferred; $26,800 common.
E) $13,000 preferred; $29,100 common.

205) Sweet Company’s outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 5,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

A) $15,000 preferred; $25,000 common.
B) $11,000 preferred; $29,000 common.
C) $5,000 preferred; $35,000 common.
D) $12,000 preferred; $28,000 common.
E) $10,000 preferred; $30,000 common.

206) Halverstein Company's outstanding stock consists of 9,450 shares of cumulative 5% preferred stock with a $10 par value and 4,050 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in Year 2 is:

A) $4,725 preferred; $3,375 common.
B) $4,050 preferred; $4,050 common.
C) $0 preferred; $8,100common.
D) $8,100 preferred; $0 common.
E) $5,670 preferred; $2,430 common.

207) Halverstein Company's outstanding stock consists of 7,000 shares of cumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in Year 2 is:

A) $6,000 preferred; $0 common.
B) $4,200 preferred; $1,800 common.
C) $3,500 preferred; $2,500 common.
D) $3,000 preferred; $3,000 common.
E) $0 preferred; $6,000 common.

208) Prior to June 30, a company has never had any treasury stock transactions. The company repurchased 100 shares of its $1 par common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the journal entry necessary to record the repurchase of stock on June 30?

A) Debit Common Stock $4,000; credit Cash $4,000.
B) Debit Common Stock $100; debit Treasury Stock $3,900; credit Cash $4,000.
C) Debit Treasury Stock $3,900; debit Paid-in Capital, Treasury Stock $100; credit Cash $4,000.
D) Debit Treasury Stock, Common $4,000; credit Cash $4,000.
E) Debit Cash $4,000; credit Treasury Stock $4,000.

209) Prior to June 30, a company has never had any treasury stock transactions. The company repurchased 100 shares of its $1 par common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the journal entry necessary to record the reissuance of treasury stock on July 20?

A) Debit Common Stock $2,300; credit Cash $2,300.
B) Debit Common Stock $20; debit Treasury Stock $2,290; credit Cash $2,300.
C) Debit Common Stock $2,300; credit Treasury Stock $2,000; credit Paid-In Capital, Treasury Stock $300.
D) Debit Cash $2,300; credit Paid-in Capital, Treasury Stock $300; credit Treasury Stock $2,000.
E) Debit Cash $2,300; credit Treasury Stock $2,300.

210) A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transaction would be:

A) Debit Cash $27,500; credit Paid-in Capital in Excess of Par Value, Common Stock $2,500; credit Common Stock $25,000.
B) Debit Cash $27,500; credit Common Stock $27,500.
C) Debit Common Stock $27,500; credit Cash $27,500.
D) Debit Treasury Stock $27,500; credit Cash $27,500.
E) Debit Treasury Stock $2,500; debit Paid-in Capital in Excess of Par Value, Treasury Stock $25,000; credit Common Stock $27,500.

211) A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:

A) Debit Cash $50,000; credit Paid-in Capital in Excess of Stated Value, Common Stock $45,000; credit Common Stock $5,000.
B) Debit Cash $50,000; credit Common Stock $50,000.
C) Debit Common Stock $50,000; credit Cash $50,000.
D) Debit Treasury Stock $50,000; credit Cash $50,000.
E) Debit Common Stock $25,000; debit Paid-in Capital in Excess of Par Value, Common Stock $5,000; credit Common Stock $45,000.

Answer Key

Test name: John Wild Ch11 Algorithmic and Static

1) TRUE

2) FALSE

3) TRUE

4) FALSE

5) TRUE

6) FALSE

7) TRUE

8) TRUE

9) TRUE

10) TRUE

11) FALSE

12) TRUE

13) FALSE

14) FALSE

15) TRUE

16) TRUE

17) TRUE

18) FALSE

19) FALSE

20) TRUE

21) TRUE

22) TRUE

23) FALSE

24) TRUE

25) TRUE

26) FALSE

27) TRUE

28) TRUE

29) TRUE

30) TRUE

31) TRUE

32) TRUE

33) FALSE

34) FALSE

35) FALSE

36) TRUE

37) TRUE

38) FALSE

39) FALSE

40) TRUE

41) TRUE

42) FALSE

43) TRUE

44) FALSE

45) TRUE

46) FALSE

47) TRUE

48) FALSE

49) TRUE

50) TRUE

51) TRUE

52) TRUE

53) FALSE

54) TRUE

55) FALSE

56) TRUE

57) TRUE

58) FALSE

59) FALSE

60) FALSE

61) TRUE

62) TRUE

63) FALSE

64) FALSE

65) TRUE

66) TRUE

67) TRUE

68) TRUE

69) FALSE

70) FALSE

71) TRUE

72) TRUE

73) FALSE

74) C

75) A

76) A

77) E

78) E

79) B

80) B

81) B

82) C

83) E

84) B

85) B

86) B

87) A

88) B

89) C

90) E

91) A

92) D

93) C

94) C

95) C

96) C

97) C

98) C

99) B

100) D

101) A

102) D

103) C

104) A

105) D

106) B

107) B

108) E

109) B

110) C

111) E

112) C

113) A

114) A

115) E

116) A

117) D

118) C

119) B

120) B

121) B

122) B

123) D

124) D

125) D

126) C

127) D

128) B

129) E

130) D

131) A

132) D

133) A

134) C

135) B

136) E

137) C

138) E

139) C

140) C

141) A

142) A

143) A

144) B

145) C

146) B

147) C

148) C

149) C

150) A

151) D

152) C

153) A

154) A

155) B

156) A

157) D

158) A

159) E

160) D

161) B

162) B

163) B

164) D

165) C

166) E

167) D

168) D

169) B

170) A

171) C

172) B

173) A

174) D

175) D

176) C

177) E

178) A

179) B

180) B

181) D

182) D

183) A

184) E

185) C

186) E

187) B

188) D

189) D

190) D

191) B

192) A

193) C

194) A

195) D

196) E

197) D

198) A

199) A

200) A

201) A

202) D

203) D

204) A

205) A

206) D

207) A

208) D

209) D

210) B

211) A