Quiz of multiple choice questions for chapter 11 Attempt review PDF

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Quiz of multiple choice questions for chapter 11 Attempt review...

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Dashboard / My Courses / 2021FAIBAD_9710 / CHAPTER 11: REPORTING AND ANALYZING STOCKHOLDERS' EQUITY / Quiz of multiple choice questions for chapter 11

Started on State Completed on Time taken

Thursday, 3 December 2020, 6:30 PM Finished Thursday, 3 December 2020, 7:22 PM 51 mins 37 secs

Marks

34,00/40,00

Grade

8,50 out of 10,00 (85%)

Question 1 Correct

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If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to Select one: a. decrease total retained earnings and increase total liabilities. b. decrease total assets and total stockholders’ equity. c. reduce the amount of retained earnings available for dividend declarations.

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d. increase stockholders’ equity and to decrease total liabilities. The correct answer is: reduce the amount of retained earnings available for dividend declarations.

Question 2 Correct

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What is the total stockholders’ equity based on the following account balances?

Common Stock

$1,500,000

Paid-In Capital in Excess of Par

120,000

Retained Earnings

570,000

Treasury Stock

60,000

Select one: a. $ 1,890,000. b. $ 2,250,000. c. $ 1,380,000. d. $ 2,130,000. Your answer is correct. The correct answer is: $ 2,130,000.

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Question 3 Correct

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Which of the following statements about treasury stock is true? Select one: a. Companies acquire treasury stock to increase the number of shares outstanding. b. Few corporations have treasury stock. c. Companies acquire treasury stock to decrease earnings per share. d. Purchasing treasury stock is done to eliminate hostile shareholder buyouts.

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Your answer is correct. The correct answer is: Purchasing treasury stock is done to eliminate hostile shareholder buyouts.

Question 4 Correct

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Which of the following statements is not considered a disadvantage of the corporate form of organization? Select one: a. Additional taxes. b. Separation of ownership and management. c. Limited liability of stockholders. d. Government regulations. The correct answer is: Limited liability of stockholders.

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Question 5 Correct

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Stock dividends and stock splits have the following effects on retained earnings:

Stock Splits

Stock Dividends

Increase

No change

No change

Decrease

Decrease

Decrease

No change

No change

Select one: a. No change

No change

b. Decrease

Decrease

c. Increase

No change

d. No change

Decrease

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Your answer is correct. The correct answer is: No change

Decrease

Question 6 Correct

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The following data is available for BOX Corporation at December 31, 2014:

Common stock, par $10 (authorized 30,000 shares)

Treasury stock (at cost $15 per share)

$ 200,000

$ 1,200

Based on the data, how many shares of common stock are outstanding? Select one: a. 20,000. b. 30,000. c. 29,920. d. 19,920 Your answer is correct. The correct answer is: 19,920

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Question 7 Correct

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Dividends in arrears on cumulative preferred stock Select one: a. are considered to be a non-current liability. b. should be disclosed in the notes to the financial statements.

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c. only occur when preferred dividends have been declared. d. are considered to be a current liability. The correct answer is: should be disclosed in the notes to the financial statements.

Question 8 Correct

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Ace Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock? Select one: a. $ 6,000 in total. b. $ 0.60 per share. c. $ 60,000 in total.

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d. $ 60 per share. The correct answer is: $ 60,000 in total.

Question 9 Correct

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Brewer Inc. has 3,000 shares of 8%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2014, and December 31, 2013. The board of directors declared and paid a $9,000 dividend in 2013. In 2014, $36,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2014? Select one: a. $ 21,000. b. $ 18,000. c. $ 12,000. d. $ 15,000. The correct answer is: $ 15,000.

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Question 10 Correct

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The two ways that a corporation can be classified by ownership are Select one: a. stock and non-stock. b. inside and outside. c. majority and minority. d. publicly held and privately held.

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The correct answer is: publicly held and privately held.

Question 11 Correct

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A corporation purchases 10,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders’ equity? Select one: a. Decrease by $ 250,000.

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b. Increase by $ 100,000. c. Decrease by $ 100,000. d. Increase by $ 250,000. The correct answer is: Decrease by $ 250,000.

Question 12 Correct

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Cey, Inc. issued 5,000 shares of stock at a stated value of $10/share. The total issue of stock sold for $15/share. The journal entry to record this transaction would include a Select one: a. credit to Paid-in Capital in Excess of Par Value for $25,000. b. credit to Common Stock for $50,000. c. debit to Cash for $50,000. d. credit to Common Stock for $75,000. The correct answer is: credit to Common Stock for $50,000.

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Question 13 Incorrect

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The board of directors of Yancey Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on August 15, 2014, to stockholders of record on July 31, 2014. The effects of the journal entry to record the declaration of the dividend on July 15, 2014, are to Select one: a. decrease stockholders’ equity and decrease assets. b. increase stockholders’ equity and increase liabilities.

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c. decrease stockholders’ equity and increase liabilities. d. increase stockholders’ equity and decrease assets. The correct answer is: decrease stockholders’ equity and increase liabilities.

Question 14 Correct

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Identify the effect the declaration of a stock dividend has on the par value per share and book value per share.

Par Value per Share

Book Value per Share

Increase

Decrease

No effect

Increase

Decrease

Decrease

Noeffect

Decrease

Select one: a. Decrease b. No effect c. Increase d. No effect

Decrease 

Decrease Decrease Increase

Your answer is correct. The correct answer is: No effect

Decrease

Question 15 Correct

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Kaplan Manufacturing Corporation purchased 2,000 shares of its own previously issued $10 par common stock for $46,000. As a result of this event, Select one: a. Kaplan’s total stockholders’ equity decreased $46,000.

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b. Kaplan’s Paid-in Capital in Excess of Par Value account decreased $26,000. c. Kaplan’s Common Stock account decreased $20,000. d. All of the above. The correct answer is: Kaplan’s total stockholders’ equity decreased $46,000.

Question 16 Correct

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When retained earnings are restricted, total retained earnings Select one: a. increase. b. decrease. c. may increase or decrease. d. are unaffected. The correct answer is: are unaffected.

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Question 17 Correct

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Nance Corporation’s December 31, 2014 balance sheet showed the following:

8% preferred stock, $20 par value, cumulative, 20,000 shares authorized; 10,000 shares issued

$ 200,000

Common stock, $10 par value, 2,000,000 shares authorized; 1,300,000 shares issued, 1,280,000 shares outstanding Paid-in capital in excess of par value – preferred stock Paid-in capital in excess of par value – common stock Retained earnings Treasury stock (20,000 shares)

13,000,000 40,000 18,000,000 5,100,000 420,000

Nance declared and paid a $50,000 cash dividend on December 15, 2014. If the company’s dividends in arrears prior to that date were $12,000, Nance’s common stockholders received Select one: a. $ 22,000.

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b. $ 18,000. c. $ 38,000. d. no dividend. Your answer is correct. The correct answer is: $ 22,000.

Question 18 Correct

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Nice Corporation issues 20,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $2,200,000 and a credit or credits to Select one: a. Preferred Stock for $ 2,000,000 and Retained Earnings for $ 200,000. b. Paid-in Capital from Preferred Stock for $ 2,200,000. c. Preferred Stock for $ 2,200,000. d. Preferred Stock for $ 2,000,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $ 200,000. The correct answer is: Preferred Stock for $ 2,000,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $ 200,000.

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Question 19 Correct

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The board of directors of Yancey Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on August 15, 2014, to stockholders of record on July 31, 2014. The correct entry to be recorded on July 15, 2014, will include a Select one: a. credit to Cash. b. debit to Dividends Payable. c. credit to Cash Dividends. 

d. debit to Cash Dividends. The correct answer is: debit to Cash Dividends.

Question 20 Correct

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The following information pertains to Benedict Company. Assume that all balance sheet amounts represent average balance figures.

Total assets

$300,000

Stockholders’ equity—common

160,000

Total stockholders’ equity

200,000

Sales

100,000

Net income

20,000

Number of shares of common stock

6,000

Common stock dividends

6,000

Preferred stock dividends

4,000

What is the return on common stockholders’ equity ratio for Benedict? Select one: a. 10.0%. b. 8.8%. c. 8.0%. d. 12.5%. Your answer is correct. The correct answer is: 10.0%.

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Question 21 Correct

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Which of the following phrases is not descriptive of the corporate form of business? Select one: a. Unlimited liability.

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b. Professional management. c. Continuous existence. d. Double taxation on distributed earnings. The correct answer is: Unlimited liability.

Question 22 Correct

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Watson, Inc. has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2014. There were no dividends declared in 2012. The board of directors declares and pays a $ 50,000 dividend in 2013 and in 2014. What is the amount of dividends received by the common stockholders in 2014? Select one: a. $ 30,000. b. $ 50,000. c. $ 10,000.

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d. $ 0. The correct answer is: $ 10,000.

Question 23 Correct

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On January 1, Edmiston Corporation had 1,200,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event, Select one: a. Edmiston’s Stock Dividends account increased $1,800,000. b. All of the above. c. Edmiston’s Paid-in Capital in Excess of Par Value account increased $600,000. d. Edmiston’s total stockholders’ equity was unaffected. The correct answer is: All of the above.

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Question 24 Incorrect

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Racer Corporation’s December 31, 2014 balance sheet showed the following:

8% preferred stock, $20 par value, cumulative, 30,000 shares authorized; 15,000 shares issued

$ 300,000

Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding

19,500,000

Paid-in capital in excess of par value – preferred stock

60,000

Paid-in capital in excess of par value – common stock

27,000,000

Retained earnings Treasury stock (15,000 shares)

7,650,000 630,000

Racer’s total paid-in capital was Select one: a. $ 46,230,000. b. $ 46,860,000. c. $ 27,060,000.

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d. $ 47,490,000. Your answer is incorrect. The correct answer is: $ 46,860,000.

Question 25 Correct

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A corporation records a dividend-related liability Select one: a. on the declaration date. b. on the record date. c. on the payment date. d. when dividends are in arrears. Your answer is correct. The correct answer is: on the declaration date.

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Question 26 Incorrect

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Denson, Inc. has 10,000 shares of 8%, $100 par value, non-cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2014. There were no dividends declared in 2013. The board of directors declares and pays a $120,000 dividend in 2014. What is the amount of dividends received by the common stockholders in 2014? Select one: a. $ 120,000. b. $ 40,000. c. $0. d. $ 80,000.

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The correct answer is: $ 40,000.

Question 27 Incorrect

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Which of the following statements is not true about a 2-for-1 stock split? Select one: a. A stockholder with 5 shares before the split owns 10 shares after the split. b. Total paid-in capital increases. c. Par value per share is reduced to half of what it was before the split.

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d. The market value of the stock will probably decrease. The correct answer is: Total paid-in capital increases.

Question 28 Incorrect

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On January 1, Hamblin Corporation had 80,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The stock was distributed on March 30. The entry to record the transaction of March 30 would include a Select one: a. credit to Cash for $80,000. b. debit to Stock Dividends for $24,000. c. debit to Common Stock Dividends Distributable for $80,000. d. credit to Paid-in Capital in Excess of Par Value for $24,000. Your answer is incorrect. The correct answer is: debit to Common Stock Dividends Distributable for $80,000.

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Question 29 Correct

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XYZ Company has $20,000 of dividends in arrears. Based on this information, which of the following statements is false? Select one: a. The investment community looks favorably on companies with dividends in arrears, since the money is redirected toward more important growth opportunities.

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b. The amount of dividends in arrears should be disclosed in the notes to the financial statements. c. An obligation for dividends in arrears exists only after the board of directors declares payment. d. Dividends in arrears are not considered to be liabilities. The correct answer is: The investment community looks favorably on companies with dividends in arrears, since the money is redirected toward more important growth opportunities.

Question 30 Correct

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The per share amount normally assigned by the board of directors to a large stock dividend is Select one: a. zero. b. the average price paid by stockholders on outstanding shares. c. the par or stated value of the stock.

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d. the market value of the stock on the date of declaration. The correct answer is: the par or stated value of the stock.

Question 31 Correct

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The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to Select one: a. increase total expenses and total liabilities. b. decrease total liabilities and stockholders’ equity. c. increase total assets and stockholders’ equity. d. decrease total assets and stockholders’ equity. The correct answer is: decrease total assets and stockholders’ equity.

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Question 32 Correct

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CAB Inc. has 1,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock? Select one: a. $ 4,000 in total.

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b. $ 0.40 per share. c. $ 400 in total. d. $ 40 per share. The correct answer is: $ 4,000 in total.

Question 33 Correct

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Regular dividends are declared out of Select one: a. common stock. b. paid-in capital in excess of par value. c. retained earnings.

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d. treasury stock. The correct answer is: retained earnings.

Question 34 Correct

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When stock dividends are distributed, Select one: a. no entry is necessary if it is a large stock dividend. b. retained earnings is decreased. c. Paid-in Capital in Excess of Par Value is debited if it is a small stock dividend. d. Common Stock Dividends Distributable is decreased. The correct answer is: Common Stock Dividends Distributable is decreased.

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Question 35 Incorrect

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Berman Inc. has 4,000 shares of 8%, $ 50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2013, and December 31, 2014. The board of directors declared and paid a $ 12,000 dividend in 2013. In 2014, $48,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2014? Select one: a. $ 16,000. b. $ 20,000.

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c. $ 24,000. d. $ 28,000. The correct answer is: $ 28,000.

Question 36 Correct

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S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $20,000 by issuing 10,000 shares of its common stock (par $1). The stock trades on...