Question 1

Ironworks,Inc.issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000.Which of the following is NOT part of the journal entry for this transaction?

Accepted Answer

The common stock should be credited for the par value of the shares issued, which is $2,400 (200 shares x $12 par value), not the market value of $3,000. The excess over par value is credited to paid-in capital in excess of par-common.

Question 2

Five hundred shares of $25 par common stock were exchanged for a piece of equipment with a current market value of $13,500.The journal entry to record the transaction would include a:

Accepted Answer

The equipment is valued at $13,500, and the par value of the stock is $12,500 (500 shares x $25). The excess of $1,000 is credited to Paid-In Capital in Excess of Par-Common.

Question 3

Which of the following is NOT a date associated with cash dividends?

Accepted Answer

The date of issuance is not associated with cash dividends. It refers to the date on which a security is first offered or sold, such as in an initial public offering (IPO) or a bond offering. The date of declaration is when the board of directors announces the dividend payment, the date of record is when the company determines which shareholders are eligible to receive the dividend, and the date of payment is when the dividend is actually distributed to shareholders.

Question 4

Cumulative common stock will pay dividends in arrears.

Accepted Answer

The answer of Cumulative common stock will pay dividends in...

Question 5

Corporations declare cash dividends from Retained Earnings.

Accepted Answer

Corporations can declare cash dividends from their retained earnings, which are the profits they have accumulated over time and have not yet distributed to shareholders. When a corporation declares a cash dividend, it is essentially distributing a portion of its retained earnings to shareholders.

Question 6

The entry to record selling 150 shares of $30 stated value common stock for $40 per share would include:

Accepted Answer

The entry involves crediting Cash for the total sale amount ($6,000) and crediting Common Stock for the stated value ($4,500). The excess amount ($1,500) is credited to Paid-in Capital in Excess of Stated Value.

Question 7

The entry to record selling 500 shares of stated value $40 common stock for $52 per share would be:

Accepted Answer

The entry involves debiting Cash for the total amount received ($52 x 500 shares = $26,000), crediting Common Stock for the stated value ($40 x 500 shares = $20,000), and crediting Paid-in Capital in Excess of Stated Value for the excess amount received over the stated value ($12 x 500 shares = $6,000).

Question 8

TLR Productions issued 40 shares of $20 par value stock to its accountant in full payment for her $900 fee for assisting in setting up the new company.The entry to record the issuance of the stock would include a:

Accepted Answer

The entry to record the issuance of the stock would be a credit to Common Stock for the par value of the stock issued, which is $20 per share, multiplied by the number of shares issued, which is 40 shares, for a total of $800. Since the accountant's fee was $900, there would also be a credit to Additional Paid-in Capital for the excess of $100. Thus, the correct answer is choice letter C, which only includes the credit to Common Stock for $800.

Question 9

Preferred stock may have its dividend rate listed as a percentage of par value per share or as a flat stated amount.

Accepted Answer

This is true. Preferred stock can have various types of dividend rates, including a percentage of par value per share or a flat stated amount.

Question 10

A company has 25,000 shares of $12 par,8% preferred stock.The 8% refers to the stock's:

Accepted Answer

The 8% refers to the dividend rate of the preferred stock, which means that the company is obligated to pay an 8% dividend rate on the $12 par value of each share of preferred stock.

Question 11

The entry to record selling 300 shares of stated value $60 common stock for $70 per share would be:

Accepted Answer

The stated value of the 300 shares is $60 per share, meaning that the total common stock issued is $18,000 (300 shares x $60 per share). However, the shares were sold for $70 per share, resulting in a total cash received of $21,000 (300 shares x $70 per share). Therefore, the entry should debit Cash for $21,000, credit Common Stock for $18,000, and credit Paid-in Capital in Excess of Stated Value for $3,000 (the difference between the cash received and the common stock issued). This is the only entry that correctly reflects the sale of the shares at a price above their stated value.

Question 12

If a company has 3,000 shares authorized and 2,000 have been issued,the annual dividends on $18 par 3% preferred stock is $1,620.

Accepted Answer

The number of authorized and issued shares is not relevant to the calculation of dividend payments on preferred stock. The calculation of annual dividends on preferred stock is based on the par value, dividend rate, and number of shares of preferred stock outstanding. Therefore, the information provided about the authorized and issued shares is not useful in determining the accuracy of the statement about the annual dividends.

Question 13

The portion of Stockholders' Equity that can be used for dividends is referred to as legal capital.

Accepted Answer

Legal capital typically refers to the portion of stockholders' equity that cannot be used for dividends, as it is intended to protect creditors by maintaining a minimum equity base in the company.

Question 14

Paying dividends causes a decrease in total assets,but an increase in total Stockholders' Equity.

Accepted Answer

Paying dividends causes a decrease in total assets and also a decrease in total Stockholders' Equity, as dividends are paid out from the company's retained earnings.

Question 15

A company issued 500 shares of $3 par common stock in exchange for a piece of equipment with a current market value of $20,000.Which of the following is the correct journal entry for this transaction?

Accepted Answer

The answer of A company issued 500 shares of $3...

Question 16

The entry to record S&C,Inc.selling 1,000 shares of $12 par common stock for $20 per share would be to:

Accepted Answer

The par value of the common stock sold is $12, hence the initial entry records the sale of 1,000 shares for $12,000 (debit Cash $20,000, credit Common Stock $12,000). Since the stock was sold for more than par value, the remaining $8,000 is recorded as Paid-In Capital in Excess of Par-Common Stock (credit Paid-In Capital in Excess of Par-Common Stock $8,000).

Question 17

If a corporation has both common and preferred stock,the preferred stockholders will receive their dividends first,if the money is available.

Accepted Answer

This is because preferred stock has priority over common stock in receiving dividends.

Question 18

If a company has 2,500 shares authorized and 1,500 have been issued,the annual dividends on $20 par 5% preferred stock is $1,500.

Accepted Answer

The answer of If a company has 2,500 shares authorized...

Question 19

Evergreen Building,Inc.issued 2,000 shares of $18 par common stock in exchange for a truck with a current market value of $40,000.Which of the following is NOT part of the journal entry for this transaction?

Accepted Answer

The common stock should be credited for the par value of the shares issued, which is 2,000 shares x $18 = $36,000, not $40,000. The excess over par value is credited to paid-in capital in excess of par.

Question 20

NW Stone Supply issued 50 shares of $15 par common stock in exchange for a piece of equipment with a current market value of $1,000.Which of the following is NOT part of the journal entry for this transaction?

Accepted Answer

The equipment should be debited for its market value of $1,000, not $750.

Quiz 10: Corporations: Paid-In Capital and Retained Earnings