978-0134125053 Chapter 10 Part 2

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12) A company issues 15,000 shares of its $22 par common stock for $32 per share. The amount

to be debited to Cash is:

A) $330,000.

B) $480,000.

C) $150,000.

D) $810,000.

Question Type: Application

13) A company issues 55,000 shares of its $5 par common stock for $20 per share. The amount

to be debited to Cash is:

A) $275,000.

B) $825,000.

C) $1,375,000.

D) $1,100,000.

Question Type: Application

14) A journal entry for the sale of $10 par-common stock for $18 per share would include a:

A) credit to Cash.

B) debit to Common Stock.

C) credit to Paid-In Capital in Excess of Par–Common Stock.

D) debit to Paid-In Capital in Excess of Par–Common Stock.

Question Type: Concept

15) If shares of preferred stock are sold at par value for cash, the transaction would be entered

by:

A) debiting Cash and crediting Preferred Stock.

B) debiting Preferred Stock and crediting Cash.

C) debiting Cash and crediting Paid-in Capital in Excess of Par.

D) debiting Paid-In Capital in Excess of Par and crediting Preferred Stock.

Question Type: Concept

16) Lionworks, Inc. issues 5,000 shares of $40 par common stock for $43 per share. The amount

credited to paid-in capital in excess of par is:

A) $200,000.

B) $215,000.

C) $15,000.

D) $0.

Question Type: Application

17) Illusions Corp. issues 8,000 shares of $24 par common stock for $29 per share. The amount

credited to paid-in capital in excess of par is:

A) $192,000.

B) $40,000.

C) $8,000.

D) $232,000.

Question Type: Application

18) Evergreen Corp. issues 12,000 shares of $5 par common stock for $8.50 per share. The

amount credited to paid-in capital in excess of par is:

A) $102,000.

B) $60,000.

C) $12,000.

D) $42,000.

Question Type: Application

19) The entry to record TLR, Inc. selling 1,200 shares of $6 par common stock at $10 per share

would be to:

A) debit Cash $12,000; credit Common Stock $7,200; credit Paid-In Capital in Excess of Par–

Common Stock $4,800.

B) debit Cash $7,200; credit Common Stock $7,200.

C) debit Cash $12,000; debit Paid-In Capital in Excess of Par–Common $4,800; credit Common

Stock $16,800.

D) debit Cash $12,000; credit Common Stock $12,000.

Question Type: Application

20) The entry to record S&C, Inc. selling 1,500 shares of $9 par common stock for $22 per share

would be to:

A) debit Cash $33,000; credit Common Stock $33,000.

B) debit Cash $33,000; credit Common Stock $13,500; credit Paid-In Capital in Excess of Par-

Common Stock $19,500.

C) debit Cash $13,500; credit Common Stock $13,500.

D) debit Cash $13,500; debit Paid-In Capital in Excess of Par–Common $19,500; credit

Common Stock $33,000.

Question Type: Application

21) The entry to record selling 400 shares of $28 stated value common stock for $44 per share

would include:

A) debiting Common Stock for $17,600.

B) crediting Cash for $17,600.

C) crediting Paid-in Capital in Excess of Stated Value for $6,400.

D) debiting Paid–in Capital in Excess of Stated Value for $6,400.

Question Type: Application

22) The entry to record selling 700 shares of stated value $50 common stock for $74 per share

would be:

A) debit Cash $51,800; credit Common Stock $51,800.

B) debit Cash $35,000; credit Common Stock $35,000.

C) debit Cash $35,000; debit Paid–in Capital in Excess of Stated Value–$16,800; credit Common

Stock $51,800.

D) debit Cash $51,800; credit Common Stock $35,000; credit Paid–in Capital in Excess of Stated

Value–$16,800.

Question Type: Application

23) The entry to record selling 800 shares of stated value $37 common stock for $59 per share

would be:

A) debit Cash $47,200; credit Common Stock $29,600; credit Paid–in Capital in Excess of Stated

Value–$17,600.

B) debit Cash $29,600; credit Common Stock $29,600.

C) debit Cash $29,600; debit Paid–in Capital in Excess of Stated Value–$17,600; credit Common

Stock $47,200.

D) debit Cash $47,200; credit Common Stock $47,200.

Question Type: Application

24) A company issued 700 shares of $2 par common stock in exchange for a piece of equipment

with a current market value of $24,000. Which of the following is the correct journal entry for

this transaction?

Equipment

24,000

Common Stock

1,400

Paid-in Capital in Excess of Par —

Common

22,600

Paid-in Capital in Excess of Par —

Common

22,600

Common Stock

1,400

Equipment

24,000

Equipment

24,000

Common Stock

24,000

Equipment

24,000

Common Stock

700

Paid-in Capital in Excess of Par —

Common

23,300

Question Type: Application

25) TLR Productions issued 40 shares of $16 par value stock to its accountant in full payment for

her $1,300 fee for assisting in setting up the new company. The entry to record the issuance of

the stock would include a:

A) debit to Common Stock for $640.

B) credit to Common Stock for $1,300.

C) credit to Common Stock for $640.

D) debit to Paid-in Capital in Excess of Par–Common for $660.

Question Type: Application

26) Ironworks, Inc. issued 400 shares of $9 par common stock in exchange for a piece of

equipment with a current market value of $5,000. Which of the following is NOT part of the

journal entry for this transaction?

A) Debiting equipment for $5,000

B) Crediting Common Stock for $5,000

C) Crediting paid-in capital in excess of par-common for $1,400

D) Crediting Common Stock for $3,600

Question Type: Application

27) NW Stone Supply issued 50 shares of $14 par common stock in exchange for a piece of

equipment with a current market value of $1,000. Which of the following is NOT part of the

journal entry for this transaction?

A) Debiting equipment for $700

B) Crediting Common Stock for $700

C) Debiting equipment for $1,000

D) Crediting paid-in capital in excess of par-common for $300

Question Type: Application

28) Evergreen Building, Inc. issued 2,000 shares of $14 par common stock in exchange for a

truck with a current market value of $45,000. Which of the following is NOT part of the journal

entry for this transaction?

A) Debiting equipment for $45,000

B) Crediting Common Stock for $45,000

C) Crediting Common Stock for $28,000

D) Crediting paid-in capital in excess of par-common for $17,000

Question Type: Application

10.4 Account for cash dividends

1) Paying dividends causes a decrease in total assets, but an increase in total Stockholders‘

Equity.

Question Type: Concept

2) Corporations declare cash dividends from Retained Earnings.

Question Type: Concept

3) The portion of Stockholders‘ Equity that can be used for dividends is referred to as legal

capital.

Question Type: Concept

4) Preferred stock may have its dividend rate listed as a percentage of par value per share or as a

flat stated amount.

Question Type: Concept

5) If a corporation has both common and preferred stock, the preferred stockholders will receive

their dividends first, if the money is available.

Question Type: Concept

6) Cumulative common stock will pay dividends in arrears.

Question Type: Concept

7) If a company has 2,500 shares authorized and 1,500 have been issued, the annual dividends on

$20 par 5% preferred stock is $1,500.

Question Type: Application

8) If a company has 3,000 shares authorized and 2,000 have been issued, the annual dividends on

$18 par 3% preferred stock is $1,620.

Question Type: Application

9) A company has 50,000 shares of $1 par, 10% preferred stock. The 10% refers to the stock’s:

A) market rate.

B) dividend rate.

C) paid-in capital rate.

D) interest rate.

Question Type: Concept

10) Which of the following is NOT a date associated with cash dividends?

A) Date of issuance

B) Date of declaration

C) Date of payment

D) Date of record

Question Type: Concept

11) Which of the following dates do NOT require a journal entry?

A) Date of payment

B) Date of record

C) Date of declaration

D) All dividend dates require a journal entry.

Question Type: Concept

12) The date of declaration creates a(n) ________ for the corporation.

A) asset

B) liability

C) expense

D) revenue

Question Type: Concept

13) The date of record is the date that:

A) the board of directors announces a dividend will be paid.

B) the dividends will be transferred to the shareholders.

C) the shareholders purchased the stock.

D) will determine which shareholders receive the dividends.

Question Type: Concept

14) On the date of declaration:

A) debit Dividends and credit Retained Earnings.

B) debit Dividends Payable and credit Cash.

C) debit Retained Earnings and credit Cash.

D) debit Retained Earnings and credit Dividends Payable.

Question Type: Application

15) On the date of record:

A) debit Dividends and credit Retained Earnings.

B) debit Dividends Payable and credit Cash.

C) no entry is required.

D) debit Retained Earnings and credit Dividends Payable.

Question Type: Concept

16) On the date of payment:

A) debit Dividends and credit Retained Earnings.

B) debit Dividends Payable and credit Cash.

C) debit Cash and credit Dividends Payable.

D) debit Retained Earnings and credit Dividends Payable.

Question Type: Concept

17) A type of stock that pays dividends in arrears is:

A) cumulative common stock.

B) cumulative preferred stock.

C) non-cumulative common stock.

D) non-cumulative preferred stock.

Question Type: Concept

18) The formula to determine dividends on par-value preferred stock is:

A) number of outstanding shares times dividend rate.

B) dividend rate times par value.

C) par value times number of outstanding shares times dividend rate.

D) number of outstanding shares divided by the dividend rate.

19) What are the annual dividends on $22 par preferred 5% stock, if 2,100 shares are authorized

and 800 shares have been issued?

A) $880

B) $2,310

C) $110

D) $22

Question Type: Application

20) The liability “dividend payable” is recognized on the date of:

A) stock issue.

B) payment.

C) record.

D) declaration.

Question Type: Concept

21) Payment of a cash dividend causes a(n):

A) increase in liabilities.

B) decrease in an assets.

C) increase in Stockholders’ Equity.

D) increase in revenue.

Question Type: Concept

22) What are dividends in arrears?

A) The portion of Stockholders’ Equity that cannot be used to pay dividends

B) A distribution of a corporation’s own stock to its shareholders

C) The portion of an annual dividend on cumulative preferred stock which has not been paid

D) An increase in the number of outstanding shares of stock

Question Type: Concept

23) Vintage Boutique’s outstanding stock is 90 shares of $110 par, 11% cumulative preferred

stock and 2,500 shares of $14 par common stock. Vintage Boutique paid $1,600 in cash

dividends during the year. No dividends are in arrears. Common stockholders received:

A) $0.

B) $511.

C) $1,600.

D) $1,089.

Question Type: Application

24) Cypress Corporation’s outstanding stock is 75 shares of $55-par, 7% non-cumulative

preferred stock and 2,100 shares of $12-par common stock. Cypress paid $2,500 in dividends

during the year. Common stockholders received:

A) $2,500.

B) $2,211.

C) $289.

D) $0.

Question Type: Application

25) Stonework Company‘s outstanding stock is 80 shares of $80, 4% cumulative preferred stock

and 2,000 shares of $12 par common stock. Stonework paid $2,000 in cash dividends including

one-year dividends in arrears to preferred stockholders. Common stockholders received:

A) $1,744.

B) $1,488.

C) $960.

D) $0.

Question Type: Application

26) Sonny‘s Sails has declared a $44,000 cash dividend to shareholders. The company has 4,000

shares of $20-par, 6% preferred stock and 10,000 shares of $16-par common stock. The

preferred stock is non-cumulative. How much will be distributed to the preferred and common

stockholders on the date of payment?

A) $44,000 preferred, $0 common

B) $0 preferred, $44,000 common

C) $39,200 preferred, $4,800 common

D) $4,800 preferred, $39,200 common

Question Type: Application

27) Ironworks, Inc. has declared a $21,000 cash dividend to shareholders. The company has

5,000 shares of $15-par, 7% preferred stock and 11,000 shares of $20-par common stock. The

preferred stock is non-cumulative. How much will be distributed to the preferred and common

stockholders on the date of payment?

A) $0 preferred, $21,000 common

B) $5,250 preferred, $15,750 common

C) $21,000 preferred, $0 common

D) $15,750 preferred, $5,250 common

Question Type: Application