Question 1

Hsu, Inc.issued 10,000 shares of stock at a stated value of $8/share.The total issue of stock sold for $15 per share.The journal entry to record this transaction would include a

Accepted Answer

The correct entry includes a credit to Common Stock for $80,000, which is calculated by multiplying the number of shares (10,000) by the stated value per share ($8). This represents the par value of the shares issued.

Question 2

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share.The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Accepted Answer

The answer of The Northern Corporation issues 7,000 shares of...

Question 3

The acquisition of treasury stock by a corporation

Accepted Answer

When a corporation acquires treasury stock, it is essentially buying back its own stock from the market. This decreases the total number of outstanding shares and therefore decreases the total stockholders' equity. The purchase is paid for using the corporation's assets, which also decreases the total assets. Therefore, the correct answer is B - the acquisition of treasury stock by a corporation decreases its total assets and total stockholders' equity.

Question 4

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

Accepted Answer

The declaration of a cash dividend will decrease the retained earnings section of the stockholders' equity portion of the balance sheet (Choice B), as dividends are a distribution of profits to shareholders. The other sections of the balance sheet such as assets, liabilities, and contributed capital are not directly affected by the declaration of a cash dividend.

Question 5

Cork Inc.declared a $160,000 cash dividend.It currently has 6,000 shares of 6%, $100 par value cumulative preferred stock outstanding.It is one year in arrears on its preferred stock.How much cash will Cork distribute to the common stockholders?

Accepted Answer

Cork Inc. has 6,000 shares of 6%, $100 par value cumulative preferred stock outstanding. This means that the company must pay $36,000 in dividends to the preferred stockholders before it can pay any dividends to the common stockholders. Since the company is one year in arrears on its preferred stock, it must pay $72,000 in dividends to the preferred stockholders before it can pay any dividends to the common stockholders. This leaves $88,000 available for distribution to the common stockholders.

Question 6

The effect of a stock dividend is to

Accepted Answer

A stock dividend does not change the total assets or total liabilities of a company. Instead, it changes the composition of stockholders' equity by transferring a portion of retained earnings to the common stock account. This results in an increase in the number of shares outstanding and a decrease in the earnings per share, but the book value per share of common stock remains the same.

Question 7

Moore, Inc.had 250,000 shares of common stock outstanding before a stock split occurred, and 1,000,000 shares outstanding after the stock split.The stock split was

Accepted Answer

A 4-for-1 stock split would result in the number of outstanding shares increasing by four times (from 250,000 to 1,000,000).

Question 8

Assume that all balance sheet amounts for Marley Company represent average balance figures.  What is the return on common stockholders' equity for Marley?

Accepted Answer

The answer of Assume that all balance sheet amounts for...

Question 9

A corporation acts under its own name rather than in the name of its stockholders.

Accepted Answer

A corporation is a legal entity separate from its stockholders, and therefore acts under its own name in conducting business activities.

Question 10

The number of common shares outstanding can never be greater than the number of shares issued.

Accepted Answer

This is because all issued shares become outstanding shares unless they have been repurchased by the company as treasury shares or cancelled. Therefore, the number of common shares outstanding can never exceed the number of shares originally issued.

Question 11

A retained earnings statement shows the same information as a corporation income statement.

Accepted Answer

A retained earnings statement shows the change in retained earnings over a period of time, while an income statement shows revenues, expenses, and net income. While there may be some overlap in the information presented on both statements, they are not the same thing.

Question 12

Which one of the following is a privately held corporation?

Accepted Answer

Cargill Inc. is a privately held corporation, meaning it is owned by a relatively small group of individuals or entities, and its stock is not publicly traded on a stock exchange. Intel, General Electric, and Caterpillar Inc. are all publicly traded corporations.

Question 13

The officer who is generally responsible for maintaining the cash position of the corporation is the

Accepted Answer

The treasurer is generally responsible for maintaining the cash position of the corporation. The controller is responsible for financial planning and record-keeping, the cashier is responsible for physical handling of cash and internal auditor is responsible for ensuring compliance and identifying areas of improvement in financial operations.

Question 14

When stock is issued for legal services, the transaction is recorded by debiting Organization Expense for the

Accepted Answer

When stock is issued for legal services, the transaction is recorded by debiting Organization Expense for the market value of the stock. This is because the market value represents the fair value of the services received.

Question 15

S.Lamar performed legal services for E.Garr.Due to a cash shortage, an agreement was reached whereby E.Garr would pay S.Lamar a legal fee of approximately $12,000 by issuing 3,000 shares of its common stock (par $1).The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.50 per share.Given this information, the journal entry for E.Garr.to record this transaction is:

Accepted Answer

The answer of S.Lamar performed legal services for E.Garr.Due to...

Question 16

Accounting for treasury stock is done by the

Accepted Answer

Accounting for treasury stock is typically done using the cost method, which involves recording the treasury stock at the cost at which it was repurchased. This cost is then subtracted from the company's total equity to reflect the reduction in shares outstanding. The FIFO, LIFO, and lower of cost or market methods are not typically used to account for treasury stock.

Question 17

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

Accepted Answer

Treasury stock represents shares of a corporation's own issued common or preferred stock that are repurchased and held by the corporation. The cost of the treasury stock is deducted from both the total paid-in capital and retained earnings sections of stockholders' equity in the financial statements. This reduces the total amount of equity reported on the balance sheet. Therefore, the correct option is D, i.e., Treasury stock should be reported in the financial statements of a corporation as a deduction from total paid-in capital and retained earnings. Neither A nor B is correct as treasury stock is not an investment asset nor is it a liability. Option C is incorrect since treasury stock is not reported as a deduction from total paid-in capital alone.

Question 18

Which of the following statements about dividends is not accurate?

Accepted Answer

The board of directors is not obligated to declare dividends. It is ultimately their decision whether or not to distribute dividends to shareholders, and they must consider various factors such as the company's financial health and future growth opportunities before making a decision.

Question 19

Land, Inc.has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 300,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share.If Land declares a 10% stock dividend on its common stock

Accepted Answer

A 10% stock dividend means 30,000 new shares (10% of 300,000) will be issued. The market value of these shares is $30 each, totaling $900,000. Retained earnings decrease by $900,000, and total paid-in capital increases by the same amount, keeping total stockholders' equity unchanged.

Question 20

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Accepted Answer

When a corporation declares a stock dividend, it debits the Stock Dividends account, which represents the value of the dividend declared. This account is used to record the distribution of additional shares to shareholders, rather than affecting the Common Stock account directly at the time of declaration.

Quiz 11: Corporations: Organisations, Stock Transactions and Stockholders Equity