Question 1

Outstanding shares of stock are

Accepted Answer

A)   all shares that a corporation sells or transfers to stockholders.
B)   also called treasury shares.
C)   the maximum number of shares a corporation can issue.
D)   issued shares that are still in circulation.E) A) and B)
F) None of the above

Question 2

An advantage of the corporate form of business is

Accepted Answer

A)   possible lack of control by owners.
B)   possible restrictions due to lack of liability.
C)   continuous existence
D)   government regulation.E) All of the above
F) A) and B)

Question 3

Financing a business with common stock is riskier than financing it with bonds.

Accepted Answer

A) True 
 B)False

Question 4

Elmore Corporation had the following shares of stock outstanding on December 31,2013: Common stock,$250 par value,200,000 shares outstanding
Preferred stock,8 percent,$50 par value,cumulative,20,000 shares outstanding
Dividends were in arrears for 2011 and 2012.On December 31,2013,total cash dividends of $400,000 were declared.The total amounts payable to preferred stockholders and common stockholders,respectively,are

Accepted Answer

A)   $80,000 and $320,000.
B)   $240,000 and $160,000.
C)   $160,000 and $240,000.
D)   $200,000 and $200,000.E) None of the above
F) B) and C)

Question 5

On the balance sheet,treasury stock owned by the company is classified properly as

Accepted Answer

A)   contra-stockholders' equity.
B)   current assets.
C)   investments.
D)   a note to the financial statements.E) A) and D)
F) A) and C)

Question 6

In the rare instance when a par value stock is issued at a cash price below par,the excess of the par value over the amount of cash received should be

Accepted Answer

A)   credited to a liability account.
B)   debited to the Retained Earnings account.
C)   debited to an account titled Discount on Capital Stock.
D)   credited to the Retained Earnings account.E) A) and B)
F) None of the above

Question 7

For accounting purposes,stated value is treated differently than par value.

Accepted Answer

A) True 
 B)False

Question 8

Bibb Corporation had the following stock outstanding for years 2010 through 2013:
Preferred Stock-$100 par value,8 percent cumulative,10,000 shares authorized,4,000 shares issued and outstanding
Common Stock-$20 par value,10,000 shares authorized,6,000 shares issued and outstanding
Bibb paid $15,000,$30,000,$100,000,and $130,000 in cash dividends during 2010,2011,2012,and 2013,respectively.
a.Calculate the total cash dividends received by owners of preferred and common stock and the dividends in arrears in each year.
b.Now assume that the preferred stock is noncumulative rather than cumulative.Calculate the total cash dividends received by owners of preferred and common stock in each year.

Accepted Answer

a.Preferred dividends each yea...

Question 9

All of the following normally are found in a corporation's stockholders' equity section except

Accepted Answer

A)   Common Stock.
B)   Additional Paid-in Capital.
C)   Retained Earnings.
D)   Dividends in Arrears.E) A) and B)
F) A) and C)

Question 10

Chambers Corporation had the following shares of stock outstanding on December 31,2013: Common stock,$100 par value,100,000 shares outstanding
Preferred stock,8 percent,$200 par value,cumulative,10,000 shares outstanding
Dividends were in arrears for 2011 and 2012.
On December 31,2013,total cash dividends of $800,000 were declared.The total amounts payable to preferred stockholders and common stockholders,respectively,are

Accepted Answer

A)   $400,000 and $400,000.
B)   $320,000 and $480,000.
C)   $480,000 and $320,000.
D)   $160,000 and $640,000.E) All of the above
F) A) and D)

Question 11

Dividends in arrears are often disclosed in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 12

A liability arises when the board of directors declares a stock dividend.

Accepted Answer

A) True 
 B)False

Question 13

Match each definition with the correct term below.
-Stock dividend

Accepted Answer

A)  The maximum number of shares of stock that a corporation's state charter allows it to issue.
B)  A distribution among stockholders of the assets that a corporation's earnings have generated.
C)  A summary of the changes in the components of the stockholders' equity section of the balance sheet.
D)  A proportional distribution of shares among a corporation's shareholders.
E)  Stock that does not have a par value.F) Represents a company's total assets minus its liabilities.G) No-par stock that has a value assigned to it either by the board of directors or the state.H) A dividend declared by a company that is in excess of its retained earnings.I) The shares of stock that a corporation sells or otherwise transfers to stockholders.J) When a corporation increases the number of shares of stock issued and outstanding and reduces the par or stated value proportionally.K) C) and E)
L) C) and J)

Question 14

Start-up and organization costs

Accepted Answer

A)   are capitalized,but never amortized.
B)   are capitalized and amortized,usually over five years.
C)   are expensed in the year incurred.
D)   appear on the balance sheet as a current asset.E) A) and C)
F) B) and D)

Question 15

The par value of stock refers to its value on the open market.

Accepted Answer

A) True 
 B)False

Question 16

How will the declaration and distribution of a 10 percent stock dividend affect the issuing corporation's balance of retained earnings and total stockholders' equity,respectively?

Accepted Answer

A)   Decrease and no effect
B)   No effect and no effect
C)   Decrease and increase
D)   No effect and increaseE) A) and B)
F) A) and C)

Question 17

People's Electric Company omitted all its preferred stock dividends indefinitely in an effort to improve liquidity.All of the company's cumulative preferred stock was affected.According to the Wall Street Journal,"Some interpreted the drastic action as a requisite for the cash-strapped utility to secure a new credit agreement....If the credit agreement falls through,the omission of preferred-stock dividends would suggest People's Electric is perilously close to filing for bankruptcy." What is cumulative preferred stock? Why is the omission of dividends on those shares a drastic action? If new bank financing is not obtained,why would the company have to consider declaring bankruptcy?

Accepted Answer

Cumulative preferred stock is capital st...

Question 18

Beckham Corporation has 3,000 shares of $100 par value,7 percent cumulative preferred stock,and 10,000 shares of $10 par value common stock outstanding during its first five years of operation.Beckham Corporation paid cash dividends as follows: 2009,$30,000; 2010,$0; 2011,$65,000; 2012,$30,000; 2013,$15,000.The amount of dividends received by the common stockholders during 2012 was

Accepted Answer

A)   $11,000.
B)   $13,000.
C)   $9,000.
D)   $15,000.E) All of the above
F) A) and C)

Question 19

Match each definition with the correct term below.
-Stock split

Accepted Answer

A)  The maximum number of shares of stock that a corporation's state charter allows it to issue.
B)  A distribution among stockholders of the assets that a corporation's earnings have generated.
C)  A summary of the changes in the components of the stockholders' equity section of the balance sheet.
D)  A proportional distribution of shares among a corporation's shareholders.
E)  Stock that does not have a par value.F) Represents a company's total assets minus its liabilities.G) No-par stock that has a value assigned to it either by the board of directors or the state.H) A dividend declared by a company that is in excess of its retained earnings.I) The shares of stock that a corporation sells or otherwise transfers to stockholders.J) When a corporation increases the number of shares of stock issued and outstanding and reduces the par or stated value proportionally.K) B) and D)
L) A) and D)

Question 20

The entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury shares.

Accepted Answer

A) True 
 B)False

Exam 12: Stockholders Equity

Correct Answer
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a.Preferred dividends each yea...
View Answer

A liability arises when the board of directors declares a stock dividend.

Correct Answer
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Start-up and organization costs

Correct Answer
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The par value of stock refers to its value on the open market.

Correct Answer
verified

Correct Answer
verified
Cumulative preferred stock is capital st...
View Answer

The entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury shares.

Correct Answer
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Financing a business with common stock is riskier than financing it with bonds.

Correct Answer
verified

Match each definition with the correct term below. -Stock dividend

Correct Answer
verified

Correct Answer
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How will the declaration and distribution of a 10 percent stock dividend affect the issuing corporation's balance of retained earnings and total stockholders' equity,respectively?

Correct Answer
verified

Outstanding shares of stock are

Correct Answer
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An advantage of the corporate form of business is

Correct Answer
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All of the following normally are found in a corporation's stockholders' equity section except

Correct Answer
verified

Correct Answer
verified

In the rare instance when a par value stock is issued at a cash price below par,the excess of the par value over the amount of cash received should be

Correct Answer
verified

Dividends in arrears are often disclosed in the notes to the financial statements.

Correct Answer
verified

On the balance sheet,treasury stock owned by the company is classified properly as

Correct Answer
verified

Match each definition with the correct term below. -Stock split

Correct Answer
verified

Correct Answer
verified

For accounting purposes,stated value is treated differently than par value.

Correct Answer
verified

Exam 12: Stockholders Equity

Correct Answerverifieda.Preferred dividends each yea...View AnswerShow Answer

A liability arises when the board of directors declares a stock dividend.

Correct AnswerverifiedShow Answer

Start-up and organization costs

Correct AnswerverifiedShow Answer

The par value of stock refers to its value on the open market.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedCumulative preferred stock is capital st...View AnswerShow Answer

The entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury shares.

Correct AnswerverifiedShow Answer

Financing a business with common stock is riskier than financing it with bonds.

Correct AnswerverifiedShow Answer

Match each definition with the correct term below. -Stock dividend

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How will the declaration and distribution of a 10 percent stock dividend affect the issuing corporation's balance of retained earnings and total stockholders' equity,respectively?

Correct AnswerverifiedShow Answer

Outstanding shares of stock are

Correct AnswerverifiedShow Answer

An advantage of the corporate form of business is

Correct AnswerverifiedShow Answer

All of the following normally are found in a corporation's stockholders' equity section except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the rare instance when a par value stock is issued at a cash price below par,the excess of the par value over the amount of cash received should be

Correct AnswerverifiedShow Answer

Dividends in arrears are often disclosed in the notes to the financial statements.

Correct AnswerverifiedShow Answer

On the balance sheet,treasury stock owned by the company is classified properly as

Correct AnswerverifiedShow Answer

Match each definition with the correct term below. -Stock split

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For accounting purposes,stated value is treated differently than par value.

Correct AnswerverifiedShow Answer

Correct Answer
verified
a.Preferred dividends each yea...
View Answer

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Correct Answer
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Cumulative preferred stock is capital st...
View Answer

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