Question 1

The account Paid-In Capital from Treasury Stock Transactions has a credit balance of $2,000.The corporation resells 450 shares of its treasury stock.These shares were acquired for $10 per share and sold for $3 per share.The entry to record the sale of treasury stock includes a debit to Retained Earnings of $3,150.

Accepted Answer

The entry to record the sale of treasury stock at a loss does not typically involve Retained Earnings directly. Instead, it would involve debiting Treasury Stock for the cost of the shares, crediting Cash for the proceeds from the sale, and if the sale results in a loss that exceeds the balance in Paid-In Capital from Treasury Stock Transactions (if any), then and only then might Retained Earnings be debited for the remaining loss. However, with the information provided, the calculation for a direct debit to Retained Earnings of $3,150 is not supported.

Question 2

Retired shares of treasury stock may later be reissued.

Accepted Answer

Retired shares of treasury stock are permanently canceled and cannot be reissued. They are removed from the pool of issued shares.

Question 3

Rosiland,Inc.purchases 16,000 shares of its previously issued $2 par value common stock for $460 per share.Which of the following is the correct journal entry to record this transaction?

Accepted Answer

16,000 × $460 = $7,360,000

Question 4

When a corporation retires its shares of treasury stock,the stock certificates are canceled.

Accepted Answer

When a corporation retires its shares of treasury stock, the stock certificates are indeed canceled. This action reduces the total number of outstanding shares of the company, which can potentially increase the value of the remaining shares.

Question 5

Cash dividends cause a decrease in both assets and stockholders' equity of the corporation.

Accepted Answer

Cash dividends are declared to distribute profits to the shareholders. When cash dividends are paid, the assets of the corporation decrease as cash goes out, and stockholders' equity also decreases because the retained earnings, which is a part of stockholders' equity, reduce by the amount of cash dividends paid. Therefore, cash dividends cause a decrease in both assets and stockholders' equity of the corporation.

Question 6

Foodmart,Inc.completed the following treasury stock transactions in 2018:
 Mar. 3 Rurchased 1,Bed shares of the company's $\$ 3$ par value common stock as treasury stock, paying cash of $\$ 10$ per share.
Mar. 17 Sold 400 shares of the treasury stock for cash of $\$ 12$ per share.
Mar. 25 Sold 600 shares of the treasury stock for cash of $\$ 7$ per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on March 24 is $ 1,200.)
Journalize these transactions.Explanations are not required.
How will Foodmart,Inc.report treasury stock on its balance sheet as of December 31,2018?

Accepted Answer

The answer of Foodmart,Inc.completed the following treasury stock transactions in...

Question 7

If a company retires preferred stock,________.

Accepted Answer

When a company retires preferred stock, it reduces the total stockholders' equity because it is buying back shares, which decreases the equity balance.

Question 8

A corporation originally issued $7 par value common stock for $13 per share.It purchased the stock for $17 per share.Which of the following is included in the entry to record the sale of 20 shares of treasury stock for $18 per share?

Accepted Answer

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Question 9

If treasury stock is resold for more than cost,the difference is debited to the account Paid-In Capital from Treasury Stock Transactions.

Accepted Answer

If treasury stock is resold for more than cost, the difference is credited to the account Paid-In Capital from Treasury Stock Transactions.

Question 10

Land Corporation reported the following: $$\begin{array} { | l | r | } 
\hline \text { Common Stock, } \$ 5 \text { par, } 211,000 \text { shares authorized, } 165,000 \text { shares issued } & \$ 825,000 \
\hline \text { Paid in Capital in Excess of Par - Common } & 217,000 \
\hline \text { Retained Earnings } & 207,000 \
\hline \text { Total Stockholders' Equity } & \$ 1,249,000 \
\hline
\end{array}$$ Which of the following is included in the entry to record the corporation's purchase of 40,000 shares of its common stock for $12.00 per share?

Accepted Answer

When a corporation purchases its own stock, the purchase is recorded by debiting Treasury Stock for the total purchase price. In this case, 40,000 shares at $12.00 per share equals $480,000.

Question 11

On March 31,2018,Water Front,Inc.shows the following data on its balance sheet: $$\begin{array} { | l | r | } 
\hline \text { Stockholders' Equity } & \
\hline \text { Common Stock, } \$ 1 \text { Par, 1,180,000 shares authorized } & \
\hline 240,000 \text { shares issued, 230,000 shares outstanding } & \$ 240,000 \
\hline \text { Paid-In Capital in Excess of Par-Common } & 2,560,000 \
\hline \text { Retained Earnings } & 4,790,000 \
\hline \text { Treasury stock, 15,000 shares at } \$ 40 & \$ 600,000 \
\hline \text { Total Stockholder's Equity } & \$ 6,990,000 \
\hline
\end{array}$$ Assume that Water Front sells 1500 shares of treasury stock at $33 per share.What is total stockholders' equity after this transaction?

Accepted Answer

When Water Front sells 1,500 shares of treasury stock at $33 per share, it receives $49,500 (1,500 shares * $33). This amount does not directly affect the total stockholders' equity as the sale of treasury stock is a transaction within equity. However, the cost of the treasury stock (15,000 shares at $40 = $600,000) will be reduced by the cost of the 1,500 shares sold. Since the shares were originally purchased for $40 each, the cost of the 1,500 shares is $60,000 (1,500 shares * $40). The sale at $33 per share for a total of $49,500 results in a loss of $10,500 ($60,000 - $49,500) compared to the cost. This loss reduces the additional paid-in capital or retained earnings, depending on the accounting policy of the company. Therefore, the total stockholders' equity after the sale is the original equity of $6,990,000 plus the proceeds from the sale of $49,500, minus the loss of $10,500, resulting in $7,029,000. However, since this option is not available, it appears there was a mistake in my calculation. The correct approach to find the answer given the options would involve recognizing the proceeds from the sale increase the stockholders' equity. The correct calculation should consider the increase in equity due to the sale proceeds without mistakenly subtracting the cost of treasury stock sold, as this cost was already accounted for in the treasury stock account. Therefore, the correct answer involves adding the proceeds from the sale to the original stockholders' equity, which aligns with option B) $7,039,500, acknowledging an error in the initial explanation.

Question 12

Corporations may not retire preferred stock in order to avoid paying the preferred dividends.

Accepted Answer

Corporations can retire preferred stock, which means buying it back from the shareholders, as a way to stop paying dividends on that stock. This action is subject to the terms outlined in the stock's issuance agreement.

Question 13

Marketsite,Inc.completed the following treasury stock transactions in 2018:
 June. 3 Purchased 2,000 shares of the company's $ \$ 5 $ par value common stock as treasury stock, paying cash of $ \$ 15 $ per share.
June 14 Sold 800 shares of the treasury stock for cash of $ \$ 20 $ per share. Journalize these transactions.Explanations are not required.
How will Marketsite,Inc.report treasury stock on its balance sheet as of December 31,2018?

Accepted Answer

The answer of Marketsite,Inc.completed the following treasury stock transactions in...

Question 14

Refer to the following information for Tolan Corporation: • Common Stock,$1.00 par,106,000 shares issued,100,000 shares outstanding
• Paid-In Capital in Excess of Par-Common: $2,190,000
• Retained Earnings: $920,000
• Treasury Stock: 6000 shares purchased at $21 per share
If Tolan resold 2500 shares of treasury stock for $22.50 per share,which of the following statements would be TRUE?

Accepted Answer

2500 × $21 = $52,500

Question 15

Which of the following is TRUE of dividends?

Accepted Answer

Dividends are a distribution of cash, stock, or other property to stockholders. They are not recorded as an increase in assets or a decrease in total stockholders' equity, nor do they decrease paid-in capital. Dividend payments do increase stockholders' equity, however, as they represent a return of capital to investors.

Question 16

A profitable corporation may make distributions to stockholders in the form of bonuses.

Accepted Answer

A profitable corporation may make distributions to stockholders in the form of dividends.

Question 17

A sale of treasury stock at its cost increases assets and increases equity.

Accepted Answer

The answer of A sale of treasury stock at its...

Question 18

Dividends can be paid in the form of cash,stock,or other property.

Accepted Answer

Dividends can be paid in various forms including cash, additional stock, or other assets.

Question 19

If treasury shares are sold for less than their cost,the difference is recorded as a loss.

Accepted Answer

If treasury shares are sold for less than their cost, the difference is first debited to Paid-In Capital from Treasury Stock Transactions and then to Retained Earnings if the balance in Paid-In Capital from Treasury Stock Transactions is too small.

Question 20

Jarrell,Inc.purchases 8,500 shares of the company's own $6 par common stock for $8 per share.Journalize the transaction.Omit explanation.

Accepted Answer

The answer of Jarrell,Inc.purchases 8,500 shares of the company's own...

Quiz 13: Corporations