53. Chambers Corporation had the following shares of stock outstanding on December 31, 2013:
Common stock, $100 par value, 100,000 shares outstanding
Preferred stock, 8 percent, $200 par value, cumulative, 10,000 shares outstanding
Dividends were in arrears for 2011 and 2012.
On December 31, 2013, total cash dividends of $800,000 were declared. The total amounts payable to
preferred stockholders and common stockholders, respectively, are
a.
$400,000 and $400,000.
b.
$320,000 and $480,000.
c.
$480,000 and $320,000.
d.
$160,000 and $640,000.
54. Cleburne Corporation has 3,000 shares of $200 par value, 7 percent cumulative preferred stock, and
10,000 shares of $20 par value common stock outstanding during its first five years of operation.
Cleburne Corporation paid cash dividends as follows: 2009, $33,000; 2010, $0; 2011, $130,000; 2011,
$60,000; 2013, $30,000. The amount of dividends the common stockholders received during 2009 was
a.
$0.
b.
$16,500.
c.
$33,000.
d.
$49,500.
55. Elmore Corporation had the following shares of stock outstanding on December 31, 2013:
Common stock, $250 par value, 200,000 shares outstanding
Preferred stock, 8 percent, $50 par value, cumulative, 20,000 shares outstanding
Dividends were in arrears for 2011 and 2012. On December 31, 2013, total cash dividends of $400,000
were declared. The total amounts payable to preferred stockholders and common stockholders,
respectively, are
a.
$80,000 and $320,000.
b.
$240,000 and $160,000.
c.
$160,000 and $240,000.
d.
$200,000 and $200,000.
56. Henry Corporation has 3,000 shares of $50 par value, 7 percent cumulative preferred stock, and 10,000
shares of $5 par value common stock outstanding during its first five years of operation. Henry
Corporation paid cash dividends as follows: 2009, $4,500; 2010, $0; 2011, $32,500; 2012, $15,000;
2013, $7,500. The amount of dividends in arrears at the end of 2010 was
a.
$0.
b.
$6,000.
c.
$9,500.
d.
$16,500.
57. Lamar Corporation has 3,000 shares of $150 par value, 7 percent cumulative preferred stock, and
10,000 shares of $15 par value common stock outstanding during its first five years of operation.
Lamar Corporation paid cash dividends as follows: 2009, $25,500; 2010, $0; 2011, $97,500; 2012,
$45,000; 2013, $22,500. The amount of dividends received by the preferred stockholders during 2011
was
a.
$97,500.
b.
$69,000.
c.
$37,500.
d.
$27,000.
58. Beckham Corporation has 3,000 shares of $100 par value, 7 percent cumulative preferred stock, and
10,000 shares of $10 par value common stock outstanding during its first five years of operation.
Beckham Corporation paid cash dividends as follows: 2009, $30,000; 2010, $0; 2011, $65,000; 2012,
$30,000; 2013, $15,000. The amount of dividends received by the common stockholders during 2012
was
a.
$11,000.
b.
$13,000.
c.
$9,000.
d.
$15,000.
59. Macon Corporation has 3,000 shares of $300 par value, 7 percent cumulative preferred stock, and
10,000 shares of $30 par value common stock outstanding during its first five years of operation.
Macon Corporation paid cash dividends as follows: 2009, $42,000; 2010, $54,000; 2011, $195,000;
2012, $90,000; 2013, $45,000. The amount of dividends received by the preferred stockholders during
2013 was
a.
$52,500.
b.
$45,000.
c.
$49,500.
d.
$51,000.
60. A corporation has 10,000 shares of 8 percent cumulative preferred stock and 20,000 shares of common
stock outstanding. Par value for each is $200. No dividends were paid last year, but this year a
$400,000 dividend is paid. How much of this $400,000 goes to the holders of common stock?
a.
$80,000
b.
$160,000
c.
$320,000
d.
$360,000
61. A corporation has 5,000 shares of 8 percent noncumulative preferred stock and 10,000 shares of
common stock outstanding. Par value for each is $50. No dividends were paid last year, but this year a
$46,500 dividend is paid. How much of this $46,500 goes to the holders of common stock?
a.
$26,500
b.
$31,500
c.
$36,500
d.
$41,500
62. If Willis Corporation has 80,000 shares of common stock authorized, 50,000 shares of common stock
issued, and holds 12,000 shares of common stock as treasury stock, the total number of outstanding
shares of Willis Corporation amounts to
a.
22,000.
b.
68,000.
c.
38,000.
d.
26,000.
63. Par value is the minimum cushion of capital established for the protection of
a.
investors (stockholders).
b.
management.
c.
creditors.
d.
all of these.
64. The excess of the issuance price over the stated value of a no-par common stock should be credited to
the
a.
Common Stock account.
b.
Preferred Stock account.
c.
Additional Paid-in Capital.
d.
Treasury Stock.
65. The par value of the common stock represents the
a.
corporation’s legal capital.
b.
liquidation value of the stock.
c.
market value of a share of stock.
d.
amount the corporation received in cash when the stock was issued.
66. In the rare instance when a par value stock is issued at a cash price below par, the excess of the par
value over the amount of cash received should be
a.
credited to a liability account.
b.
debited to the Retained Earnings account.
c.
debited to an account titled Discount on Capital Stock.
d.
credited to the Retained Earnings account.
67. When stock is issued for noncash assets or services, the dollar amount to be recorded for this exchange
is determined by the
a.
treasurer of the corporation.
b.
par value of the stock.
c.
market value of the stock or the market value of the consideration received, whichever is
greater.
d.
market value of the stock or the market value of the consideration received when the
market value of the stock cannot be determined.
68. Which of the following stock terms is least like the others?
a.
Market value
b.
Stated value
c.
Par value
d.
Legal capital
69. When common stock is issued by a corporation for a cash price above par value, the excess of the cash
proceeds over the par value should be reported in the financial statements as a component of
a.
retained earnings on the balance sheet.
b.
total liabilities on the balance sheet.
c.
operating income on the income statement.
d.
total contributed capital on the balance sheet.
70. The Additional Paid-in Capital account normally arises in the accounting records when
a.
no-par common stock is issued.
b.
the stated value of capital stock is greater than the par value.
c.
the par value of the stock exceeds the market value.
d.
capital stock is issued at an amount greater than par value.
71. If a corporation has issued common stock at various prices that exceed par value, legal capital will be
made up of the
a.
par value of the shares issued.
b.
total stockholders’ equity plus total liabilities.
c.
total amount of contributed capital.
d.
total amount of contributed capital plus retained earnings.
72. Use the following information to answer the question below.
When Sumter Corporation was formed on January 1, 2013, the corporate charter provided for 50,000
shares of $40 par value common stock. The following transactions were among those engaged in by
the corporation during its first month of operation:
1. The corporation issued 200 shares of stock to its lawyer in full payment of the $10,000 bill for
assisting the company in drawing up its articles of incorporation and filing the proper papers with the
state agency.
2. The company issued 8,000 shares of stock at a price of $50 per share.
3. The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of
$320,000.
The entry to record transaction 1 would be:
a.
Start-up and Organization Costs 8,000
Common Stock 8,000
b.
Start-up and Organization Costs 10,000
Common Stock 8,000
Additional Paid-in Capital 2,000
c.
Start-up and Organization Costs 8,000
Additional Paid-in Capital 8,000
d.
Start-up and Organization Costs 10,000
Common Stock 10,000
73. Use the following information to answer the question below.
When Sumter Corporation was formed on January 1, 2013, the corporate charter provided for 50,000
shares of $40 par value common stock. The following transactions were among those engaged in by
the corporation during its first month of operation:
1. The corporation issued 200 shares of stock to its lawyer in full payment of the $10,000 bill for
assisting the company in drawing up its articles of incorporation and filing the proper papers with the
state agency.
2. The company issued 8,000 shares of stock at a price of $50 per share.
3. The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of
$320,000.
The entry to record transaction 2 would be:
a.
Cash 400,000
Common Stock 400,000
b.
Cash 400,000
Common Stock 320,000
Additional Paid-in Capital 80,000
c.
Cash 320,000
Additional Paid-in Capital 80,000
Common Stock 400,000
d.
Cash 320,000
Common Stock 320,000
74. Use the following information to answer the question below.
When Sumter Corporation was formed on January 1, 2013, the corporate charter provided for 50,000
shares of $40 par value common stock. The following transactions were among those engaged in by
the corporation during its first month of operation:
1. The corporation issued 200 shares of stock to its lawyer in full payment of the $10,000 bill for
assisting the company in drawing up its articles of incorporation and filing the proper papers with the
state agency.
2. The company issued 8,000 shares of stock at a price of $50 per share.
3. The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of
$320,000.
The entry to record transaction 3 would be:
a.
Equipment 280,000
Common Stock 280,000
b.
Common Stock 280,000
Equipment 280,000
c.
Equipment 320,000
Common Stock 320,000
d.
Equipment 320,000
Common Stock 280,000
Additional Paid-in Capital 40,000
75. Use the following information to answer the question below.
When Sumter Corporation was formed on January 1, 2013, the corporate charter provided for 50,000
shares of $40 par value common stock. The following transactions were among those engaged in by
the corporation during its first month of operation:
1. The corporation issued 200 shares of stock to its lawyer in full payment of the $10,000 bill for
assisting the company in drawing up its articles of incorporation and filing the proper papers with the
state agency.
2. The company issued 8,000 shares of stock at a price of $50 per share.
3. The company issued 8,000 shares of stock in exchange for equipment that had a fair market value of
$320,000.
The entry to record transaction 3 would be:
a.
Equipment 320,000
Common Stock 320,000
b.
Common Stock 320,000
Equipment 320,000
c.
Additional Paid-in Capital 70,000
Equipment 250,000
Common Stock 320,000
d.
Cash 320,000
Equipment 320,000
76. According to generally accepted accounting principles, treasury stock usually should be recorded at
a.
market value.
b.
par value.
c.
cost.
d.
net realizable value.
77. On the balance sheet, treasury stock owned by the company is classified properly as
a.
contra-stockholders’ equity.
b.
current assets.
c.
investments.
d.
a note to the financial statements.
78. The sale of treasury stock cannot result in
a.
an increase in Retained Earnings.
b.
the crediting of Paid-in Capital, Treasury Stock.
c.
the debiting of Paid-in Capital, Treasury Stock.
d.
an increase in total stockholders’ equity.
79. The purchase of treasury stock will result in
a.
no net changes in assets, liabilities, or stockholders’ equity.
b.
a decrease in assets and a decrease in stockholders’ equity.
c.
an increase in assets and an increase in liabilities.
d.
an increase in assets and an increase in stockholders’ equity.
80. A company purchases 300 shares of its $50 par value common stock at $55 per share. It then reissues
50 shares at $57 per share. The entry upon reissue of the stock would be:
a.
Cash 2,850
Treasury Stock-Common 2,750
Paid-in Capital, Treasury Stock 100
b.
Cash 2,850
Treasury Stock-Common 2,750
Gain on Sale of Treasury Stock 100
c.
Cash 2,850
Treasury Stock-Common 2,500
Retained Earnings 350
d.
Cash 2,850
Treasury Stock-Common 2,850
81. A company purchases 600 shares of its $200 par value common stock at $220 per share. It then
reissues 100 shares at $228 per share. The entry upon reissue of the stock would be:
a.
Cash 22,800
Treasury Stock-Common 22,000
Paid-in Capital, Treasury Stock 800
b.
Cash 22,800
Treasury Stock-Common 22,800
c.
Cash 22,800
Treasury Stock-Common 22,000
Gain on Sale of Treasury Stock 800
d.
Cash 22,800
Treasury Stock-Common 20,000
Retained Earnings 2,800
82. A company purchases 400 shares of its $50 par value common stock at $55 per share. It then reissues
60 shares at $58 per share. The entry upon reissue of the stock would be:
a.
Cash 3,480
Treasury Stock-Common 3,300
Paid-in Capital, Treasury Stock 180
b.
Cash 3,480
Treasury Stock-Common 3,480
c.
Cash 3,480
Paid-in Capital, Treasury Stock 3,480
d.
Cash 3,480
Treasury Stock-Common 3,000
Retained Earnings 480
83. On January 1, 2013, Belmont Corporation had 50,000 shares of $10 par value common stock issued
and outstanding. All 50,000 shares had been issued in a prior period at $15 per share. On February 1,
2013, Belmont purchased 2,000 shares of treasury stock for $18 per share and later sold the treasury
shares for $20 per share on March 2, 2013. The entry to record the purchase of the treasury shares on
February 1, 2013, would be:
a.
Cash 36,000
Treasury Stock-Common 36,000
b.
Cash 36,000
Treasury Stock-Common 30,000
Gain on Treasury Stock-Common 6,000
c.
Treasury Stock, Common 30,000
Loss on Treasury Stock-Common 6,000
Cash 36,000
d.
Treasury Stock, Common 36,000
Cash 36,000
84. On January 1, 2013, Belmont Corporation had 50,000 shares of $10 par value common stock issued
and outstanding. All 50,000 shares had been issued in a prior period at $15 per share. On February 1,
2013, Belmont purchased 2,000 shares of treasury stock for $18 per share and later sold the treasury
shares for $20 per share on March 2, 2013. The entry to record the sale of the treasury shares on March
2, 2013, would be:
a.
Cash 40,000
Treasury Stock-Common 40,000
b.
Cash 40,000
Treasury Stock-Common 36,000
Paid-in Capital, Treasury Stock 4,000
c.
Cash 40,000
Treasury Stock-Common 36,000
Retained Earnings 4,000
d.
Cash 40,000
Treasury Stock-Common 36,000
Gain on Treasury Stock 4,000
85. Use the following information to answer the question below.
The following transactions involving Culbert Corporation occurred during the year:
Apr.
1
May
3
June
5
The entry to record the April 1 transaction would be:
a.
Cash 80,000
Treasury Stock, Preferred 80,000
b.
Retained Earnings 80,000
Cash 80,000
c.
Paid-in Capital, Preferred 80,000
Treasury Stock, Preferred 80,000
d.
Treasury Stock, Preferred 80,000
Cash 80,000
86. Use the following information to answer the question below.
The following transactions involving Culbert Corporation occurred during the year:
Apr.
1
May
3
June
5
The entry to record the May 3 transaction would be:
a.
Treasury Stock, Preferred 20,000
Cash 20,000
b.
Cash 20,000
Treasury Stock, Preferred 16,000
Paid-in Capital, Treasury Stock 4,000
c.
Cash 8,000
Retained Earnings 12,000
Treasury Stock, Preferred 20,000
d.
Treasury Stock, Preferred 16,000
Cash 16,000
87. Use the following information to answer the question below.
The following transactions involving Culbert Corporation occurred during the year:
Apr.
1
May
3
June
5
The entry to record the June 5 transaction would be:
a.
Preferred Stock 6,000
Additional Paid-in Capital, Preferred 6,000
Treasury Stock, Preferred 12,000
b.
Treasury Stock, Preferred 12,000
Cash 12,000
c.
Cash 6,000
Treasury Stock, Preferred 6,000
d.
Preferred Stock 6,000
Additional Paid-in Capital, Preferred 6,000
Retained Earnings 12,000
Treasury Stock, Preferred 24,000
88. Use the following information to answer the question below.
On January 1, 2013, Falcon 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 $17 per share. On February 1, 2013,
Falcon purchased 6,100 shares of treasury stock for $19 per share and later sold the treasury shares for
$26 per share on March 2, 2013.
What amount of gain due to these treasury stock transactions should be reported on the income
statement for the year ended December 31, 2013?
a.
$0
b.
$42,700
c.
$6,100
d.
$4,270
89. Use the following information to answer the question below.
On January 1, 2013, Falcon 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 $17 per share. On February 1, 2013,
Falcon purchased 1,000 shares of treasury stock for $19 per share and later sold the treasury shares for
$26 per share on March 2, 2013.
The entry to record the sale of the treasury shares on March 2, 2013 is:
a.
Cash 26,000
Common Stock 19,000
Retained Earnings 7,000
b.
Cash 24,000
Retained Earnings 2,000
Treasury Stock, Common 26,000
c.
Cash 26,000
Treasury Stock, Common 19,000
Gain on Treasury Stock, Common 7,000
d.
Cash 26,000
Treasury Stock, Common 19,000
Paid-in Capital, Treasury Stock 7,000
90. A corporation should account for the declaration of a 10 percent stock dividend by
a.
transferring from retained earnings to contributed capital an amount equal to the legal
capital represented by the dividend shares.
b.
transferring from retained earnings to contributed capital an amount equal to the market
value of the dividend shares.
c.
transferring from retained earnings to contributed capital whatever amount the board of
directors deems appropriate.
d.
making only a memorandum entry in the general journal.
91. On which of the following dates involving stock dividends does a liability arise?
a.
Date of distribution
b.
Date of declaration
c.
Date of record
d.
On no date
92. A small stock dividend should be recorded on the basis of
a.
par or stated value.
b.
original issue price.
c.
market price.
d.
cost.
93. Which of the following statements is not true about a 2-for-1 stock split?
a.
Total contributed capital remains the same.
b.
Par value per share is reduced to twice what it was before the split.
c.
A stockholder with twenty shares before the split owns forty shares after the split.
d.
The market price probably will decrease.
94. Which of the following is not true about a 35 percent stock dividend?
a.
The market value of the stock is needed to record the stock dividend.
b.
Retained earnings decreases.
c.
Contributed capital increases.
d.
Par value per share remains the same.
95. Which of the following transactions affects total retained earnings?
a.
Purchase of treasury stock
b.
Payment of previously declared cash dividend
c.
Declaration of a stock dividend
d.
Declaration of a stock split
96. How will the declaration and distribution of a 10 percent stock dividend affect the issuing corporation’s
balance of retained earnings and total stockholders’ equity, respectively?
a.
Decrease and no effect
b.
No effect and no effect
c.
Decrease and increase
d.
No effect and increase
97. On July 1, 2013, Lee Corporation had 10,000 shares of its $200 par value common stock outstanding.
On July 2, 2013, Lee declared a 15 percent stock dividend to be distributed on August 6, 2013, to
shareholders of record on July 16, 2013. What amount of retained earnings should be transferred to
contributed capital because of this dividend?
a.
None
b.
Market value of the stock at the date of distribution multiplied by the number of dividend
shares
c.
Market value of the stock at the date of declaration multiplied by the number of dividend
shares
d.
Par value per share multiplied by the number of dividend shares
98. On June 1, 2013, Hale Corporation had 80,000 shares of $20 par value common stock outstanding. On
June 2, 2013, Hale declared a 50 percent stock dividend to be distributed on July 5, 2013, to
shareholders of record on June 15, 2013. What amount of retained earnings should be transferred to
contributed capital because of this dividend?
a.
None
b.
Par value per share multiplied by the number of dividend shares
c.
Market value of the stock at the date of distribution multiplied by the number of dividend
shares
d.
Market value of the stock at the date of declaration multiplied by the number of dividend
shares
99. At the beginning of 2013, Helms Corporation had 34,000 shares of $10 par value common stock
issued and outstanding. During January 2013, Helms declared and distributed a 10 percent stock
dividend. The market value of Helms’s stock was $24 throughout the month of January. The entry to
be recorded for the declaration of stock dividend is:
a.
Stock Dividends 81,600
Common Stock Distributable 34,000
Additional Paid-in Capital 47,600
b.
Common Stock Distributable 81,600
Common Stock 81,600
c.
Common Stock Distributable 81,600
Common Stock 34,000
Retained Earnings 47,600
d.
Stock Dividends 68,000
Cash 68,000
100. On May 1, 2013, Monroe Corporation had 200,000 shares of $200 par value common stock
outstanding with a market value of $320 per share. On May 2, 2013, Monroe announced a 4-for-1
stock split. After the split, the par value of the stock
a.
remained the same as before the split.
b.
was reduced to $50 per share.
c.
was reduced by $80 per share.
d.
was reduced by $50 per share.
101. Use this information to answer the following question.
Hernandez Corporation has 60,000 shares of $20 par value common stock outstanding. The following
transactions occurred during the year:
Mar.
17
Declared a 10 percent stock dividend to stockholders of record on March 20. Market
value of the stock was $26 on March 17.
30
Distributed the stock dividend.
The entry to record the transaction of March 17 would be:
a.
Stock Dividends 156,000
Common Stock Distributable 120,000
Additional Paid-in Capital 36,000
b.
Common Stock Distributable 120,000
Common Stock 120,000
c.
Common Stock Distributable 156,000
Common Stock 120,000
Retained Earnings 36,000
d.
Stock Dividends 156,000
Cash 156,000
102. Use this information to answer the following question.
Hernandez Corporation has 60,000 shares of $20 par value common stock outstanding. The following
transactions occurred during the year:
Mar.
17
Declared a 10 percent stock dividend to stockholders of record on March 20. Market
value of the stock was $26 on March 17.
30
Distributed the stock dividend.
The entry to record the transaction of March 30 would be:
a.
Common Stock Distributable 120,000
Common Stock 120,000
b.
Common Stock Distributable 120,000
Retained Earnings 36,000
Common Stock 156,000
c.
Common Stock Distributable 156,000
Common Stock 120,000
Additional Paid-in Capital 36,000
d.
Common Stock Distributable 120,000
Cash 120,000
103. Which of the following items will not be disclosed on a statement of stockholders’ equity?
a.
Net income
b.
Issuance of common stock for cash
c.
Extraordinary gains and losses
d.
Issuance of common stock in exchange for noncash assets
104. The purpose of a statement of stockholders’ equity is to
a.
disclose the computation of book value per share of stock.
b.
budget the transactions expected to occur during the forthcoming period.
c.
replace the statement of retained earnings.
d.
summarize the changes in the components of stockholders’ equity for a period of time.
105. The preparation of a statement of stockholders’ equity makes which other financial statement
unnecessary?
a.
Income statement
b.
Statement of cash flows
c.
Statement of retained earnings
d.
Balance sheet
106. All of the following would appear on the statement of stockholders’ equity except
a.
foreign currency translation adjustment.
b.
purchase of treasury stock.
c.
net income.
d.
declaration of a stock split.
107. Which of the following items will not be disclosed on a statement of stockholders’ equity?
a.
Conversion of preferred stock into common stock
b.
Results of discontinued operations
c.
Purchase of treasury stock
d.
Declaration of a stock dividend
108. If only common stock is outstanding, total stockholders’ equity divided by the number of shares of
common stock outstanding is called the
a.
par or stated value per share.
b.
call value per share.
c.
book value per share.
d.
market value per share.
109. Book value per share refers to the
a.
net assets represented by one share of a company’s stock.
b.
highest price that investors will pay for a share of stock.
c.
issue price of the stock, less any market decline since issuance.
d.
par or stated value of a share of stock.
110. Tallapoosa Corporation has total contributed capital of $300,000 and retained earnings of $170,000. It
has 1,000 shares of $50 par value preferred stock with no dividends in arrears and 5,000 shares of $50
par value common stock. The preferred stock is callable at 105. The book value of each share of
common stock is
a.
$84.00.
b.
$46.50.
c.
$83.50.
d.
$94.00.
111. Winston Corporation has retained earnings of $400,000. It has 5,000 shares of 6 percent, $200 par
value preferred stock outstanding that is callable at 102. The preferred stock is cumulative, and one
year of dividends is in arrears. It also has 10,000 shares of $100 par value common stock outstanding.
Assume all stock is issued at par. The book value of each share of preferred stock is
a.
$210.
b.
$216.
c.
$204.
d.
$220.