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Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders




21.The residual interest in a corporation belongs to the;a. management.;b. creditors.;c. common stockholders.;d. preferred stockholders.;22. The pre-emptive right of a common stockholder is the right to;a. share proportionately in corporate assets upon liquidation.;b. share proportionately in any new issues of stock of the same class.;c. receive cash dividends before they are distributed to preferred stockholders.;d. exclude preferred stockholders from voting rights.;23. The pre-emptive right enables a stockholder to;a. share proportionately in any new issues of stock of the same class.;b. receive cash dividends before other classes of stock without the pre-emptive right.;c. sell capital stock back to the corporation at the option of the stockholder.;d. receive the same amount of dividends on a percentage basis as the preferred stockholders.;24. In a corporate form of business organization, legal capital is best defined as;a. the amount of capital the state of incorporation allows the company to accumulate over its existence.;b. the par value of all capital stock issued.;c. the amount of capital the federal government allows a corporation to generate.;d. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission.;25. Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders;a. are entitled to a dividend every year in which the business earns a profit.;b. have the rights to specific assets of the business.;c. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.;d. can negotiate individual contracts on behalf of the enterprise.;26. Total stockholders' equity represents;a. a claim to specific assets contributed by the owners.;b. the maximum amount that can be borrowed by the enterprise.;c. a claim against a portion of the total assets of an enterprise.;d. only the amount of earnings that have been retained in the business.;27. A primary source of stockholders' equity is;a. income retained by the corporation.;b. appropriated retained earnings.;c. contributions by stockholders.;d. both income retained by the corporation and contributions by stockholders.;28. Stockholders' equity is generally classified into two major categories;a. contributed capital and appropriated capital.;b. appropriated capital and retained earnings.;c. retained earnings and unappropriated capital.;d. earned capital and contributed capital.;29. The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the;a. pro forma method.;b. proportional method.;c. incremental method.;d. either the proportional method or the incremental method.;30. When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the;a. market value of the services received.;b. par value of the shares issued.;c. market value of the shares issued.;d. Any of these provides an appropriate basis for recording the transaction.;31. Direct costs incurred to sell stock such as underwriting costs should be accounted for as;1. a reduction of additional paid-in capital.;2. an expense of the period in which the stock is issued.;3. an intangible asset.;a. 1;b. 2;c. 3;d. 1 or 3;32. A "secret reserve" will be created if;a. inadequate depreciation is charged to income.;b. a capital expenditure is charged to expense.;c. liabilities are understated.;d. stockholders' equity is overstated.;33. Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?;a. authorized shares;b. issued shares;c. unissued shares;d. outstanding shares;34. Stock that has a fixed per-share amount printed on each stock certificate is called;a. stated value stock.;b. fixed value stock.;c. uniform value stock.;d. par value stock.;35. Which of the following is not a legal restriction related to profit distributions by a corporation?;a. The amount distributed to owners must be in compliance with the state laws governing corporations.;b. The amount distributed in any one year can never exceed the net income reported for that year.;c. Profit distributions must be formally approved by the board of directors.;d. Dividends must be in full agreement with the capital stock contracts as to preferences and participation.;36. In January 2010, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2010, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares;a. decreased total stockholders' equity.;b. increased total stockholders' equity.;c. did not change total stockholders' equity.;d. decreased the number of issued shares.;37. Treasury shares are;a. shares held as an investment by the treasurer of the corporation.;b. shares held as an investment of the corporation.;c. issued and outstanding shares.;d. issued but not outstanding shares.;38. When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?;a. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.;b. Paid-in capital in excess of par for the purchase price.;c. Treasury stock for the purchase price.;d. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value.;39. ?Gains" on sales of treasury stock (using the cost method) should be credited to;a. paid-in capital from treasury stock.;b. capital stock.;c. retained earnings.;d. other income.;40. Porter Corp. purchased its own par value stock on January 1, 2010 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from;a. additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein, otherwise, from retained earnings.;b. additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein.;c. retained earnings.;d. net income.;41. How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?;a. As ordinary earnings shown on the income statement.;b. As paid-in capital from treasury stock transactions.;c. As an increase in the amount shown for common stock.;d. As an extraordinary item shown on the income statement.;42. Which of the following best describes a possible result of treasury stock transactions by a corporation?;a. May increase but not decrease retained earnings.;b. May increase net income if the cost method is used.;c. May decrease but not increase retained earnings.;d. May decrease but not increase net income.;43. Which of the following features of preferred stock makes the security more like debt than an equity instrument?;a. Participating;b. Voting;c. Redeemable;d. Noncumulative;44. The cumulative feature of preferred stock;a. limits the amount of cumulative dividends to the par value of the preferred stock.;b. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.;c. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock.;d. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends.;45. According to the FASB, redeemable preferred stock should be;a. included with common stock.;b. included as a liability.;c. excluded from the stockholders? equity heading.;d. included as a contra item in stockholders' equity.;46. Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as;a. an increase in current liabilities.;b. an increase in stockholders' equity.;c. a footnote.;d. an increase in current liabilities for the current portion and long-term liabilities for the long-term portion.;47. At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the;a. declaration of a stock split.;b. declaration of a stock dividend.;c. purchase of treasury stock.;d. payment in full of subscribed stock.;48. An entry is not made on the;a. date of declaration.;b. date of record.;c. date of payment.;d. An entry is made on all of these dates.;49. Cash dividends are paid on the basis of the number of shares;a. authorized.;b. issued.;c. outstanding.;d. outstanding less the number of treasury shares.;50. Which of the following statements about property dividends is not true?;a. A property dividend is usually in the form of securities of other companies.;b. A property dividend is also called a dividend in kind.;c. The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.;d. All of these statements are true.;51. Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2010, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a;a. property dividend.;b. stock dividend.;c. liquidating dividend.;d. cash dividend.;52. A dividend which is a return to stockholders of a portion of their original investments is a;a. liquidating dividend.;b. property dividend.;c. liability dividend.;d. participating dividend.;53. A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to;a. Retained Earnings.;b. a paid-in capital account.;c. Accumulated Depletion.;d. Accumulated Depreciation.;54. If management wishes to "capitalize" part of the earnings, it may issue a;a. cash dividend.;b. stock dividend.;c. property dividend.;d. liquidating dividend.;55. Which dividends do not reduce stockholders' equity?;a. Cash dividends;b. Stock dividends;c. Property dividends;d. Liquidating dividends;56. The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding;a. increases common stock outstanding and increases total stockholders' equity.;b. decreases retained earnings but does not change total stockholders' equity.;c. may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity.;d. increases retained earnings and increases total stockholders' equity.;57. Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?;a. There should be no capitalization of retained earnings.;b. Par value;c. Market value on the declaration date;d. Market value on the payment date;58. The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the;a. market value of the shares issued.;b. book value of the shares issued.;c. minimum legal requirements.;d. par or stated value of the shares issued.;59. At the date of declaration of a small common stock dividend, the entry should not include;a. a credit to Common Stock Dividend Payable.;b. a credit to Paid-in Capital in Excess of Par.;c. a debit to Retained Earnings.;d. All of these are acceptable.;60. The balance in Common Stock Dividend Distributable should be reported as a(n);a. deduction from common stock issued.;b. addition to capital stock.;c. current liability.;d. contra current asset.;61. A feature common to both stock splits and stock dividends is;a. a transfer to earned capital of a corporation.;b. that there is no effect on total stockholders' equity.;c. an increase in total liabilities of a corporation.;d. a reduction in the contributed capital of a corporation.;62. What effect does the issuance of a 2-for-1 stock split have on each of the following?;Par Value per Share Retained Earnings;a. No effect No effect;b. Increase No effect;c. Decrease No effect;d. Decrease Decrease;63. Which one of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements?;a. Dividend preferences;b. Liquidation preferences;c. Call prices;d. Conversion or exercise prices;64. The rate of return on common stock equity is calculated by dividing;a. net income less preferred dividends by average common stockholders? equity.;b. net income by average common stockholders? equity.;c. net income less preferred dividends by ending common stockholders? equity.;d. net income by ending common stockholders? equity.;65. The payout ratio can be calculated by dividing;a. dividends per share by earnings per share.;b. cash dividends by net income less preferred dividends.;c. cash dividends by market price per share.;d. dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends.;66. Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred is equal to its par value. The book value per share of the common stock is unaffected by;a. the declaration of a stock dividend on preferred payable in preferred stock when the market price of the preferred is equal to its par value.;b. the declaration of a stock dividend on common stock payable in common stock when the market price of the common is equal to its par value.;c. the payment of a previously declared cash dividend on the common stock.;d. a 2-for-1 split of the common stock.;67. Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called;a. book value per share.;b. par value per share.;c. stated value per share.;d. market value per share.;68. Dividends are not paid on;a. noncumulative preferred stock.;b. nonparticipating preferred stock.;c. treasury common stock.;d. Dividends are paid on all of these.;69. Noncumulative preferred dividends in arrears;a. are not paid or disclosed.;b. must be paid before any other cash dividends can be distributed.;c. are disclosed as a liability until paid.;d. are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend.;70. How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?;a. Note disclosure;b. Increase in stockholders' equity;c. Increase in current liabilities;d. Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in long-term liabilities for the balance


Paper#29885 | Written in 18-Jul-2015

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