31) Which of the following will decrease the balance in Retained earnings?
A) Cash dividend
B) Stock split
C) Purchase of long-term assets
D) Purchase of treasury stock
32) Which of the following will decrease the amount of Total stockholders’ equity?
A) Cash dividend
B) Stock split
C) Stock dividend
D) Repayment of bond principal
33) Which of the following will decrease the amount of Total stockholders’ equity?
A) Purchase of treasury stock
B) Stock split
C) Stock dividend
D) Repayment of bond principal
34) On July 31, 2013, the Archer Company reported the following information in the equity section of their balance
sheet:
Stockholders’ equity
Common stock, $1.00 par, 500,000 shares authorized, 20,000 shares
issued
$20,000
Paid-in capital in excess of par
1,180,000
Retained earnings
3,200,000
Total stockholder’s equity
$4,400,000
Assume that Archer carries out a 2-for-1 stock split. Please prepare a similar equity section showing the effects of
the stock split.
Stockholders’ equity
Stockholders’ equity
Common stock, $0.50 par, 1,000,000 shares authorized,
40,000 shares issued
Paid-in capital in excess of par
1,180,000
Retained earnings
3,200,000
Total stockholder’s equity
$4,400,000
35) On July 31, 2013, the Archer Company reported the following information in the equity section of their balance
sheet:
Stockholders’ equity
Common stock, $1.00 par, 500,000 shares authorized, 20,000 shares
issued
$20,000
Paid-in capital in excess of par
1,180,000
Retained earnings
3,200,000
Total stockholder’s equity
$4,400,000
Assume that Archer carries out a 3-for-1 stock split. Please prepare a similar equity section showing the effects of
the stock split. (Please round all numbers to the nearest cent.)
Stockholders’ equity
Stockholders’ equity
Common stock, $0.33 par, 1,000,000 shares
authorized, 60,000 shares issued
Paid-in capital in excess of par
1,180,000
Retained earnings
3,200,000
Total stockholder’s equity
36) On July 31, 2013, the Archer Company reported the following information in the equity section of their balance
sheet:
Stockholders’ equity
Common stock, $1.00 par, 500,000 shares authorized, 20,000 shares
issued
$20,000
Paid-in capital in excess of par
1,180,000
Retained earnings
3,200,000
Total stockholder’s equity
$4,400,000
Assume that Archer carries out a 4-for-1 stock split. Please prepare a similar equity section showing the effects of
the stock split. (Please round all numbers to the nearest cent.)
Stockholders’ equity
Stockholders’ equity
authorized, 80,000 shares issued
Paid-in capital in excess of par
1,180,000
Retained earnings
3,200,000
Total stockholder’s equity
1) Treasury stock is a corporation’s own stock that it has issued and later reacquired.
2) The purchase of treasury stock requires a credit to the Common stock account.
3) A corporation must record a gain on sale for the sale of treasury stock at an amount greater than its purchase
price.
4) One of the reasons for acquiring treasury stock is to avoid a hostile takeover by an outside party.
5) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales purchases an additional 5,000 shares of treasury stock at $14 per share, the total equity of the company
will go down by $70,000.
6) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales sells 10,000 shares of treasury stock at $14 per share, the company will record a gain on the sale of
treasury stock of $20,000.
7) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales sells 10,000 shares of treasury stock at $14 per share, the number of shares outstanding will go down
by 10,000.
8) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, the total equity of the company
will go up by $18,000.
9) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, the company will record a loss of
$2 per share on the transaction.
10) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 1,000 shares of treasury stock for $24 per share, the total equity of the company would remain
unchanged.
11) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 1,000 shares of treasury stock for $24 per share, the company would record a gain on sale of
treasury stock for $4,000.
12) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 800 shares of treasury stock for $15 per share, the total equity of the company would remain
unchanged.
13) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 800 shares of treasury stock for $15 per share, the company would record a loss on the sale of
treasury stock for $4,000.
14) Which of the following statements is TRUE?
A) The purchase of treasury stock decreases assets and decreases stockholders’ equity.
B) The purchase of treasury stock increases assets and increases stockholders’ equity.
C) The purchase of treasury stock increases assets and decreases stockholders’ equity.
D) The purchase of treasury stock decreases assets and increases stockholders’ equity.
15) Which of the following statements is TRUE?
A) Treasury stock causes the number of issued shares to go down.
B) Treasury stock causes the number of issued shares to exceed authorized shares.
C) Treasury stock causes the number of outstanding shares to go up.
D) Treasury stock causes the number of outstanding shares to go down.
16) What type of account is treasury stock?
A) Treasury stock is a contra stockholders’ equity account.
B) Treasury stock is a contra asset account.
C) Treasury stock is liability account.
D) Treasury stock is a contra liability account.
17) A corporation originally issued $5 par value stock for $6 per share. Which of the following would be included
in the entry to record the purchase of 200 shares of treasury stock for $8 per share?
A) Treasury stock would be debited for $1,600.
B) Treasury stock would be credited for $1,600.
C) Retained earnings would be debited for $1,000.
D) Treasury stock would be debited for $1,000.
18) A corporation originally issued $8 par value stock for $9 per share. It purchased the stock for $10 per share for
the treasury. Which of the following would be included in the entry to record the reissue of 20 shares of treasury
stock for $11 per share?
A) Paid-in capital from treasury stock transactions is credited for $220.
B) Treasury stock is credited for $200.
C) Treasury stock is credited for $220.
D) Paid-in capital from treasury stock transactions is credited for $200.
19) Ross Corporation reported the following equity section on its current balance sheet:
Common stock, $5 par, 140,000 shares authorized, 50,000 shares
issued
$250,000
Paid in capital in excess of par—common
200,000
Retained earnings
207,000
Total stockholders’ equity
$657,000
Which of the following would be included in the entry to record the corporation’s purchase of 10,000 shares of its
common stock for $7.50 per share?
A) Treasury stock would be debited for $75,000.
B) Paid-in capital from treasury stock transactions would be credited for $70,000.
C) Retained earnings would be debited for $75,000.
D) Common stock would be credited for $50,000.
20) Ross Corporation reported the following equity section on its current balance sheet:
Common stock, $5 par, 140,000 shares authorized, 50,000 shares
issued
$250,000
Paid in capital in excess of par—common
200,000
Retained earnings
207,000
Total stockholders’ equity
$657,000
Which of the following would occur if the corporation purchased 15,000 shares of its common stock for $9.50 per
share?
A) Stockholders’ equity would increase by $142,500.
B) Stockholders’ equity would decrease by $75,000.
C) Stockholders’ equity would decrease by $142,500.
D) Stockholders’ equity would neither increase nor decrease.
21) Ross Corporation reported the following equity section on its current balance sheet:
Common stock, $5 par, 140,000 shares authorized, 50,000 shares
issued
$250,000
Paid in capital in excess of par—common
200,000
Retained earnings
207,000
Total stockholders’ equity
$657,000
The corporation purchases 15,000 shares of its common stock at $9.50 per share. Which of the following is the
number of common shares issued and the number of common shares outstanding?
A) There are 50,000 shares issued and 65,000 shares outstanding.
B) There are 50,000 shares issued and 35,000 shares outstanding.
C) There are 50,000 shares issued and 50,000 shares outstanding.
D) There are 65,000 shares issued and 50,000 shares outstanding.
22) The treasury stock account is:
A) credited upon purchase of treasury stock.
B) debited upon purchase of treasury stock.
C) treated like a common stock account.
D) deducted from the common stock account and shown as a net amount.
23) Rakish Co. purchases 3,500 shares of its own $1 par value common stock for $80 per share. Which of the
following is the correct journal entry to record this transaction?
A) Debit Common stock $3,500, debit Paid-in capital $276,500 and credit Cash $280,000.
B) Debit Cash $280,000, credit Common stock $3,500 and credit Paid-in capital $276,500.
C) Debit Cash $280,000 and credit Treasury stock $280,000.
D) Debit Treasury stock $280,000 and credit Cash $280,000.
24) Rakish Co. purchases 3,500 shares of the company’s $6 par value common stock for $8 per share. It later sells
2,000 shares for $12 per share. Which of the following is the correct journal entry to record this transaction?
A) Debit Cash $24,000 and credit Treasury stock $24,000.
B) Debit Cash $24,000, credit Treasury stock $16,000 and credit Paid-in capital $8,000.
C) Debit Treasury stock $24,000 and credit Cash $24,000.
D) Debit Common stock $12,000, debit Paid–in capital $12,000 and credit Cash $24,000.
25) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales purchases an additional 5,000 shares of treasury stock at $14 per share, what journal entry is required?
A) Debit Cash $70,000 and credit Treasury stock $70,000.
B) Debit Treasury stock $70,000 and credit Cash $70,000.
C) Debit Treasury stock $70,000 and credit Sales revenue $70,000.
D) Debit Treasury stock $60,000, debit Paid-in capital $10,000 and credit Cash $70,000.
26) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales purchases an additional 5,000 shares of treasury stock at $14 per share, what number of shares will be
shown as issued and outstanding?
A) 175,000 issued; 180,000 outstanding
B) 195,000 issued; 180,000 outstanding
C) 200,000 issued; 175,000 outstanding
D) 200,000 issued; 180,000 outstanding
27) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales sells 10,000 shares of treasury stock at $14 per share, what journal entry will be made?
A) Debit Cash $140,000 and credit Treasury stock $140,000.
B) Debit Cash $140,000, credit Treasury stock $120,000 and credit Paid-in capital $20,000.
C) Debit Treasury stock $140,000 and credit Cash $140,000.
D) Debit Cash $140,000, credit Treasury stock $120,000 and credit Gain on sale of treasury stock $20,000.
28) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales sells 10,000 shares of treasury stock at $14 per share, what amounts will be shown for the number of
shares issued and outstanding?
A) 200,000 issued; 190,000 outstanding
B) 210,000 issued; 190,000 outstanding
C) 210,000 issued; 180,000 outstanding
D) 200,000 issued; 170,000 outstanding
29) Please refer to the following information for Petra Sales Company:
• Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
• Paid-in capital in excess of par: $1,600,000
• Retained earnings: $2,440,000
• Treasury stock: 20,000 shares purchased at $12 per share
If Petra Sales sells 10,000 shares of treasury stock at $14 per share, which of the following would be TRUE?
A) Retained earnings will go up.
B) The Treasury stock account balance will increase.
C) A gain on sale will be recorded.
D) Paid-in capital will increase.
30) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, what journal entry will be
required?
A) Debit Treasury stock $18,000 and credit Retained earnings $18,000.
B) Debit Treasury stock $20,000, credit Loss on sale $2,000 and credit Cash $18,000.
C) Debit Treasury stock $18,000 and credit Cash $18,000.
D) Debit Cash $18,000 and credit Treasury stock $18,000.
31) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, what amounts will be shown for
the number of shares issued and outstanding?
A) 100,000 issued; 94,000 outstanding
B) 99,000 issued; 95,000 outstanding
C) 100,000 issued; 96,000 outstanding
D) 101,000 issued; 99,000 outstanding
32) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, which of the following statements
would be TRUE?
A) Total equity of the company would remain unchanged.
B) Total equity of the company would go up by $18,000.
C) Total equity of the company would go down by $18,000.
D) Total equity of the company would go down by $2,000.
33) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, which of the following statements
would be TRUE?
A) The Treasury stock account would go down by $18,000.
B) The Paid-in capital account would not be affected.
C) The Retained earnings account would go down by $2,000.
D) The Paid-in capital account would go down by $2,000.
34) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 1,000 shares of treasury stock for $24 per share, what journal entry would be required?
A) Debit Treasury stock $24,000 and credit Cash $24,000.
B) Debit Treasury stock $20,000, debit Paid-in capital $2,000 and credit Cash $24,000.
C) Debit Cash $24,000 and credit Treasury stock $24,000.
D) Debit Cash $24,000, credit Treasury stock $20,000 and credit Paid-in capital $4,000.
35) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 1,000 shares of treasury stock for $24 per share, what amounts would be shown for number of
shares issued and outstanding?
A) 100,000 issued; 96,000 outstanding
B) 100,000 issued; 94,000 outstanding
C) 101,000 issued; 96,000 outstanding
D) 95,000 issued; 94,000 outstanding
36) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be
TRUE?
A) Total equity of the company would remain unchanged.
B) Total equity of the company would go up by $24,000.
C) Total equity of the company would go down by $24,000.
D) Total equity of the company would go up by $4,000.
37) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be
TRUE?
A) The Treasury stock account would go down by $20,000.
B) The Paid-in capital account would not be affected.
C) The Treasury stock account would go up by $24,000.
D) The Paid-in capital account would go down by $4,000.
38) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
(Assume there are no balances in Paid-in capital from treasury stock transactions.)
If Peartree resold 800 shares of treasury stock for $15 per share, what journal entry would be required?
A) Debit Treasury stock $16,000, debit Loss on sale $4,000 and credit Cash $20,000.
B) Debit Treasury stock $12,000 and credit Cash $12,000.
C) Debit Cash $12,000 and credit Treasury stock $12,000.
D) Debit Cash $12,000, debit Retained earnings $4,000 and credit Treasury stock $16,000.
39) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 800 shares of treasury stock for $15 per share, what amounts would be shown for the number of
shares issued and outstanding?
A) 100,800 issued; 95,000 outstanding
B) 100,000 issued; 95,800 outstanding
C) 100,000 issued; 94,200 outstanding
D) 100,000 issued; 5,800 outstanding
40) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 800 shares of treasury stock for $15 per share, which of the following statements would be TRUE?
A) The total equity of the company would be unchanged.
B) The total equity of the company would go up by $12,000.
C) The total equity of the company would go down by $12,000.
D) The total equity of the company would go down by $4,000.
41) Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
If Peartree resold 800 shares of treasury stock for $15 per share, which of the following statements would be TRUE?
A) The Treasury stock account would go down by $12,000.
B) The Paid-in capital account would go up by $4,000.
C) The Treasury stock account would go down by $16,000.
D) The Retained earnings account would go up by $4.000.
42) At March 31, 2014, the Park Place Company shows the following data on their balance sheet:
Stockholders’ equity
Common stock, $1 par, 1,000,000 shares
authorized,
$120,000
120,000 shares issued, 110,000 shares
outstanding
Paid-in capital in excess of par
2,470,000
Retained earnings
5,440,000
Treasury stock, 10,000 shares at $25
(250,000)
Total stockholder’s equity
$7,780,000
Assume Park Place purchases an additional 2,000 shares of treasury stock at $25 per share. What will the total
equity be after this transaction?
A) $7,802,000
B) $7,800,000
C) $7,830,000
D) $7,730,000