Question 1

Hunter Corporation beginning of year retained earnings balance was $28,300.The corporation declared and paid dividends of $19,400 during the year and ended the year with a $36,500 balance.The net income or loss for the year was:

Accepted Answer

The net income can be calculated using the formula: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends. Plugging in the values: $36,500 = $28,300 + Net Income - $19,400. Solving for Net Income gives $27,600.

Question 2

The journal entry to record the issuance of nopar common stock could include all of the following except a:

Accepted Answer

The issuance of no-par common stock would not include a credit to "Paid-in-Capital in Excess of Par--Common Stock" because no-par stock does not have a par value, and this account is used to record the amount received over the par value of the stock.

Question 3

The entry to record the declaration and the entry to record the payment of a cash dividend would include all the following except:

Accepted Answer

A credit to dividend payable and a debit to retained earnings are necessary to record the declaration of a cash dividend. However, a debit to dividend expense should not be included when recording the declaration of a cash dividend since the expense is only recognized once the dividend is paid. A debit to dividend payable would be required when recording the payment of the cash dividend.

Question 4

Carolina Corporation just issued 10,000 shares of $2 par value common stock for $7.50 per share.The journal entry to record this transaction will include a:

Accepted Answer

The correct journal entry for issuing 10,000 shares of $2 par value common stock at $7.50 per share includes a credit to Paid-in-Capital in Excess of Par--Common Stock for $55,000. This is calculated as the difference between the total amount received ($75,000) and the par value amount ($20,000), which equals $55,000.

Question 5

Quality Corporation has 500,000 shares of $1 par value common stock authorized and 200,000 shares issued and outstanding.Land worth $100,000 received in exchange for 10,000 shares of common stock of the corporation would do all the following except:

Accepted Answer

The transaction involves the issuance of common stock in exchange for land, therefore, there would be no impact on retained earnings. Option A is incorrect because the new shares would be added to the existing shares, resulting in a total of 210,000 issued and outstanding shares. Option B is correct because the par value of the shares issued is $10,000 (10,000 x $1), which would be recorded in the common stock account. Option C is correct because the difference between the market value of the land ($100,000) and the par value of the shares issued ($10,000) is $90,000, which would be recorded as paid-in capital in excess of par.

Question 6

Noncash assets given to a corporation in exchange for stock would be recorded at:

Accepted Answer

Noncash assets given to a corporation in exchange for stock should be recorded at their fair market value, which represents the value at which the asset could be sold. This is because stock represents ownership in the company, and the value of the asset being exchanged is used to determine the ownership percentage the investor will receive. Recording the transaction at any other value could misrepresent the value of the company and the ownership percentages of the investors.

Question 7

All of the following would reduce the balance in Retained Earnings except:

Accepted Answer

The acquisition of treasury stock does not affect retained earnings; it reduces stockholders' equity by decreasing cash and increasing treasury stock.

Question 8

Olio Corporation has 900,000 shares of $1 par value common stock authorized,and 550,000 shares issued and outstanding.The market value of the stock is $18 per share.The journal entry to record the declaration of a 10% stock dividend would include a:

Accepted Answer

The answer of Olio Corporation has 900,000 shares of $1...

Question 9

Carolina Corporation just issued 10,000 shares of $2 par value common stock for $7.50 per share.The journal entry to record this transaction will include all of the following except:

Accepted Answer

A credit to Retained Earnings is not necessary when recording the issuance of common stock. Retained Earnings represent the accumulated earnings of the company and are not affected by the issuance of new stock. The journal entry to record the transaction would be:

Debit Cash $75,000
Credit Common Stock $20,000
Credit Paid-in-Capital in Excess of Par--Common Stock $55,000

Question 10

Which of the following is true about a stock dividend.

Accepted Answer

A stock dividend is a distribution of additional shares to existing shareholders, which means it does not involve cash or any other asset, hence there is no change in assets or liabilities. However, since additional shares are being distributed, there is an increase in the contributed capital account and a decrease in the retained earnings account, making option C the correct choice.

Question 11

E&F Corporation issued 3,000 shares of $10 par value common stock in exchange for a tract of land valued at $135,000.Since all company stock is privately held,there is no market value for the stock.The journal entry to record this exchange includes a:

Accepted Answer

The correct journal entry to record the exchange includes a credit to Paid-in-Capital in Excess of Par--Common Stock for $105,000. This is because the company issued 3,000 shares at a $10 par value, totaling $30,000 (3,000 shares * $10), and the land was valued at $135,000. The excess of the land's value over the par value of the stock ($135,000 - $30,000) is $105,000, which is credited to Paid-in-Capital in Excess of Par--Common Stock.

Question 12

The journal entry to record the distribution of a small common stock dividend would include a:

Accepted Answer

The answer of The journal entry to record the distribution...

Question 13

A common stock dividend results in a decrease in:

Accepted Answer

A common stock dividend is paid out of a company's retained earnings, so the amount of retained earnings will decrease. It does not affect the assets or common stock of the company.

Question 14

The account "Stock Dividends Distributable" would be shown on a company's financial statements as:

Accepted Answer

Stock Dividends Distributable is part of contributed capital as it represents a commitment to issue additional shares to shareholders, increasing the equity section of the balance sheet.

Question 15

A Deficit in Retained Earnings can be created by all of the following except.

Accepted Answer

Receiving less than the par value when stock is issued may result in a decrease in the amount of paid-in capital, but it would not directly result in a deficit in retained earnings. All the other options directly result in a deficit in retained earnings.

Question 16

PAC Corporation has 500,000 shares of $5 par value common stock authorized,and 300,000 shares issued and outstanding.The market value of the stock is $14 per share.The journal entry to record the declaration of a 15% stock dividend would include a:

Accepted Answer

The stock dividend is 15% of 300,000 shares, which is 45,000 shares. The market value of the stock is $14 per share, so the total value of the dividend is 45,000 shares x $14 = $630,000. Therefore, Retained Earnings is debited for $630,000.

Question 17

The journal entry to record the declaration of a cash dividend would include a:

Accepted Answer

The answer of The journal entry to record the declaration...

Question 18

Mustang Corporation issued 5,000 shares of $1 par value common stock in exchange for a some equipment with an asking price of $75,000.The stock was sold the day before at a price of $13 per share.The journal entry to record this exchange includes a:

Accepted Answer

The answer of Mustang Corporation issued 5,000 shares of $1...

Question 19

Foster Corporation has 800,000 shares of $3 par value common stock authorized,and 350,000 shares issued and outstanding.The market value of the stock is $22 per share.The journal entry to record the declaration of a 75% stock dividend would include a:

Accepted Answer

The answer of Foster Corporation has 800,000 shares of $3...

Question 20

When the Retained Earnings account has a debit balance,it is referred to as a:

Accepted Answer

The answer of When the Retained Earnings account has a...

Quiz 15: Recording and Evaluating Capital Resource Process Activities: Financing