Question 1

The entry to record common stock issued at its par value includes a:

Accepted Answer

A)  credit to Retained Earnings.
B)  debit to Retained Earnings.
C)  credit to the Common Stock account.
D)  debit to the Common Stock account.E) A) and D)
F) All of the above

Question 2

If treasury stock is sold at a price greater than its reacquisition costs, the difference is:

Accepted Answer

A)  debited to Retained Earnings.
B)  credited to Retained Earnings.
C)  debited to Paid- in Capital from Treasury Stock Transactions.
D)  credited to Paid- in Capital from Treasury Stock Transactions.E) A) and B)
F) A) and C)

Question 3

Preferred stock appears on the balance sheet of every corporation that sells stock to the public.

Accepted Answer

A) True 
 B)False

Question 4

Paid- in capital is the amount of stockholders' equity that the:

Accepted Answer

A)  corporation has earned through profitable operations.
B)  stockholders have contributed to the corporation, less the amount of stockholders' equity that the corporation has given back to the stockholders.
C)  stockholders have contributed to the corporation, less the preferred stock.
D)  stockholders have contributed to the corporation.E) B) and C)
F) A) and B)

Question 5

The B. Spaniel Company has Common Stock with a $5 par value. 100,000 shares were authorized and 25,000 shares were issued. Common stock is currently selling at $13 per share. The entry to record the distribution of a 15% common stock dividend includes:

Accepted Answer

A)  a debit to Dividends Payable for $30,000.
B)  a debit to Retained Earnings for $48,750.
C)  a credit to Common Stock for $18,750.
D)  both a credit to Common Stock for $18,750 and debit to Retained Earnings for $48,750.E) A) and B)
F) None of the above

Question 6

The entry to record the sale of 7,000 shares of treasury stock that cost $11 per share for $13 per share includes a:

Accepted Answer

A)  credit to Paid- in Capital in Excess of Par Value-Common for $98,000.
B)  debit to Treasury stock for $24,000.
C)  credit to Paid- in Capital from Treasury Stock transactions for $14,000.
D)  debit to debit to Retained Earnings for $98,000.E) B) and C)
F) None of the above

Question 7

Monteverde Company repurchased 1,000 shares of its $5 par value common stock at $10 per share. The entry to record this transaction includes a:

Accepted Answer

A)  debit to Treasury Stock for $10,000.
B)  debit to Common Stock for $5,000.
C)  debit to Treasury Stock for $5,000.
D)  debit to Common Stock for $10,000.E) A) and C)
F) A) and D)

Question 8

A stock split increases total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

A retirement of common stock:

Accepted Answer

A)  produces a gain or loss reported on the income statement.
B)  decreases the number of shares of common stock issued and reduces the balance in the common stock account.
C)  decreases the number of shares of common stock issued.
D)  reduces the balance in the Common Stock account.E) A) and B)
F) None of the above

Question 10

The issuance of common stock in exchange for land and equipment will:

Accepted Answer

A)  affect the financing activities section of the statement of cash flows.
B)  not affect the statement of cash flows.
C)  affect the operating activities section of the statement of cash flows.
D)  affect the investing activities section of the statement of cash flows.E) B) and C)
F) None of the above

Question 11

The Floristan Company has 50,000 shares of preferred stock outstanding, with annual dividends paid at the rate of $2 per share. Floristan also has 100,000 shares of common stock outstanding. If the Floristan Company declares a $150,000 dividend, each outstanding share of common stock would receive:

Accepted Answer

A)  $2.00.
B)  $0.50.
C)  $1.50.
D)  $1.00.E) None of the above
F) A) and B)

Question 12

The rate of return on common stockholders' equity is calculated by dividing net income plus preferred dividends by average common stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 13

Stock that a corporation purchases from shareholders is called:

Accepted Answer

A)  treasury stock.
B)  authorized stock.
C)  issued stock.
D)  outstanding stock.E) B) and D)
F) None of the above

Question 14

A large stock dividend will:

Accepted Answer

A)  reduce total owners' equity.
B)  reduce total assets.
C)  increase total owners' equity.
D)  have no effect on total assets or total owners' equity.E) B) and D)
F) A) and C)

Question 15

When a company has both common stock and preferred stock, the book value per share of common stock is calculated by:

Accepted Answer

A)  dividing the amount in the common stock account by the number of shares of common stock outstanding.
B)  dividing total stockholders' equity less preferred equity by the number of shares of common stock outstanding.
C)  dividing the amount in the common stock account by the sum of the number of shares of common stock and preferred stock outstanding.
D)  dividing total stockholders' equity by the number of shares of common stock outstanding.E) C) and D)
F) A) and C)

Question 16

The rate of return on capital assets is a measure of the firm's profitability.

Accepted Answer

A) True 
 B)False

Question 17

Stock dividends:

Accepted Answer

A)  increase the total liabilities of the corporation and decrease the total stockholders' equity.
B)  are distributions of cash to the stockholders.
C)  reduce the total assets of the corporation.
D)  have no effect on total stockholders' equity.E) A) and D)
F) B) and D)

Question 18

Dividends in arrears must be paid to the holders of preferred stock before common shareholders can receive a dividend.

Accepted Answer

A) True 
 B)False

Question 19

Treasury stock accounts for the difference between:

Accepted Answer

A)  authorized shares and outstanding shares.
B)  issued shares and preferred shares.
C)  issued shares and authorized shares.
D)  outstanding shares and issued shares.E) A) and B)
F) A) and D)

Question 20

The distribution of a stock dividend may increase paid- in capital.

Accepted Answer

A) True 
 B)False

Exam 9: Stockholders Equity

Stock dividends:

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When a company has both common stock and preferred stock, the book value per share of common stock is calculated by:

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Stock that a corporation purchases from shareholders is called:

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Preferred stock appears on the balance sheet of every corporation that sells stock to the public.

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The rate of return on capital assets is a measure of the firm's profitability.

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The issuance of common stock in exchange for land and equipment will:

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The rate of return on common stockholders' equity is calculated by dividing net income plus preferred dividends by average common stockholders' equity.

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A retirement of common stock:

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The entry to record the sale of 7,000 shares of treasury stock that cost $11 per share for $13 per share includes a:

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Monteverde Company repurchased 1,000 shares of its $5 par value common stock at $10 per share. The entry to record this transaction includes a:

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Treasury stock accounts for the difference between:

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The Floristan Company has 50,000 shares of preferred stock outstanding, with annual dividends paid at the rate of $2 per share. Floristan also has 100,000 shares of common stock outstanding. If the Floristan Company declares a $150,000 dividend, each outstanding share of common stock would receive:

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The entry to record common stock issued at its par value includes a:

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The B. Spaniel Company has Common Stock with a $5 par value. 100,000 shares were authorized and 25,000 shares were issued. Common stock is currently selling at $13 per share. The entry to record the distribution of a 15% common stock dividend includes:

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Paid- in capital is the amount of stockholders' equity that the:

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The distribution of a stock dividend may increase paid- in capital.

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A large stock dividend will:

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Dividends in arrears must be paid to the holders of preferred stock before common shareholders can receive a dividend.

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If treasury stock is sold at a price greater than its reacquisition costs, the difference is:

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A stock split increases total stockholders' equity.

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