Question

26-30

As soon as a corporation is authorized to issue stock, an accounting journal entry should be made recording the total value of the shares authorized.

True

False

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

True

False

Preferred shareholders are “first in line” for dividends, and they are also guaranteed dividends when declared.

True

False

During the month, a company sells goods for a total of $108,000, which includes sales taxes of $8,000; therefore, the company should recognize $100,000 in Sales Revenues and $8,000 in Sales Tax Expense.

True

False

The first item that is documented on the indirect method of the statement of cash flows is:

		Operating activities
		Net income or net loss
		Financing activities
		Investing activities

Answer 1

Answer 26 : False

Explanation : Authorized shares indicates number of shares that the company can be issue. Thus authorized shares is just a information & not an accounting event. Therefore no journal entry is required for authorized shares.

Answer 27 : False

Explanation : Restricted retained earnings indicates those portion of cumulative profits which are to be used by the company for specific purposes & are restiricted or are unavailable for distribution of any kind of dividends.

Answer 28 : True

Explanation : Preferred shareholders are given their of dividends before common stockholders & preferred dividends are predertermined amount as percentage of Preferred stock 's face value.

Answer 29 : False

Explanation : Yes, the company should recognize $100,000 in Sales Revenues but since sales tax is not an expense its a liability thus, $8,000 should be recorded in Sales Tax Payable & not Sales Tax Expense.

Answer 30 . Operating activities