Question 1

When preferred stock carries a redemption privilege, the shareholders may:

Accepted Answer

A)  Purchase new shares as they become available.
B)  Exchange their preferred shares for common shares.
C)  Surrender the preferred shares for a specified amount of cash.
D)  Purchase treasury shares ahead of common shareholders.

Question 2

Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2013. In October 2013, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:

Accepted Answer

A)  Debit retained earnings for $18 million.
B)  Credit paid-in capital-excess of par for $18 million.
C)  Credit common stock for $18 million.
D)  None of the above is correct.

Question 3

Preferred shares that are participating may:

Accepted Answer

A)  Vote for the board of directors.
B)  Be exchanged for common stock.
C)  Receive extra cash during corporate liquidation.
D)  Receive additional dividends beyond the stated amount.

Question 4

Under IFRS, components of other comprehensive income:

Accepted Answer

A)  Can be reported as part of a single statement of comprehensive income.
B)  Are not permitted to be reported.
C)  Must be reported in a separate statement of comprehensive income.
D)  Can be reported as part of a statement of shareholders' equity.

Question 5

When treasury shares are sold at a price above cost:

Accepted Answer

A)  A gain account is credited.
B)  A loss is reported.
C)  A revenue account is credited.
D)  Paid-in capital is increased.

Question 6

When stock traded on an active exchange is issued for a machine:

Accepted Answer

A)  No entry is recorded until restrictions are lifted.
B)  An asset is recorded for the fair value of the stock.
C)  An asset is recorded for the appraised value of the machine.
D)  Paid-in capital is increased by the appraised value of the machine.

Question 7

Authorized common stock refers to the total number of shares:

Accepted Answer

A)  Outstanding.
B)  Issued.
C)  Issued and outstanding.
D)  That can be issued.

Question 8

When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity?

Accepted Answer

A)  Increase.
B)  Decrease.
C)  No effect.
D)  Cannot tell from the given information.

Question 9

ABC declared a property dividend. The dividend consisted of 10,000 common shares of its investment in XYZ Company. The shares had originally been purchased at $4 per share and had a $1 par value. The value of the shares on the declaration date is $7 per share. What is the first entry that should be recorded related to this dividend?

Accepted Answer

A)   
B)   
C)   
D)

Question 10

Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Accepted Answer

If preferred shares are noncumulative, d...

Question 11

A statement of comprehensive income does not include:

Accepted Answer

A)  Net income.
B)  Losses resulting from the return on pension assets exceeding expectations.
C)  Losses from changes in estimates regarding the PBO.
D)  Prior service cost.

Question 12

When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:

Accepted Answer

A)  Increases net income for the year.
B)  Increases retained earnings.
C)  Increases revenue for the year.
D)  Increases paid-in capital share repurchase.

Question 13

Pug Corporation has 10,000 shares of $10 par common stock outstanding and 20,000 shares of $100 par, 6% noncumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $150,000 dividend will be paid. What are the dividends per share for preferred and common, respectively?

Accepted Answer

A)  $7.50; $0.
B)  $6; $3.
C)  $6; $1.50.
D)  None of the above is correct.

Question 14

The preemptive right refers to the shareholder's right to:

Accepted Answer

A)  Maintain a proportional ownership interest in the corporation.
B)  Vote for members of the board of directors.
C)  Receive a share of dividends.
D)  Share in profits proportionally with all other stockholders.

Question 15

Accumulated other comprehensive income is reported:

Accepted Answer

A)  In the balance sheet as an asset.
B)  In the balance sheet as a liability.
C)  In the balance sheet as a component of shareholders' equity.
D)  In the statement of comprehensive income.

Question 16

Mandatorily redeemable preferred stock (preference shares)  is reported as debt, with the dividends reported in the income statement as interest expense, using:

Accepted Answer

A)  U.S.GAAP.
B)  IFRS.
C)  Both U.S.GAAP and IFRS.
D)  Neither U.S.GAAP nor IFRS.

Question 17

The shareholders' equity of Red Corporation includes $200,000 of $1 par common stock and $400,000 par value of 6% cumulative preferred stock. The board of directors of Red declared cash dividends of $50,000 in 2013 after paying $20,000 cash dividends in 2012 and $40,000 in 2011. What is the amount of dividends common shareholders will receive in 2013?

Accepted Answer

A)  $18,000.
B)  $22,000.
C)  $26,000.
D)  $28,000.

Question 18

The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend declaration?

Accepted Answer

A)   
B)   
C)   
D)

Question 19

Paid-in capital must consist solely of amounts invested by shareholders.

Accepted Answer

A) True 
 B)False

Question 20

Treasury shares are most often reported as:

Accepted Answer

A)  A reduction of total shareholders' equity.
B)  A reduction of total paid-in capital.
C)  A reduction to retained earnings.
D)  An expense on the income statement.

Exam 18: Shareholders Equity Key

Correct Answer
verified

Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Correct Answer
verified
If preferred shares are noncumulative, d...
View Answer

A statement of comprehensive income does not include:

Correct Answer
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When preferred stock carries a redemption privilege, the shareholders may:

Correct Answer
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Paid-in capital must consist solely of amounts invested by shareholders.

Correct Answer
verified

When stock traded on an active exchange is issued for a machine:

Correct Answer
verified

Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2013. In October 2013, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:

Correct Answer
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When treasury shares are sold at a price above cost:

Correct Answer
verified

Mandatorily redeemable preferred stock (preference shares) is reported as debt, with the dividends reported in the income statement as interest expense, using:

Correct Answer
verified

The preemptive right refers to the shareholder's right to:

Correct Answer
verified

Accumulated other comprehensive income is reported:

Correct Answer
verified

When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:

Correct Answer
verified

Correct Answer
verified

Treasury shares are most often reported as:

Correct Answer
verified

Preferred shares that are participating may:

Correct Answer
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Correct Answer
verified

When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity?

Correct Answer
verified

Under IFRS, components of other comprehensive income:

Correct Answer
verified

The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend declaration?

Correct Answer
verified

Authorized common stock refers to the total number of shares:

Correct Answer
verified

Exam 18: Shareholders Equity Key

Correct AnswerverifiedShow Answer

Some preferred stock is cumulative while other preferred stock is noncumulative. What does this mean?

Correct AnswerverifiedIf preferred shares are noncumulative, d...View AnswerShow Answer

A statement of comprehensive income does not include:

Correct AnswerverifiedShow Answer

When preferred stock carries a redemption privilege, the shareholders may:

Correct AnswerverifiedShow Answer

Paid-in capital must consist solely of amounts invested by shareholders.

Correct AnswerverifiedShow Answer

When stock traded on an active exchange is issued for a machine:

Correct AnswerverifiedShow Answer

Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2013. In October 2013, Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:

Correct AnswerverifiedShow Answer

When treasury shares are sold at a price above cost:

Correct AnswerverifiedShow Answer

Mandatorily redeemable preferred stock (preference shares) is reported as debt, with the dividends reported in the income statement as interest expense, using:

Correct AnswerverifiedShow Answer

The preemptive right refers to the shareholder's right to:

Correct AnswerverifiedShow Answer

Accumulated other comprehensive income is reported:

Correct AnswerverifiedShow Answer

When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Treasury shares are most often reported as:

Correct AnswerverifiedShow Answer

Preferred shares that are participating may:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity?

Correct AnswerverifiedShow Answer

Under IFRS, components of other comprehensive income:

Correct AnswerverifiedShow Answer

The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend declaration?

Correct AnswerverifiedShow Answer

Authorized common stock refers to the total number of shares:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
If preferred shares are noncumulative, d...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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