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Intermediate Accounting- 13th Edition




Question;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


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