Question 1

Ace Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?

Accepted Answer

A)  $40 per share
B)  $40,000 in total
C)  $4,000 in total
D)  $0.40 per shareE) C) and D)
F) A) and B)

Question 2

Dividends in arrears on cumulative preferred stock

Accepted Answer

A)  never have to be paid, even if common dividends are paid.
B)  must be paid before common stockholders can receive a dividend.
C)  should be recorded as a current liability until they are paid.
D)  enable the preferred stockholders to share equally in corporate earnings with the common stockholders.E) A) and B)
F) A) and C)

Question 3

Preferred stockholders generally do not have the right to vote for the board of directors.

Accepted Answer

A) True 
 B)False

Question 4

Stockholders of a corporation directly elect

Accepted Answer

A)  the president of the corporation.
B)  the board of directors.
C)  the treasurer of the corporation.
D)  all of the employees of the corporation.E) None of the above
F) All of the above

Question 5

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Accepted Answer

A)  Additional taxes.
B)  Government regulations.
C)  Limited liability of stockholders.
D)  Separation of ownership and management.E) A) and B)
F) A) and C)

Question 6

Regular dividends are declared out of

Accepted Answer

A)  paid-in capital in excess of par value.
B)  treasury stock.
C)  common stock.
D)  retained earnings.E) B) and D)
F) None of the above

Question 7

Which of the following statements about treasury stock is true?

Accepted Answer

A)  Few corporations have treasury stock.
B)  Purchasing treasury stock is done to eliminate hostile shareholder buyouts.
C)  Companies acquire treasury stock to increase the number of shares outstanding.
D)  Companies acquire treasury stock to decrease earnings per share.E) None of the above
F) A) and D)

Question 8

Watson, Inc.has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2020.There were no dividends declared in 2018.The board of directors declares and pays a $90,000 dividend in 2019 and in 2020.What is the amount of dividends received by the common stockholders in 2020?

Accepted Answer

A)  $30,000.
B)  $40,000.
C)  $50,000.
D)  $0.E) A) and B)
F) B) and C)

Question 9

The board of directors of Benson Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2020.The dividend is to be paid on August 15, 2020, to stockholders of record on July 31, 2020.The effects of the journal entry to record the payment of the dividend on August 15, 2020, are to

Accepted Answer

A)  decrease stockholders' equity and decrease liabilities.
B)  decrease liabilities and decrease assets.
C)  increase stockholders' equity and increase liabilities.
D)  increase stockholders' equity and decrease assets.E) All of the above
F) A) and C)

Question 10

The per share amount normally assigned by the board of directors to a small stock dividend is

Accepted Answer

A)  the market value of the stock on the date of declaration.
B)  the average price paid by stockholders on outstanding shares.
C)  the par or stated value of the stock.
D)  zero.E) All of the above
F) B) and C) A

Question 11

Leary Manufacturing Corporation purchased 5,000 shares of its own previously issued $10 par common stock for $125,000.As a result of this event,

Accepted Answer

A)  Leary's Common Stock account decreased $50,000.
B)  Leary's total stockholders' equity decreased $125,000.
C)  Leary's Paid-in Capital in Excess of Par Value account decreased $75,000.
D)  All of these answer choices are correct.E) All of the above
F) A) and C)

Question 12

A corporation acts under its own name rather than in the name of its stockholders.

Accepted Answer

A) True 
 B)False  True

Question 13

A liability arises when the board of directors declares a stock dividend.

Accepted Answer

A) True 
 B)False

Question 14

When no-par common stock with a stated value is issued for cash, the common stock account is credited for an amount equal to the cash proceeds.

Accepted Answer

A) True 
 B)False  False

Question 15

If a stockholder cannot attend a stockholders' meeting, he may delegate his voting rights by means of a(n)

Accepted Answer

A)  absentee ballot.
B)  proxy.
C)  certified letter.
D)  telegram.E) B) and C)
F) None of the above

Question 16

The Paid-in Capital in Excess of Par Value is increased in the accounting records when

Accepted Answer

A)  the number of shares issued exceeds par value.
B)  the stated value of capital stock is greater than the par value.
C)  the market value of the stock rises above par value.
D)  capital stock is issued at an amount greater than par value.E) None of the above
F) A) and B)

Question 17

Treasury stock is a contra stockholders' equity account.

Accepted Answer

A) True 
 B)False

Question 18

Dividends in arrears are dividends on

Accepted Answer

A)  cumulative preferred stock that have been declared but have not been paid.
B)  non-cumulative preferred stock that have not been declared for a given period of time.
C)  cumulative preferred stock that have not been declared for a given period of time.
D)  common dividends that have been declared but have not yet been paid.E) A) and D)
F) C) and D)

Question 19

Which of the following phrases is not descriptive of the corporate form of business?

Accepted Answer

A)  Professional management.
B)  Double taxation on distributed earnings.
C)  Unlimited liability.
D)  Continuous existence.E) None of the above
F) C) and D)

Question 20

The declaration and distribution of a stock dividend will

Accepted Answer

A)  increase total stockholders' equity.
B)  increase total assets.
C)  decrease total assets.
D)  have no effect on total assets.E) A) and B)
F) C) and D)

Exam 11: Reporting and Analyzing Stockholders Equity

Ace Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?

Correct Answer
verified

Dividends in arrears on cumulative preferred stock

Correct Answer
verified

Preferred stockholders generally do not have the right to vote for the board of directors.

Correct Answer
verified

Stockholders of a corporation directly elect

Correct Answer
verified

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Correct Answer
verified

Regular dividends are declared out of

Correct Answer
verified

Which of the following statements about treasury stock is true?

Correct Answer
verified

Correct Answer
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Correct Answer
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The per share amount normally assigned by the board of directors to a small stock dividend is

Correct Answer
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A

Leary Manufacturing Corporation purchased 5,000 shares of its own previously issued $10 par common stock for $125,000.As a result of this event,

Correct Answer
verified

A corporation acts under its own name rather than in the name of its stockholders.

Correct Answer
verified
True

A liability arises when the board of directors declares a stock dividend.

Correct Answer
verified

When no-par common stock with a stated value is issued for cash, the common stock account is credited for an amount equal to the cash proceeds.

Correct Answer
verified
False

If a stockholder cannot attend a stockholders' meeting, he may delegate his voting rights by means of a(n)

Correct Answer
verified

The Paid-in Capital in Excess of Par Value is increased in the accounting records when

Correct Answer
verified

Treasury stock is a contra stockholders' equity account.

Correct Answer
verified

Dividends in arrears are dividends on

Correct Answer
verified

Which of the following phrases is not descriptive of the corporate form of business?

Correct Answer
verified

The declaration and distribution of a stock dividend will

Correct Answer
verified

Exam 11: Reporting and Analyzing Stockholders Equity

Ace Inc.has 10,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2020.What is the annual dividend on the preferred stock?

Correct AnswerverifiedShow Answer

Dividends in arrears on cumulative preferred stock

Correct AnswerverifiedShow Answer

Preferred stockholders generally do not have the right to vote for the board of directors.

Correct AnswerverifiedShow Answer

Stockholders of a corporation directly elect

Correct AnswerverifiedShow Answer

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Correct AnswerverifiedShow Answer

Regular dividends are declared out of

Correct AnswerverifiedShow Answer

Which of the following statements about treasury stock is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The per share amount normally assigned by the board of directors to a small stock dividend is

Correct AnswerverifiedA

Leary Manufacturing Corporation purchased 5,000 shares of its own previously issued $10 par common stock for $125,000.As a result of this event,

Correct AnswerverifiedShow Answer

A corporation acts under its own name rather than in the name of its stockholders.

Correct AnswerverifiedTrue

A liability arises when the board of directors declares a stock dividend.

Correct AnswerverifiedShow Answer

When no-par common stock with a stated value is issued for cash, the common stock account is credited for an amount equal to the cash proceeds.

Correct AnswerverifiedFalse

If a stockholder cannot attend a stockholders' meeting, he may delegate his voting rights by means of a(n)

Correct AnswerverifiedShow Answer

The Paid-in Capital in Excess of Par Value is increased in the accounting records when

Correct AnswerverifiedShow Answer

Treasury stock is a contra stockholders' equity account.

Correct AnswerverifiedShow Answer

Dividends in arrears are dividends on

Correct AnswerverifiedShow Answer

Which of the following phrases is not descriptive of the corporate form of business?

Correct AnswerverifiedShow Answer

The declaration and distribution of a stock dividend will

Correct AnswerverifiedShow Answer

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A

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True

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False

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