Question 1

When retained earnings are restricted, total retained earnings

Accepted Answer

A)  are unaffected.
B)  increase.
C)  decrease.
D)  may increase or decrease.

Question 2

Which one of the following is not necessary in order for a corporation to pay a cash dividend?

Accepted Answer

A)  Adequate cash.
B)  Approval of stockholders.
C)  Declared dividends.
D)  Retained earnings.

Question 3

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Accepted Answer

A)  Additional taxes.
B)  Government regulations.
C)  Limited liability of stockholders.
D)  Separation of ownership and management.

Question 4

A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

Accepted Answer

A) True 
 B)False

Question 5

Paid-in Capital in Excess of Par Value

Accepted Answer

A)  is credited when no-par stock does not have a stated value.
B)  is reported as part of paid-in capital on the balance sheet.
C)  represents the amount of legal capital.
D)  normally has a debit balance.

Question 6

Treasury stock is

Accepted Answer

A)  stock issued by the U.S.Treasury Department.
B)  stock purchased by a corporation and held as an investment in its treasury.
C)  corporate stock issued by the treasurer of a company.
D)  a corporation's own stock, which has been reacquired and held for future use.

Question 7

The net effects on the corporation of the declaration and payment of a cash dividend are to

Accepted Answer

A)  decrease liabilities and decrease stockholders' equity.
B)  increase stockholders' equity and decrease liabilities.
C)  decrease assets and decrease stockholders' equity.
D)  increase assets and increase stockholders' equity.

Question 8

The per share amount normally assigned by the board of directors to a small stock dividend is

Accepted Answer

A)  the market value of the stock on the date of declaration.
B)  the average price paid by stockholders on outstanding shares.
C)  the par or stated value of the stock.
D)  zero.

Question 9

Which of the following is not true of a corporation?

Accepted Answer

A)  It may buy, own, and sell property.
B)  It may sue and be sued.
C)  The acts of its owners bind the corporation.
D)  It may enter into binding legal contracts in its own name.

Question 10

Stockholders of a corporation directly elect

Accepted Answer

A)  the president of the corporation.
B)  the board of directors.
C)  the treasurer of the corporation.
D)  all of the employees of the corporation.

Question 11

The declaration of a small stock dividend will

Accepted Answer

A)  increase paid-in capital.
B)  change the total of stockholders' equity.
C)  increase total liabilities.
D)  increase total assets.

Question 12

Which of the following statements about treasury stock is true?

Accepted Answer

A)  Few corporations have treasury stock.
B)  Purchasing treasury stock is done to eliminate hostile shareholder buyouts.
C)  Companies acquire treasury stock to increase the number of shares outstanding.
D)  Companies acquire treasury stock to decrease earnings per share.

Question 13

The ability of a corporation to obtain capital is

Accepted Answer

A)  enhanced because of limited liability and ease of share transferability.
B)  less than a partnership.
C)  restricted because of the limited life of the corporation.
D)  about the same as a partnership.

Question 14

Freidrichs Company has issued and outstanding 11,000 shares of cumulative, 6%, €50 par value preference shares which it sold for €54 per share at the beginning of 2015. The company has never paid preference dividends. As of December 31, 2017, dividends in arrears are

Accepted Answer

A)  €66,000.
B)  €99,000.
C)  €121,500.
D)  €106,920.

Question 15

Which of the following is not a right or preference associated with preferred stock?

Accepted Answer

A)  The right to vote.
B)  First claim to dividends.
C)  Preference to corporate assets in case of liquidation.
D)  To receive dividends in arrears before common stockholders receive dividends.

Question 16

The term legal capital is a descriptive term for

Accepted Answer

A)  stockholders' equity.
B)  par value.
C)  residual equity.
D)  market value.

Question 17

Jahnke Corporation issued 8,000 shares of €2 par value ordinary shares for €11 per share. The journal entry to record the sale will include

Accepted Answer

A)  a debit to Cash for €16,000.
B)  a credit to Share Premium-Ordinary for €72,000.
C)  a credit to Share Capital-Ordinary for €88,000.
D)  a debit to Retained Earnings for €72,000.

Question 18

Nice Corporation issues 40,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $4,400,000 and a credit or credits to

Accepted Answer

A)  Preferred Stock for $4,400,000.
B)  Preferred Stock for $4,000,000 and Paid-in Capital in Excess of Par Value-Preferred Stock for $400,000.
C)  Preferred Stock for $4,000,000 and Retained Earnings for $300,000.
D)  Paid-in Capital from Preferred Stock for $4,400,000.

Question 19

A corporate board of directors does not generally

Accepted Answer

A)  select officers.
B)  formulate operating policies.
C)  declare dividends.
D)  execute policy.

Question 20

Racer Corporation's December 31, 2017 balance sheet showed the following:  Racer's total stockholders' equity was

Accepted Answer

A)  $76,620,000.
B)  $63,580,000.
C)  $75,780,000.
D)  $74,940,000.

Exam 10: Reporting and Analyzing Stockholders Equity

The per share amount normally assigned by the board of directors to a small stock dividend is

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A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

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Stockholders of a corporation directly elect

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The term legal capital is a descriptive term for

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When retained earnings are restricted, total retained earnings

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Which of the following statements is not considered a disadvantage of the corporate form of organization?

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The ability of a corporation to obtain capital is

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Racer Corporation's December 31, 2017 balance sheet showed the following: Racer's total stockholders' equity was

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A corporate board of directors does not generally

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The net effects on the corporation of the declaration and payment of a cash dividend are to

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Nice Corporation issues 40,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $4,400,000 and a credit or credits to

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The declaration of a small stock dividend will

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Treasury stock is

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Jahnke Corporation issued 8,000 shares of €2 par value ordinary shares for €11 per share. The journal entry to record the sale will include

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Which one of the following is not necessary in order for a corporation to pay a cash dividend?

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Freidrichs Company has issued and outstanding 11,000 shares of cumulative, 6%, €50 par value preference shares which it sold for €54 per share at the beginning of 2015. The company has never paid preference dividends. As of December 31, 2017, dividends in arrears are

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Paid-in Capital in Excess of Par Value

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Which of the following statements about treasury stock is true?

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Which of the following is not true of a corporation?

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Which of the following is not a right or preference associated with preferred stock?

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