Chapter 14

Question 0

The primary purpose of a stock split

Answer 0

To reduce the market price of the stock per share

Question 1

The date on which a cash dividend becomes a binding legal obligation is

Answer 1

Declaration Date

Question 2

Treasury stock should be reported in the financial statements of a corporation as a(n)

Answer 2

Deduction from total paid-in capital and retained earnings

Question 3

A disadvantage of the corporate form of business entity is

Answer 3

Corporations are subject to more governmental obligations

Question 4

Under the corporate form of business organization

Answer 4

Ownership rights are easily transferred

Question 5

Stockholders’ equity

Answer 5

Includes retained earnings and paid-in capital

Question 6

Rights posessed by common stockholders of a corporation

Answer 6

Right to vote in the election of the board of directors, right to sell their stock to anyone they choose, the right to share in assets upon liquidation

Question 7

Common Stock, Paid-in Capital in Excess of Par, Retained Earnings

Answer 7

Found in the Stockholders’ Equity section of the balance sheet

Question 8

Where is Treasury Stock reported

Answer 8

Stockholders’ equity section of balance sheet

Question 9

The entry to record the issuance of shares of stock at par to an attorney in payment of legal fees for organizing the corporation includes

Answer 9

Debit - Organization Costs

Credit - Common Stock

Question 10

Under this form of business organization ownership rights are easilty transferred

Answer 10

Corporation

Question 11

The ability of a corporation to obtain capital is

Answer 11

Enhanced because of limited liability and ease of share transferability

Question 12

Premium

Answer 12

The excess of issue price over par of common stock

Question 13

The debit balance in the retained earnings account of a corporation

Answer 13

Deficit

Question 14

Investors who are most interested in the dividend yield arethose who invest for

Answer 14

Current market flow

Question 15

Dividend yield is most often computed on

Answer 15

Common Stock

Question 16

You have 5,000 shares of 5%, $100 par value, cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding. What is the annual dividend on the preferred stock?

Answer 16

$25,000

Question 17

A corporation has 40,000 shares of $20 par value stock outstanding. If the corporation issues a 5 for 1 stock splki, the par value of the stock will be

Answer 17

$4.00

Question 18

A corporation issues 1,000 shares of common stock for $30,000. The stock has a stated value of $10 per share. The journal entry to record the stock issue would include a credit to Common Stock for

Answer 18

$10,000

Question 19

The journal entry to issue 1,000,000 shares of $5 par common stock for $7.00 per share would be

Answer 19

Cash $7,000,000
Common Stock $5,000,000
PIC > Par - CS 2,000,000

Question 20

Error in the computation of depreciation expense in the preceding year

Answer 20

Prior period adjustment

Question 21

Paid - in Capital from Sale of Treasury Stock

Answer 21

The excess of cost over sales price of treasury stock

Question 22

If the board of directors authorizes a restriction of retained earnings for a future plant expansion the effect of this action is to

Answer 22

Reduce the amount of retained earnings available for divident declarations

Question 23

Your company had 30,000 shares of $10 par valkue common stock issued and outstanding. All shares had been issued in a prior period at $20 per share. In February your company purchased 2,000 shares of treasury stock for $20 per share and later sold the treasury shares and later sold the treasury shares for $22 per share. The journal entry to record the purchase of the treasury stock shares includes a debit to

Answer 23

Treasury Stock for $40,000

Question 24

What is not a reason for a corporation to buy back its own stock

Answer 24

To increase outstanding shares

Question 25

Double taxation

Answer 25

A disadvantage of corporations

Question 26

Where is the authorized stock of a corporation indicated

Answer 26

Charter

Question 27

A stock split

Answer 27

decreases the market price per share, decreases par value per share

Question 28

Authorized stock

Answer 28

The amount of shares of stock that a corporation is allowed to issue

Question 29

How do we determine the total stocdkholders’ equity

Answer 29

Add: Common Stock, PIC > Par + Retained Earnings - Treasury Stock

Question 30

If your corpoiration has 25,000 shars of stock and issues a 4:1 stock split how many shares of stock are outstanding after the split?

Answer 30

100,000

Question 31

When a stock dividend is declared we credit

Answer 31

Stock Dividends Distributable

Question 32

What form of business gives shareholders limited liability

Answer 32

Corporation

Question 33

What is not a prerequisite to paying a cash dividend?

Answer 33

Market value in excess of par value

Question 34

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

Answer 34

Cash

Question 35

What is not true about a stock split

Answer 35

Total contributed capital increases

Question 36

Retained earnings statement

Answer 36

Where changes are summarized for retained earnings

Question 37

Board of Directors

Answer 37

Those most responsible for th emajor policy decisions of a corporation

Question 38

Declaration of Cash Dividends

Answer 38

Cash Dividends

Cash Dividends Payable

Question 39

Debit Stock Dividends Distributable

Answer 39

To record the issuance of stock certificates for common stock dividend

Question 40

Paid-in Capital in Excess of Par

Answer 40

Stock is issued for an amount greater than par value

Question 41

What types of taxes do corporations pay

Answer 41

Federal and state income taxes

Question 42

Par value

Answer 42

The monetary value assigned per share in the corporate charter

Question 43

Reported in the Paid-in Capital/Stockholders’ Equity section of the Corporate Balance Sheet

Answer 43

Preferred Stock

Question 44

Has no effect on total retained earnings

Answer 44

Restriction/Appropriation of retained earnings

Question 45

Decreases stockholders’ equity

Answer 45

Treasury Stock

Question 46

Disadvantage of corporate form of organization

Answer 46

Governmental regulation

Question 47

Significant changes in stockholders’ equity are reported in

Answer 47

Statement of stockholders’ equity

Question 48

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

Answer 48

Fair market value of asset acquired or of the stock whichever can be determined more objectively

Question 49

A corporation issues 50,000 shares of common stock. 22,500 shars were originally issued and 2,500 were subsequently reacquired. What is the number of shares outstanding?

Answer 49

20,000