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1. Investors who are most interested in the dividend yield are those who invest for
a. Current income flow
b. Market price appreciation
c. Both market price appreciation and current income flow
d. Neither market price appreciation or current income flow
2. Organization Costs is included on the balance sheet as a(n):
a. Plant asset
b. Investment
c. Current asset
d. Intangible asset
3. Retained earnings:
a. is the same as contributed capital
b. changes are summarized in the Retained Earnings Statement
c. cannot have a debit balance
d. over time will have a direct relationship with the amount of cash on hand if the
corporation is profitable.
4. The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 20,000 shares were originally issued and 2,500 were subsequently
reacquired. What is the number of shares outstanding?
a. 22,500
b. 17,500
c. 20,000
d. 82,500
5. A Company acquired land in exchange for 5,000 shares of its $10 par common stock. The
fair market value of the land is $63,000, it is appraised at $60,000 and the stock is widely
traded and was selling for $12.50 per share when exchanged for the land. At what
amount should the land be recorded by A Company?
a. $50,000
b. $62,500
c. $63,000
d. $60,000
6. The excess of sales price of treasury stock over its cost should be credited to:
a. Treasury Stock Receivable
b. Premium on Capital Stock
c. Income fro Sale of Treasury Stock
d. Paid-In Capital from Sale of Treasury Stock
7. A corporation purchases 10,000 shares of its own $10 par common stock for $17.50 per
share, recording it at cost. What will be the effect on total stockholders’ equity?
a. Decrease, $175,000
b. Decrease, $100,000
c. Increase, $175,000
d. Increase, $100,000
8. A corporation has 25,000 shares of $100 par value stock outstanding. If the corporation
issues a 2-for-1 split or a 100% stock dividend, the number of shares outstanding after
the split or dividend will be:
a. 25,000 shares
b. 50,000 shares
c. 75,000 shares
d. 100,000 shares
9. The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently
reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is
declared?
a. $50,000
b. $100,000
c. $70,000
d. $60,000
10. A company with 100,000 authorized shares of $5 par common stock issued 80,000
shares at $7. Subsequently, the company declared a 2% stock dividend on a date when
the market price was $10 a share. The effect of the declaration and issuance of the stock
dividend is to:
a. Decrease retained earnings, increase common stock, and decrease paid-in capital
b. Increase retained earnings, decrease common stock, and decrease paid-in capital
c. Increase retained earnings, decrease commons tock, and increase paid-in capital
d. Decrease retained earnings, increase common stock, and increase paid-in capital
11. Easy transfer of ownership is a characteristic of which form of business organization?
a. Sole proprietorship
b. Partnership
c. Corporation
d. All of the above
12. In which forms of business organization are the owners personally liable for all the debts
of the business?
a. Sole proprietorship and corporation
b. Sole proprietorship and partnerships
c. Partnership and corporation
d. All of them
13. Issuing stock to investors for cash at a price above par would result in
a. a debit to Common Stock and a
credit to
Cash
b. a debit to Cash and a credit to Common Stock
c. a debit to Cash and PIC-excess of par-CS and a credit to Common Stock
d. a debit to Cash and a credit to Common Stock and PIC-excess of par-CS
14. The par value of the shares issued represents a corporation’s legal capital.
a. True
b. False
15. When treasury stock is purchased, the number of outstanding shares decreases.
a. Trueb. False
16. Dividends in arrears are reported as a current liability on the balance sheet.
a. Trueb. False
17. No journal entry is required on the date of record.
a. Trueb. False
18. Which of the following is not a characteristic of a corporation?
a. Separate legal existence
b. Unlimited liability for stockholders
c. Easy transferability of ownership interests
d. Ability to acquire capital easily
19. Which of the following is not a disadvantage of the corporate business form?
a. Organization Costs
b. Government regulation
c. Continuous life
d. Additional taxes
20. Which of the following is not a stockholder right?
a. The preemptive right
b. The right to share in dividends
c. The right to vote on the board of directors
d. The right to participate in management decisions
21. Which of the following represents the maximum number of shares that a corporation can
issue?
a. Outstanding shares
b. Issued shares
c. Authorized shares
d. Treasury shares
22. Which of the following decreases when a corporation purchases treasury stock?
a. Authorized shares
b. Issued shares
c. Treasury shares
d. Outstanding shares
23. Sting, Inc. issued 1,000 shares of common stock at $10 per share. If the stock has a
par value of $4 a share, the journal entry to record the issuance would include a
a. Credit to Common Stock for $4,000.
b. Debit to Cash for $4,000.
c. Credit to Paid-in-Capital in Excess of Par for $10,000
d. Debit to Retained Earnings for $6,000
24. Sting, Inc. issued 1,000 shares of common stock at $10 per share. If the stock was nopar
stock, the journal entry to record the issuance would include a
a. debit to Cash for $6,000
b. credit to Paid-in-Capital in Excess of Par for 6,000
c. credit to Common Stock for $10,000
d. debit to Paid-in-Capital in Excess of Par for $10,000
25. If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share,
total stockholders’ equity will be reduced by
a. $5,000
b. $12,000
c. $0
d. $7,000
26. Which of the following will increase the Paid-in-Capital section of the balance sheet?
a. Stock split
b. Stock dividend
c. Cash dividend
d. Property dividend
27. Buzz, Inc. has 8,000 shares of 5%, $50 par, cumulative preferred stock and 50,000
shares of $3 par common stock outstanding. No dividends were declared last year,
however, a dividend of $50,000 was declared and paid this year. What amount of the
total dividend was paid to common stockholders?
a. $10,000
b. $30,000
c. $15,000
d. $50,000
28. Scratch, Inc. has 2,000 shares of 5%, $100 par, cumulative preferred stock and 80,000
shares of $4 par common stock outstanding. Last year the board of directors declared
and paid an $8,000 dividend. This year the dividend declared and paid was $15,000.
What amount of this year’s total dividend was paid to preferred stockholders?
a. $15,000
b. $10,000
c. $0
d. $12,000
29. Visor, Inc. had 300,000 shares of $20 par common stock outstanding when a 3% stock
dividend was declared and paid. How many shares were outstanding after the stock
dividend?
a. 390,000
b. 330,000
c. 300,000
d. 309,000
30. Visor, Inc. had 300,000 shares of $20 par common stock outstanding when a 3% stock
dividend was declared. The market price of the stock at the time of the declaration was
$22 per share. The journal entry to record the dividend declaration would include a
credit to
a. Common Stock for $180,000
b. PIC-excess of par-CS for $198,000
c. Stock Dividends for $198,000
d. Stock Dividends Distributable for $180,000
