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Which one of the following is not an ownership right of a stockholder in a corporation?
To declare dividends on the common stock.
To share in assets upon liquidation.
To share in corporate earnings.
To vote in the election of directors.
A corporation has the following account balances: Common stock, $1 par value, $30,000; Paid-in Capital in Excess of Par Value, $1,350,000. Based on this information, the
average price per share issued is $4.60.
number of shares outstanding are 1,380,000.
number of shares issued are 30,000.
legal capital is $1,380,000.
If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at
a nominal amount.
zero.
fair market value.
cost.
Which of the following represents the largest number of common shares?
Outstanding shares
Authorized shares
Treasury shares
Issued shares
A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders’ equity?
Decrease by $400,000
Increase by $400,000
Decrease by $700,000
Increase by $700,000
The acquisition of treasury stock by a corporation
requires that a gain or loss be recognized on the income statement.
increases its total assets and total stockholders’ equity.
decreases its total assets and total stockholders’ equity.
has no effect on total assets and total stockholders’ equity.
Which of the following is not a right or preference associated with preferred stock?
The right to vote.
To receive dividends in arrears before common stockholders receive dividends.
First claim to dividends.
Preference to corporate assets in case of liquidation.
If preferred stock is cumulative, the
common shareholders will share in the preferred dividends.
preferred shareholders and the common shareholders receive equal dividends.
preferred dividends not declared in a given year are called dividends in arrears.
preferred shareholders and the common shareholders receive the same total dollar amount of dividends.
When common stock is issued for services or non-cash assets, cost should be
the book value of the common stock issued.
either the fair market value of the consideration given up or the consideration received, whichever is more clearly evident.
only the fair market value of the consideration received.
only the fair market value of the consideration given up.
Common Stock Dividends Distributable is classified as a(n)
liability account.
asset account.
stockholders’ equity account.
expense account.
Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:
Total Assets Total Liabilities Total Stockholders’ Equity
Decrease No change Increase
No change Increase Decrease
Decrease Increase Decrease
Increase Decrease No change
No change Increase Decrease
Which of the following show the proper effect of a stock split and a stock dividend?
Item Stock Split Stock Dividend
Total par value (common) Decrease Increase
Total retained earnings Decrease Decrease
Par value per share Decrease No change
Total paid-in capital Increase Increase
Par value per share Decrease No change
Restricting retained earnings for the cost of treasury stock purchased is a
legal restriction.
stock restriction.
voluntary restriction.
contractual restriction.
Retained earnings are occasionally restricted
if preferred dividends are in arrears.
to set aside cash for dividends.
to keep the legal capital associated with paid-in capital intact.
due to contractual loan restrictions.
Prior period adjustments
may only increase retained earnings.
may either increase or decrease retained earnings.
do not affect retained earnings.
may only decrease retained earnings.
