Question 1

Paid-in capital from treasury stock would appear on a balance sheet under the category

Accepted Answer

Paid-in capital from treasury stock represents the amount of proceeds received from the sale of treasury stock that exceeds the cost of the treasury stock. It is considered to be an additional contribution by the stockholders and is therefore recorded as a component of additional paid-in capital on the balance sheet.

Question 2

The purchase of treasury stock

Accepted Answer

When a company purchases its own stock, it reduces the number of shares outstanding, which results in a decrease in common stock outstanding. Therefore, option C is the correct answer. Options A and B are incorrect because the purchase of treasury stock does not affect the number of shares authorized or issued, it only affects the number of shares outstanding. Option D is incorrect because treasury stock transactions do affect the number of shares outstanding.

Question 3

Additional paid-in capital includes all of the following except

Accepted Answer

Paid-in capital in excess of book value is not a component of additional paid-in capital. This is because book value is based on the historical cost of assets and liabilities, and is not related to the amount of capital raised from investors. The other three options are all components of additional paid-in capital, as they represent amounts received from investors in excess of a company's legal or accounting requirements.

Question 4

A statement of stockholders' equity discloses all of the following except:

Accepted Answer

The statement of stockholders' equity discloses information about the changes in stockholders' equity during the year, including the beginning and ending balances of each component of stockholders' equity, such as common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income. However, it does not disclose the market value of the stockholders' equity at the end of the year, as this information is subject to fluctuations based on various external factors and is not directly related to the equity components themselves.

Question 5

When the selling price of treasury stock is greater than its cost, the company credits the difference to

Accepted Answer

When the selling price of treasury stock is greater than its cost, the difference is credited to Paid-in Capital from Treasury Stock. This account reflects the additional capital that the company receives from selling its own stock above its cost, rather than recognizing it as a gain in the income statement.

Question 6

Preferred stockholders have a priority over common stockholders as to

Accepted Answer

Preferred stockholders have a priority over common stockholders both in terms of dividends (they receive fixed dividends before common stockholders) and in terms of assets in the event of liquidation (they have a higher claim on the company's assets compared to common stockholders).

Question 7

Legal capital per share cannot be equal to the

Accepted Answer

The answer of Legal capital per share cannot be equal...

Question 8

When common stock is issued for services or non-cash assets, cost should be

Accepted Answer

When common stock is issued for services or non-cash assets, cost should be either the fair value of the consideration given up or the consideration received, whichever is more clearly evident. This means that the cost should be based on the most reliable and objective measurement available. Therefore, if the fair value of either the consideration given up or received is more clearly evident, that should be used as the cost.

Question 9

Book value per share is

Accepted Answer

Book value per share is the equity a common stockholder has in the net assets of the corporation from owning one share of stock. It is calculated by subtracting total liabilities from total assets and then dividing by the number of outstanding shares of common stock. It does not necessarily reflect the market value of the stock. Book value per share is relevant for investors who are interested in the actual value of the company's assets rather than its market price. It is not computed for preferred stockholders.

Question 10

Two classifications appearing in the paid-in capital section of the balance sheet are

Accepted Answer

Capital stock represents the par value of the stock, while additional paid-in capital represents any amount received above the par value. This separation allows for a clearer understanding of the sources of a company's equity financing. Preferred stock and common stock are two types of capital stock, but they do not encompass all of the paid-in capital section. Retained earnings are part of the equity section, but they are not part of the paid-in capital section. Treasury stock is a contra-equity account and is not part of the paid-in capital section. Therefore, option C is the best classification for the paid-in capital section, as it accurately reflects the different sources of equity financing.

Question 11

In published annual reports

Accepted Answer

The answer of In published annual reports
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Question 12

Information that is not generally reported for each class of stock on the balance sheet is

Accepted Answer

The market value of a company's stock is not typically reported on the balance sheet. The balance sheet typically reports the par value, shares authorized, and shares issued for each class of stock.

Question 13

Which of the following statements about a cash dividend is incorrect?

Accepted Answer

While shareholders may have the right to vote on certain dividend-related matters, such as the declaration of a dividend, they do not typically vote on the amount of income to be distributed. The board of directors usually determines the amount of the dividend payout. Therefore, statement D is incorrect.

Question 14

Sandoz Corporation was organized on January 1, 2018, with authorized capital of 500,000 shares of $10 par value common stock. During 2018, Sandoz issued 30,000 shares at $12 per share, purchased 3,000 shares of treasury stock at $13 per share, and sold 3,000 shares of treasury stock at $14 per share. What is the amount of additional paid-in capital at December 31, 2018?

Accepted Answer

The additional paid-in capital is the difference between the amount received from issuing stock and the par value of the stock issued. 
30,000 shares were issued at $12 per share, which means there was a total of $360,000 ($12 x 30,000) received from issuing stock. 
Par value of 30,000 shares at $10 per share is $300,000 ($10 x 30,000). 
Therefore, the additional paid-in capital is $60,000 ($360,000 - $300,000). 
In addition, the purchase and sale of treasury stock do not affect the additional paid-in capital. Therefore, the correct answer is option D.

Question 15

The date a cash dividend becomes a binding legal obligation to a corporation is the

Accepted Answer

The declaration date is the date on which the board of directors announces its intention to pay a cash dividend to the shareholders. At this point, it becomes a binding legal obligation for the corporation to pay the dividend.

Question 16

Barr, Inc. reports $4,000,000 of common stock, and $6,000,000 of additional paid-in capital on its balance sheet. The number of common shares issued and outstanding is 500,000 shares. The book value per share is

Accepted Answer

The answer of Barr, Inc. reports $4,000,000 of common stock,...

Question 17

A stockholders' equity statement shows

Accepted Answer

A stockholders' equity statement shows the changes in each stockholders' equity account and in total stockholders' equity during the period, as well as any dividends paid out. It does not show the names of each stockholder, how profits are distributed to the various classes of stockholders, or the number of shares owned by each stockholder.

Question 18

On January 2, 2015, Porter Corporation issued 30,000 shares of 5% cumulative preferred stock at $100 par value. On December 31, 2018, Porter Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stockholders?

Accepted Answer

The answer of On January 2, 2015, Porter Corporation issued...

Question 19

Book value per share is computed by dividing total

Accepted Answer

Book value per share is calculated by dividing the total stockholders' equity by the number of common shares outstanding. Paid-in capital (choices A and B) represents the amount of capital contributed by shareholders for the issuance of shares, but it does not reflect retained earnings or other components of stockholders' equity. Only outstanding shares (not issued shares) are used in the calculation.

Question 20

Which of the following is an incorrect statement about a corporation?

Accepted Answer

A corporation must be formed in writing by filing articles of incorporation with the state in which it will be incorporated. Oral or implied formation of a corporation is not legally recognized.

Quiz 11: Corporations: Organization, Stock Transactions