Question 1

A stock dividend decreases the market price of the company's stock.

Accepted Answer

A) True 
 B)False

Question 2

The Discount on Common Stock account reflects:

Accepted Answer

A)  The difference between the par value of stock and its issue price when it is issued at a price below par value.
B)  One share's portion of the issued corporation's net assets recorded in its accounts.
C)  The difference between the par value of the stock and the amount paid-in by stockholders when the amount paid-in is more than par value.
D)  An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
E)  The amount a corporation must pay in addition to dividends in arrears if and when it exercises its right to retire a share of callable preferred stock.

Question 3

A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $70,000.The entry to record this exchange is:

Accepted Answer

A)  Debit Land $70,000;credit Common Stock $50,000;credit Paid-In Capital in Excess of Par Value,Common Stock $20,000.
B)  Debit Land $70,000;credit Common Stock $70,000.
C)  Debit Land $50,000;credit Common Stock $50,000.
D)  Debit Common Stock $50,000;debit Paid-In Capital in Excess of Par Value,Common Stock $20,000;credit Land $70,000.
E)  Debit Common Stock $70,000;credit Land $70,000.

Question 4

The declaration of cash dividends increases retained earnings.

Accepted Answer

A) True 
 B)False

Question 5

The following selected transactions took place during the current year for a company:  (a)Prepare the journal entries for these transactions.
(b)If Retained Earnings had a $155,000 credit balance on January 1,calculate its year-end balance as of December 31.

Accepted Answer

The answer of The following selected transactions took place during...

Question 6

Book value per common share is computed by:

Accepted Answer

A)  Multiplying the number of common shares outstanding times the market price per common share.
B)  Dividing total assets by the number of shares outstanding.
C)  Dividing stockholders' equity applicable to common shares by the number of common shares outstanding.
D)  Multiplying the number of common shares outstanding by par value per share.
E)  Dividing the number of common shares outstanding by stockholders' equity applicable to common shares.

Question 7

A debit balance in retained earnings is referred to as an accumulated deficit.

Accepted Answer

A) True 
 B)False

Question 8

The costs of bringing a corporation into existence,including legal fees,promoter fees,and amounts paid to obtain a charter are called:

Accepted Answer

A)  Minimum legal capital.
B)  Stock subscriptions.
C)  Organization expenses.
D)  Selling expenses.
E)  Prepaid fees.

Question 9

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:

Accepted Answer

A)  Preemptive right.
B)  Proxy right.
C)  Right to call.
D)  Financial leverage.
E)  Voting right.

Question 10

A company has earnings per share net income of $90,000;its weighted-average common shares outstanding are 18,000.Its dividend per share is $0.45,its market price per share is $88,and its book value per share is $76.Its price-earnings ratio equals:

Accepted Answer

A)  9.0.
B)  17.6.
C)  12.5.
D)  15.2.
E)  16.9.

Question 11

On June 30,a company declared a cash dividend of $0.35 per common share to the shareholders of record on July 15.The cash dividend will be paid on July 31.This company has 500,000 shares authorized and 100,000 shares outstanding.Prepare the journal entries required on June 30,July 15 and July 31.

Accepted Answer

The answer of On June 30,a company declared a cash...

Question 12

A corporation declared and issued a 15% stock dividend on October 1.The following information was available immediately prior to the dividend:  The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

Accepted Answer

A)  $45,000.
B)  $135,000.
C)  $(45,000) .
D)  $(135,000) .
E)  $0.

Question 13

The board of directors of a corporation:

Accepted Answer

A)  Are elected by the corporate registrar.
B)  Are responsible for day-to-day operations of the business.
C)  Do not have the power to bind the corporation to contracts,due to lack of mutual agency.
D)  May not also be executive officers of the corporation,due to the separate entity principle.
E)  Are responsible for and have final authority for managing corporate activities.

Question 14

Common shareholders always share equally with all other shareholders in dividends.

Accepted Answer

A) True 
 B)False

Question 15

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Accepted Answer

A) True 
 B)False

Question 16

Wiggins Company has 1,000 shares of $10 par preferred stock.It also has 25,000 shares of common stock outstanding,and its total stockholders' equity equals $500,000.The book value per common share is:

Accepted Answer

A)  $16.00.
B)  $19.60.
C)  $19.96.
D)  $20.00.
E)  $10.00.

Question 17

Comfort Mattresses,Inc.sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share.The entry to record this transaction would be:

Accepted Answer

A)  Debit Cash $312,000;credit Common Stock $26,000;credit Paid-in Capital in Excess of Par Value,Common Stock $286,000.
B)  Debit Cash for $312,000;credit Common Stock $312,000.
C)  Debit Common Stock $26,000;debit Paid-in Capital in Excess of Par Value,Common Stock $286,000;credit Cash $312,000.
D)  Debit Cash $312,000;credit Stock Liability $286,000;credit Common Stock $26,000.
E)  Debit Common Stock $26,000;credit Cash $26,000.

Question 18

Cactus Joe Corporation reported stockholders' equity on January 1 of the current year as follows: Common Stock,$5 par value,1,000,000 shares authorized,600,000 shares issued;Paid-in Capital in Excess of Par Value,Common Stock,$1,025,000;Retained Earnings,$1,850,000.Prepare journal entries to record the following transactions:

Accepted Answer

The answer of Cactus Joe Corporation reported stockholders' equity on...

Question 19

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration,the dividends account is closed to Retained Earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 20

The price-earnings ratio is calculated by dividing:

Accepted Answer

A)  Market value per share by earnings per share.
B)  Earnings per share by market value per share.
C)  Dividends per share by earnings per share.
D)  Dividends per share by market value per share.
E)  Market value per share by dividends per share.

Exam 13: Accounting for Corporations

Comfort Mattresses,Inc.sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share.The entry to record this transaction would be:

Correct Answer
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The price-earnings ratio is calculated by dividing:

Correct Answer
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The declaration of cash dividends increases retained earnings.

Correct Answer
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The Discount on Common Stock account reflects:

Correct Answer
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Correct Answer
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The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:

Correct Answer
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Book value per common share is computed by:

Correct Answer
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If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration,the dividends account is closed to Retained Earnings at the end of the accounting period.

Correct Answer
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The following selected transactions took place during the current year for a company: (a)Prepare the journal entries for these transactions. (b)If Retained Earnings had a $155,000 credit balance on January 1,calculate its year-end balance as of December 31.

Correct Answer
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The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Correct Answer
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Common shareholders always share equally with all other shareholders in dividends.

Correct Answer
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Wiggins Company has 1,000 shares of $10 par preferred stock.It also has 25,000 shares of common stock outstanding,and its total stockholders' equity equals $500,000.The book value per common share is:

Correct Answer
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A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $70,000.The entry to record this exchange is:

Correct Answer
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On June 30,a company declared a cash dividend of $0.35 per common share to the shareholders of record on July 15.The cash dividend will be paid on July 31.This company has 500,000 shares authorized and 100,000 shares outstanding.Prepare the journal entries required on June 30,July 15 and July 31.

Correct Answer
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The board of directors of a corporation:

Correct Answer
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A company has earnings per share net income of $90,000;its weighted-average common shares outstanding are 18,000.Its dividend per share is $0.45,its market price per share is $88,and its book value per share is $76.Its price-earnings ratio equals:

Correct Answer
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A stock dividend decreases the market price of the company's stock.

Correct Answer
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The costs of bringing a corporation into existence,including legal fees,promoter fees,and amounts paid to obtain a charter are called:

Correct Answer
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A debit balance in retained earnings is referred to as an accumulated deficit.

Correct Answer
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A corporation declared and issued a 15% stock dividend on October 1.The following information was available immediately prior to the dividend: The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

Correct Answer
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Exam 13: Accounting for Corporations

Comfort Mattresses,Inc.sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share.The entry to record this transaction would be:

Correct AnswerverifiedShow Answer

The price-earnings ratio is calculated by dividing:

Correct AnswerverifiedShow Answer

The declaration of cash dividends increases retained earnings.

Correct AnswerverifiedShow Answer

The Discount on Common Stock account reflects:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:

Correct AnswerverifiedShow Answer

Book value per common share is computed by:

Correct AnswerverifiedShow Answer

If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration,the dividends account is closed to Retained Earnings at the end of the accounting period.

Correct AnswerverifiedShow Answer

The following selected transactions took place during the current year for a company: (a)Prepare the journal entries for these transactions. (b)If Retained Earnings had a $155,000 credit balance on January 1,calculate its year-end balance as of December 31.

Correct AnswerverifiedShow Answer

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Correct AnswerverifiedShow Answer

Common shareholders always share equally with all other shareholders in dividends.

Correct AnswerverifiedShow Answer

Wiggins Company has 1,000 shares of $10 par preferred stock.It also has 25,000 shares of common stock outstanding,and its total stockholders' equity equals $500,000.The book value per common share is:

Correct AnswerverifiedShow Answer

A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $70,000.The entry to record this exchange is:

Correct AnswerverifiedShow Answer

On June 30,a company declared a cash dividend of $0.35 per common share to the shareholders of record on July 15.The cash dividend will be paid on July 31.This company has 500,000 shares authorized and 100,000 shares outstanding.Prepare the journal entries required on June 30,July 15 and July 31.

Correct AnswerverifiedShow Answer

The board of directors of a corporation:

Correct AnswerverifiedShow Answer

A company has earnings per share net income of $90,000;its weighted-average common shares outstanding are 18,000.Its dividend per share is $0.45,its market price per share is $88,and its book value per share is $76.Its price-earnings ratio equals:

Correct AnswerverifiedShow Answer

A stock dividend decreases the market price of the company's stock.

Correct AnswerverifiedShow Answer

The costs of bringing a corporation into existence,including legal fees,promoter fees,and amounts paid to obtain a charter are called:

Correct AnswerverifiedShow Answer

A debit balance in retained earnings is referred to as an accumulated deficit.

Correct AnswerverifiedShow Answer

A corporation declared and issued a 15% stock dividend on October 1.The following information was available immediately prior to the dividend: The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

Correct AnswerverifiedShow Answer

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