107) The balance of Retained Earning at the end of the year represents:
A) Current year’s profits less payments to owners.
B) Total earnings less payments to owners over the life of the company.
C) Total contributions from owners less withdrawals over the life of the company.
D) Total earnings over the life of the company.
108) Retained Earnings normally has an account balance that:
A) Has a normal debit balance.
B) Decreases stockholders’ equity.
C) Is equal to the balance in cash.
D) Increases stockholders’ equity.
109) Journal entries to record cash dividends are made on the:
A) Declaration date, record date, and payment date.
B) Record date and payment date.
C) Declaration date and payment date.
D) Declaration date and record date.
42
110) On June 1, the board of directors declares a cash dividend to be paid on June 30 to
stockholders of record on June 15. On which date would the company record a credit to the
Dividends Payable account?
A) June 30
B) June 15
C) June 1
D) Dividends Payable is never credited
111) The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1
par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000
shares issued, and 5,000 shares held as treasury stock.
What is the entry when the dividends are declared?
A.
Dividends
9,000
Dividends Payable
9,000
B.
Dividends
9,000
Cash
9,000
C.
Dividends
12,000
Dividends Payable
12,000
D.
Dividends
12,000
Cash
12,000
A) Option A
B) Option B
C) Option C
D) Option D
Dividends [(20,000 – 5,000) × $0.60]
Dividends Payable
112) The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1
par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000
shares issued, and 5,000 shares held as treasury stock.
Assuming the dividends were declared on June 1, what is the entry on June 30 to record the
payment of cash dividends?
A.
Dividends
Dividends Payable
9,000
B.
Dividends Payable
Cash
9,000
C.
Dividends
Dividends Payable
12,000
D.
Dividends Payable
Cash
12,000
A) Option A.
B) Option B.
C) Option C.
D) Option D.
Dividends Payable [(20,000 – 5,000) × $.60]
Cash
113) The following amounts represent totals from the first three years of operations. Calculate
the balance of Retained Earnings at the end of 2021.
2019
2020
2021
Net Income (loss)
$
1,200
$
(500
)
$
2,300
Net Cash Flows
$
500
$
300
$
2,800
Dividends
$
200
$
0
$
200
Issuance of Stock
$
2,000
$
0
$
0
A) $2,600.
B) $4,600.
C) $3,100.
D) $3,500.
114) The ending Retained Earnings balance of Lambert Inc. increased by $1.5 million from the
beginning of the year. The company’s net income earned during the year is $3.5 million. What is
the amount of dividends Lambert Inc. declared and paid?
A) $1.5 million.
B) $3.5 million.
C) $2.0 million.
D) $5.0 million.
115) Over the first four years of the company’s life, the company earned the following net
income (loss): $6,000; $3,000; $6,000, and ($2,000). If the company’s ending retained earnings is
$10,000 after year 4, what is the average amount of dividends paid per year?
A) $3,000.
B) $7,000.
C) $0.
D) $750.
116) Fashion, Inc. had a Retained Earnings balance of $12,000 at December 31, 2021. The
company had an average income of $7,500 over the next 3 years, and an ending Retained
Earnings balance of $15,000 at December 31, 2024. What was the total amount of dividends paid
over the last three years?
A) $4,500.
B) $6,500.
C) $19,500.
D) $27,000.
117) Given the information below, what was the amount of Dividends in the current period?
Beginning Retained Earnings = $150,000.
Increase in Cash = $40,000.
Ending Retained Earnings = $200,000.
Issuance of Common Stock = $50,000.
Net Income = $160,000.
A) $90,000.
B) $60,000.
C) $110,000.
D) $150,000.
118) A noncash asset that is distributed to stockholders is referred to as a:
A) Treasury dividend.
B) Property dividend.
C) Preferred dividend.
D) Real dividend.
119) Both cash dividends and stock dividends:
A) Reduce total assets.
B) Reduce total liabilities.
C) Reduce total stockholders’ equity.
D) Reduce retained earnings.
120) The declaration and issuance of a stock dividend:
A) Does not change total assets, liabilities, or total stockholders’ equity.
B) Decreases total stockholders’ equity and increases common stock.
C) Decreases assets and decreases total stockholders’ equity.
D) Does not change retained earnings or paid-in capital.
121) The issuer of a 100% common stock dividend (large stock dividend) to common
stockholders should debit stock dividends for an amount equal to the
A) Book value of the shares issued.
B) Par value of the shares issued.
C) Market value of the shares issued.
D) Minimum legal requirements.
122) The issuer of a 100% common stock dividend (large stock dividend) to common
stockholders should credit common stock for an amount equal to the
A) Book value of the shares issued.
B) Par value of the shares issued.
C) Market value of the shares issued.
D) Minimum legal requirements.
123) The issuer of a 5% common stock dividend (small stock dividend) to common stockholders
should debit stock dividends for an amount equal to the
A) Book value of the shares issued.
B) Par or stated value of the shares issued.
C) Market value of the shares issued.
D) Minimum legal requirements.
124) The entry to record a large stock dividend would include a:
A) Debit to Additional Paid-in Capital.
B) Debit to Common Stock.
C) Debit to Stock Dividends.
D) Credit to Stock Dividends.
125) The issuer of a 5% common stock dividend (small stock dividend) to common stockholders
should credit common stock for an amount equal to the
A) Book value of the shares issued.
B) Par or stated value of the shares issued.
C) Market value of the shares issued.
D) Minimum legal requirements.
126) A feature common to both stock splits and stock dividends is
A) That there is no effect on total stockholders’ equity.
B) A reduction in the contributed capital of a corporation.
C) A transfer to earned capital of a corporation.
D) An increase in total liabilities of a corporation.
127) Large stock dividends and stock splits are issued primarily to:
A) Lower the trading price of the stock per share.
B) Increase the number of authorized shares.
C) Increase legal capital.
D) Increase the number of outstanding shares.
128) The Common Stock account in a company’s balance sheet is measured as:
A) The number of common shares outstanding × the stock’s par value per share.
B) The number of common shares outstanding × the stock’s current market value per share.
C) The number of common shares issued × the stock’s par value per share.
D) The number of common shares issued × the stock’s current market value per share.
129) The stockholders’ equity section in the balance sheet shows:
A) The ending balance in each stockholders’ equity account.
B) How each equity account changed over time.
C) The average balance in each stockholders’ equity account.
D) More information than the statement of stockholders’ equity.
130) The statement of stockholders’ equity shows:
A) Only the ending balance in each stockholders’ equity account.
B) How each equity account changed over time.
C) Only the beginning balance in each stockholders’ equity account.
D) Less information than the stockholders’ equity section in the balance sheet.
131) The statement of stockholders’ equity shows:
A) Only the ending balance in each stockholders’ equity account.
B) More information than the stockholders’ equity section in the balance sheet.
C) Only the beginning balance in each stockholders’ equity account.
D) Less information than the stockholders’ equity section in the balance sheet.
132) How does the stockholders’ equity section in the balance sheet differ from the statement of
stockholders’ equity?
A) The stockholders’ equity section is more detailed than the statement of stockholders’ equity.
B) The stockholders’ equity section shows balances at a point in time; whereas, the statement of
stockholders’ equity shows activity over a period of time.
C) The stockholders’ equity section shows activity over a period of time; whereas, the statement
of stockholders’ equity is at a point time.
D) There are no differences between them.
133) Clothing Emporium was organized on January 1, 2021. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2021, Clothing Emporium had the
following transactions relating to stockholders’ equity:
Issued 30,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
What is the total amount recorded in the Common Stock account at the end of 2021?
A) $420,000.
B) $370,000.
C) $470,000.
D) $250,000.
134) Clothing Emporium was organized on January 1, 2021. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2021, Clothing Emporium had the
following transactions relating to stockholders’ equity:
Issued 30,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
What is total paid-in capital at the end of 2021?
A) $420,000.
B) $370,000.
C) $470,000.
D) $320,000.
135) Clothing Emporium was organized on January 1, 2021. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2021, Clothing Emporium had the
following transactions relating to stockholders’ equity:
Issued 30,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
What is the ending balance in the Retained Earnings account at the end of 2021?
A) $50,000.
B) $370,000.
C) $420,000.
D) $100,000.
136) Clothing Emporium was organized on January 1, 2021. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2021, Clothing Emporium had the
following transactions relating to stockholders’ equity:
Issued 30,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
What is the total stockholders’ equity at the end of 2021?
A) $420,000.
B) $370,000.
C) $470,000.
D) $250,000.
137) Roberto Designers was organized on January 1, 2021. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2021, Roberto had the following
transactions relating to stockholders’ equity:
Issued 10,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8).
What is the balance in the Treasury Stock account at the end of 2021?
A) $160,000.
B) $260,000.
C) $30,000.
D) $250,000.
138) Roberto Designers was organized on January 1, 2021. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2021, Roberto had the following
transactions relating to stockholders’ equity:
Issued 10,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8).
What is total stockholders’ equity at the end of 2021?
A) $270,000.
B) $300,000.
C) $250,000.
D) $200,000.
139) Why doesn’t stockholders’ equity equal the market value of equity?
A) Stockholders’ equity usually does equal the market value of equity.
B) Investors tend to incorrectly price the market value of equity.
C) It’s related to the use of historical cost to report many long-term assets and the expensing of
value generating costs such as research and development and advertising.
D) It’s due to incorrect entries prepared by accountants.
140) The balance sheet of California Clothing reports total equity of $600,000 and $700,000 at
the beginning and end of the year, respectively. Net income and sales for the year are $65,000
and $1,300,000, respectively. What is California Clothing’s return on equity?
A) 10%.
B) 20%.
C) 200%.
D) 5%.
141) Western Wear reports net income and sales for the year of $65,000 and $1,300,000,
respectively. Return on equity is 10%. What is Western Wear’s average Stockholders’ Equity for
the year?
A) $650,000.
B) $13,000,000.
C) $682,500.
D) 5%.
142) The balance sheet of Sand Sportswear reports total equity of $500,000 and $650,000 at the
beginning and end of the year, respectively. The return on equity for the year is 20%. What is
Sand Sportswear’s net income for the year?
A) $100,000.
B) $130,000.
C) $2,875,000.
D) $115,000.