ACC 112 - Chapters 11 & 14 Exam

Question 1

One of the main disadvantages of the corporate form is the:

Answer 1

Double taxation of dividends

Question 2

The state charter allows a corporation to issue only a certain number of shares of each class of stocks. This amount of stock is called:

Answer 2

Authorized Stock

Question 3

If preferred stock has dividends in arrears, the preferred stock must be:

Answer 3

Cumulative

Question 4

The outstanding stock is composed of 10,000 shares of $100 par, cumulative preferred 5% stck, and 50,000 shares of $20 par common stock. Preferred stock dividends have been paid every year except for the preceding two years and the current year. If $145,000 is able to be distributed as a dividend for the current year, what total amount will be distributed to the preferred stockholders?

Answer 4

$145,000

Question 5

The par value per share of common stock represents:

Answer 5

An arbitrary amount established in the articles of incorporation

Question 6

A corporation issues 2,000 shares of common stock for $32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for:

Answer 6

$20,000

Question 7

The excess of issue price over par of common stock is termed a(n):

Answer 7

Premium

Question 8

The entry to record the issuance of common stock at a price above par includes a debit to:

Answer 8

Cash

Question 9

When common stock is issued in exchange for a non cash asset, the transaction should be recorded at:

Answer 9

The fair market value of the asset acquired or the fair market value of the stock, whichever can be determined more objectively

Question 10

Hurd Company acquired a building valued at $160,000 for property tax purposes in exchange for 10,000 shares of its $5 par common stock. The stock is widely traded and selling for $15 per share. At what amount should the building be recorded by Hurd Company?

Answer 10

$150,000

Question 11

How is treasury stock shown on the balance sheet?

Answer 11

A decrease in Stockholder’s Equity

Question 12

What is the total stockholders’ equity based on the following data?
Common Stock $800,000
Excess of Issue Price over Par $375,000
Retained Earnings (deficit) $50,000

Answer 12

$1,125,000

Question 13

The excess of sales price of treasury stick over its cost should be credited to:

Answer 13

Paid-In-Capital from Sale of Treasury Stock

Question 14

A corporation purchases 10,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders’ equity?

Answer 14

decrease, $250,000

Question 15

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 50,000 shares were originally issued and 5,000 subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?

Answer 15

$45,000

Question 16

A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

Answer 16

$8,800

Question 17

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 a share. The effect of the declaration and issuance of the stock dividend is to:

Answer 17

Decrease Retained Earnings, Increase Common Stock, and Increase Paid-In Capital

Question 18

Which of the following is not a prerequisite to paying a cash dividend?

Answer 18

Market value in excess of par value per share

Question 19

The net effect to a corporation of the declaration and payment of a cash dividend is to:

Answer 19

Decrease Assets and Increase Stockholders’ Equity

Question 20

The liability for a dividend is recorded on which of the following date?

Answer 20

The date of Declaration

Question 21

When a stock dividend is declared, which of the following accounts is credited?

Answer 21

Stock Dividend Distributable

Question 22

The entry to record the issuance of stock certificates for a common stock dividend that had been declared would include a debit to:

Answer 22

Stock Dividends Distributable

Question 23

Significant changes in stockholders’ equity are reported in:

Answer 23

Statement of Stockholders’ Equity

Question 24

Retained earnings:

Answer 24

Changes are are summarized in the Retained Earnings Statement

Question 25

A restriction/appropriation of retained earnings:

Answer 25

Has no effect on total retained earnings

Question 26

The Rand Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.

Answer 26

$29,000

Question 27

The statement of cash flows reports:

Answer 27

Cash flows from operating activities

Question 28

On the statement of cash flows, the cash flows from operating activities section would include:

Answer 28

Cash receipts from sales activities

Question 29

Preferred stock issued in exchange for land would be reported in the statement of cash flows in:

Answer 29

A separate schedule

Question 30

Cash paid to purchase long-term investments would be reported in the statement of cash flows in:

Answer 30

The cash flows from investing activities section

Question 31

Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?

Answer 31

Issuance of long-term debt

Question 32

A ten-year bond was issued at par for $150,000 cash. This transaction should be shown on a statement of cash flows under:

Answer 32

Financing activities

Question 33

Cash paid for preferred stock dividends should be shown on the statement of cash flows under:

Answer 33

Financing activities

Question 34

Which of the following is a noncash investing and financing activity?

Answer 34

Issuance of common stock to acquire land

Question 35

A company purchases equipment for $29,000 cash. This transaction should be shown on the statement of cash flows under:

Answer 35

Investing activities

Question 36

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in:

Answer 36

The cash flows from operating activities section

Question 37

Which of the following should be deducted to net income in calculating net cash flows from operating activities using the indirect method?

Answer 37

A decrease to Accounts Receivables

Question 38

Which of the following should be deducted from net income in calculating net cash flows from operating activities using the indirect method?

Answer 38

Depreciation Expnse

Question 39

Which of the following below increases cash?

Answer 39

Borrowing money by issuing a six-month note

Question 40

Which one of the following below should be added to net income in calculating net cash flow from operating activities using the indirect method?

Answer 40

A decrease in Accounts Payable

Question 41

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:

Answer 41

Deducted from net income in converting the net income reported on the income statement to cash flows from operating activities

Question 42

On the statement of cash flows, the cash flows from investing activities section would include:

Answer 42

Receipts from the sale of investments

Question 43

A building with the book value of $45,000 is sold for $50,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as follows:

Answer 43

An increase of $50,000 and a deduction from net income of $5,000

Question 44

Cash paid for equipment would be reported in the statement of cash flows in:

Answer 44

the cash flows from investing activities section

Question 45

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

Answer 45

Purchase of concurrent assets

Question 46

Land costing $47,000 was sold for $78,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Answer 46

$78,000

Question 47

On the statement of cash flows, the cash flows from financing activities section would include:

Answer 47

Receipts from the issuance of capital stock

Question 48

On the statement of cash flows, the cash flows from financing activities section would include all of the following except:

Answer 48

Payments of interest on bonds payable

Question 49

Cash dividends paid on capital stock would be reported in the statement of cash flows in:

Answer 49

The cash flows from financing activities section

Question 50

The current period statement of cash flows includes the following:
Cash balance at the beginning of the period…$410,000
Cash provided by operating activities…185,000
Cash used in investing activities…43,000
Cash used in financing activities…97,000
The cash balance at the end of the period is:

Answer 50

$455,000