Question 1

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1.Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27.The entry to record this dividend is:
A) 
B) 
C) 
D) 
E)No entry is made until the stock is issued

Accepted Answer

The answer of A corporation had 50,000 shares of $20...

Question 2

A corporation had 20,000 shares of $10 par value common stock outstanding on January 10.Later that day the board of directors declared a 30% stock dividend when the market value of each share was $40.The entry to record this dividend is:
A) 
B) 
C) 
D) 
E)No entry is made until the stock is issued

Accepted Answer

The answer of A corporation had 20,000 shares of $10...

Question 3

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:
A)Cumulative preferred stock
B)Callable preferred stock
C)Participating preferred stock
D)Convertible preferred stock
E)Preferential preferred stock

Accepted Answer

This type of preferred stock is called participating preferred stock because it allows the holders to participate in excess dividends. Cumulative preferred stock refers to a feature of preferred stock where missed dividends must be paid before any dividends are paid to common stockholders. Callable preferred stock can be redeemed by the issuer at a predetermined price. Convertible preferred stock can be converted into common stock. Preferential preferred stock is not a recognized term in finance.

Question 4

A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of paid-in capital in excess of par is:
A)$100
B)$600
C)$1,000
D)$6,000
E)$7,000

Accepted Answer

The answer of A company issued 60 shares of $100...

Question 5

A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $60,000.The entry to record this exchange is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of A corporation issued 5,000 shares of $10...

Question 6

A liquidating dividend is:
A)Only declared when a corporation closes down.
B)A return of a part of the original investment back to the stockholders.
C)Not allowed under federal law.
D)Only paid in assets other than cash.
E)Only paid in shares of stock.

Accepted Answer

A liquidating dividend is a distribution of the corporation's assets to stockholders after all debts and liabilities have been paid. It is a return of a portion of the original investment back to the stockholders. This typically happens when a corporation is closing down or when it has excess cash that it cannot invest profitably back into the business. It is allowed under federal law and can be paid in cash or other assets.

Question 7

A company's board of directors votes to declare a cash dividend of $0.75 per share.The company has 15,000 shares authorized,10,000 issued,and 9,500 shares outstanding.The total amount of the cash dividend is:
A)$375
B)$4,125
C)$7,125
D)$7,500
E)$11,250

Accepted Answer

The total amount of the cash dividend can be calculated by multiplying the dividend per share by the number of outstanding shares. 
Dividend amount = $0.75 x 9,500 = $7,125. 
Therefore, the correct answer is (C) $7,125.

Question 8

A corporation declared and issued a 15% stock dividend on November 1.The following up-to-date information was available immediately prior to the dividend:  The amount that total stockholders' equity will increase (decrease) as a result of recording this stock dividend is:
A)$45,000
B)$135,000
C)$(90,000)
D)$(135,000)
E)$0

Accepted Answer

The answer of A corporation declared and issued a 15%...

Question 9

A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:
A)Stock dividend
B)Stock subscription
C)Premium on stock
D)Discount on stock
E)Treasury stock

Accepted Answer

A distribution of additional shares to stockholders without payment is called a stock dividend. Stock subscription refers to the purchase of new shares, premium on stock is the amount paid above the face value of a stock, discount on stock is a reduction in the price of a stock, and treasury stock is stock that a corporation has repurchased from the public.

Question 10

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:
A)Financial leverage
B)Discount on stock
C)Premium on stock
D)Preemptive right
E)Capital gain

Accepted Answer

This is an example of financial leverage, where the company is using borrowed funds (in the form of preferred stock) at a lower rate of return than what they are earning on their investments, in order to increase their return on common stock. By doing this, the company is able to generate more earnings for their common shareholders without having to issue more common stock or take on additional debt.

Question 11

Xtreme Sports has $100,000 par,8% noncumulative,nonparticipating,preferred stock outstanding.Xtreme Sports also has $500,000 par common stock outstanding.In the company's first year of operation,no dividends were paid.During the second year,Xtreme Sports paid cash dividends of $30,000.This dividend should be distributed as follows:
A)$8,000 preferred; $22,000 common.
B)$16,000 preferred; $14,000 common.
C)$7,500 preferred; $22,500 common.
D)$15,000 preferred; $15,000 common.
E)$0 preferred; $30,000 common.

Accepted Answer

The preferred stock is noncumulative, so only the current year's dividend of 8% on $100,000, which is $8,000, is paid to preferred shareholders. The remaining $22,000 goes to common shareholders.

Question 12

A stock dividend transfers:
A)Contributed capital to retained earnings.
B)Retained earnings to contributed capital.
C)Retained earnings to assets.
D)Contributed capital to assets.
E)Assets to contributed capital.

Accepted Answer

A stock dividend increases the number of shares outstanding, but does not change the total amount of the company's retained earnings. Therefore, the retained earnings are transferred to the contributed capital account.

Question 13

A corporation had 40,000 shares of $10 par value common stock outstanding on August 1.Later that day,the board of directors declared a 9% stock dividend when the market value of each share was $72.The entry to record this dividend is:
A) 
B) 
C) 
D) 
E)No entry is made until the stock is issued

Accepted Answer

The answer of A corporation had 40,000 shares of $10...

Question 14

Assume Garrison Guitar Company declared a $0.28 per share cash dividend and that the company has 25,000 shares authorized,19,000 shares issued,and 12,000 shares of common stock outstanding.The general journal entry to record the dividend declaration is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of Assume Garrison Guitar Company declared a $0.28...

Question 15

A premium on common stock:
A)Is the amount paid in excess of par by purchasers of newly issued stock.
B)Is the difference between par value and issue price when the amount paid is below par
C)Represents profit from issuing stock.
D)Represents capital gain on sale of stock.
E)Is prohibited in most states.

Accepted Answer

A premium on common stock is the amount paid in excess of the par value by purchasers of newly issued stock. It reflects the perceived value or attractiveness of the company, and investors are willing to pay a premium to own a part of it.

Question 16

Preferred stock that the issuing corporation at its option may retire by paying a specified amount to the preferred stockholders plus any dividends in arrears is called:
A)Convertible preferred stock
B)Callable preferred stock
C)Premium stock
D)Cumulative preferred stock
E)Participating preferred stock

Accepted Answer

Callable preferred stock is preferred stock that can be redeemed by the issuing corporation at a predetermined price at its option. This means that the corporation has the right to buy back the stock from the preferred stockholders, usually at a premium price. This gives the corporation flexibility in managing its capital structure and allows it to reduce its debt levels.

Question 17

A company declared a $0.50 per share cash dividend.The company has 20,000 shares authorized,9,000 shares issued,and 8,000 shares of common stock outstanding.The journal entry to record the dividend declaration is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of A company declared a $0.50 per share...

Question 18

The date the board of directors votes to pay a dividend is called the:
A)Date of stockholders' meeting
B)Date of declaration
C)Date of record
D)Date of payment
E)Liquidating date

Accepted Answer

The date the board of directors votes to pay a dividend is called the date of declaration. This is when the board announces the payment of a dividend and sets the amount to be paid. The date of record is the date on which a shareholder must own shares in order to receive the dividend, while the date of payment is when the actual payment of the dividend is made. The date of stockholders' meeting is when shareholders gather to vote on important matters relating to the company. The liquidating date is not a relevant term in this context.

Question 19

Preferred stock on which the right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders is called:
A)Noncumulative preferred stock
B)Participating preferred stock
C)Callable preferred stock
D)Cumulative preferred stock
E)Convertible preferred stock

Accepted Answer

Cumulative preferred stock has the right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders. Noncumulative preferred stock only has the right to be paid current dividends, without the ability to collect any missed dividends in prior periods. Participating preferred stock has the right to receive additional dividends beyond what is normally distributed to preferred stockholders. Callable preferred stock is stock that can be repurchased by the issuer at a specified price. Convertible preferred stock can be converted by the stockholder into a specified number of common shares.

Question 20

On September 1,a corporation had 50,000 shares of $5 par value common stock and $1,000,000 of retained earnings.On that date,when the market price of the stock is $15 per share,the corporation issues a 2-for-1 stock split.The general journal entry to record this transaction is:
A) 
B) 
C) 
D) 
E)No entry is made for this transaction.

Accepted Answer

The answer of On September 1,a corporation had 50,000 shares...

Quiz 11: Reporting and Analyzing Equity

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1.Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27.The entry to record this dividend is:

A corporation had 20,000 shares of $10 par value common stock outstanding on January 10.Later that day the board of directors declared a 30% stock dividend when the market value of each share was $40.The entry to record this dividend is:

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:

A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of paid-in capital in excess of par is:

A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $60,000.The entry to record this exchange is:

A liquidating dividend is:

A company's board of directors votes to declare a cash dividend of $0.75 per share.The company has 15,000 shares authorized,10,000 issued,and 9,500 shares outstanding.The total amount of the cash dividend is:

A corporation declared and issued a 15% stock dividend on November 1.The following up-to-date information was available immediately prior to the dividend: The amount that total stockholders' equity will increase (decrease) as a result of recording this stock dividend is:

A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

A stock dividend transfers:

A corporation had 40,000 shares of $10 par value common stock outstanding on August 1.Later that day,the board of directors declared a 9% stock dividend when the market value of each share was $72.The entry to record this dividend is:

Assume Garrison Guitar Company declared a $0.28 per share cash dividend and that the company has 25,000 shares authorized,19,000 shares issued,and 12,000 shares of common stock outstanding.The general journal entry to record the dividend declaration is:

A premium on common stock:

Preferred stock that the issuing corporation at its option may retire by paying a specified amount to the preferred stockholders plus any dividends in arrears is called:

A company declared a $0.50 per share cash dividend.The company has 20,000 shares authorized,9,000 shares issued,and 8,000 shares of common stock outstanding.The journal entry to record the dividend declaration is:

The date the board of directors votes to pay a dividend is called the:

Preferred stock on which the right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders is called:

On September 1,a corporation had 50,000 shares of $5 par value common stock and $1,000,000 of retained earnings.On that date,when the market price of the stock is $15 per share,the corporation issues a 2-for-1 stock split.The general journal entry to record this transaction is: