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Chapter 12 - Corporations: Organization, Stock Transactions, and Dividends
RATIONALE:
Preferred stock dividend to be paid = 20,000 × $100 × 2% = $40,000
Year 1
Year 2
Preferred stock dividend to
be paid
$40,000
$70,000
($40,000 + $30,000)
Preferred stock dividend
paid
(10,000)
(45,000)
Arrears
$30,000
$25,000
Dividends per share:
Preferred stock = $45,000 / 20,000 = $2.25
Common stock = $0.00
POINTS:
1
DIFFICULTY:
Bloom's: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-02 - LO: 12-02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
101. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par
common stock. The following amounts were distributed as dividends:
Year 1:
$10,000
Year 2:
45,000
Year 3:
90,000
Determine the dividends per share for preferred and common stock for the third year.
a.
$4.50 and $0.25
b.
$3.25 and $0.25
c.
$4.50 and $0.90
d.
$2.00 and $0.25
ANSWER:
b
RATIONALE:
Preferred stock dividend to be paid = 20,000 × $100 × 2% = $40,000
Year 1
Year 2
Year 3
Preferred stock
dividend to be paid
$40,000
$70,000
($40,000 +
$30,000)
$65,000 ($40,000 +
$25,000)
Preferred stock
dividend paid
(10,000)
(45,000)
(65,000)
Arrears
$30,000
$25,000
$0
Common stock dividend to be paid in Year 3 = $90,000 – $65,000 = $25,000
Chapter 12 - Corporations: Organization, Stock Transactions, and Dividends
Copyright Cengage Learning. Powered by Cognero.
Page 43
ANSWER:
c
POINTS:
1
DIFFICULTY:
Bloom's: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-03 - LO: 12-03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
104. Treasury stock shares are
a.
shares held by the U.S. Treasury Department
b.
part of the total outstanding shares but not part of the total issued shares of a corporation
c.
unissued shares that are held by the treasurer of the corporation
d.
issued shares that have been reacquired by a corporation
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-05 - LO: 12-05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
105. On January 1, Vermont Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All
40,000 shares had been issued in a prior period at $20.00 per share. On February 1, Vermont purchased 3,750 shares of
treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1.
The journal entry to record the purchase of the treasury shares on February 1 would include a
a.
credit to Treasury Stock for $90,000
b.
debit to Treasury Stock for $90,000
c.
debit to a loss account for $112,500
d.
credit to a gain account for $112,500
ANSWER:
b
RATIONALE:
Value of shares purchased = Purchase price of each share × Number of shares
purchased = $24 × 3,750 = $90,000
POINTS:
1
DIFFICULTY:
Moderate
Bloom's: Applying
Chapter 12 - Corporations: Organization, Stock Transactions, and Dividends
Copyright Cengage Learning. Powered by Cognero.
Page 45
a.
Treasury Stock Receivable
b.
Premium on Capital Stock
c.
Paid-In Capital from Sale of Treasury Stock
d.
Income from Sale of Treasury Stock
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-05 - LO: 12-05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
109. Treasury stock that was purchased for $3,000 is sold for $3,500. As a result of these two transactions combined
a.
income will be increased by $500
b.
stockholders' equity will be increased by $3,500
c.
stockholders' equity will be increased by $500
d.
stockholders' equity will not change
ANSWER:
c
RATIONALE:
Effect on stockholders' equity = Sale price of treasury stock – Purchase price of
treasury stock = $3,500 – $3,000 = $500
Increase in stockholders' equity = $500
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Applying
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-05 - LO: 12-05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
110. Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500. The journal entry
to record the reissuance would include a credit to
a.
Treasury Stock for $8,500
b.
Paid-In Capital from Sale of Treasury Stock for $8,500
c.
Paid-In Capital in Excess of Par—Common Stock for $2,900
d.
Paid-In Capital from Sale of Treasury Stock for $2,900
ANSWER:
d
Chapter 12 - Corporations: Organization, Stock Transactions, and Dividends
Copyright Cengage Learning. Powered by Cognero.
Page 49
c.
the number of shares of common stock authorized
d.
all of these
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-06 - LO: 12-06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
118. Significant changes in stockholders' equity are reported in
a.
income statement
b.
retained earnings statement
c.
statement of stockholders' equity
d.
statement of cash flows
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-06 - LO: 12-06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 - Accounting for Corporations
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
119. Retained earnings
a.
is the same as contributed capital
b.
must be restricted by law
c.
changes are summarized in the retained earnings statement
d.
is equal to cash on hand
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12-06 - LO: 12-06
