Question

Accounting questions :

• All of the following are components of stockholders’ equity, except ____________.
  • notes payable
  • Paid in capital
  • retained earnings
  • Treasury stock
• Earnings not distributed as dividends to stockholders is known as
  • common stock
  • Paid-in capital
  • Retained earnings
  • treasury stock
• When comparing the typical sole proprietorship and corporation, the form of business having higher assets and earnings is the corporation.
  • true
  • False
• A corporation’s officers are appointed by the:
  • board of directors
  • company president
  • Primary stockholder
  • state in which the corporation operates
• Companies usually rely on angel investors and venture capital firms following an initial public offering.
  • true
  • False
• When a corporation issues stock to the general public for the first time, it is known as a(n):
  • Integrated primary offering
  • initial public offering
  • seasoned equity offering
  • secondary public offering
• All privately held corporations are regulated by the Securities and Exchange Commission.
  • True
  • False
• The general public is entitled to invest in a privately held corporation.
  • True
  • false
• Identify the primary advantages of the corporate form of business compared to a sole proprietorship or partnership. (check all that apply)
  • Limited liability
  • Ability to raise capital
  • lower taxes
  • Less paperwork
  • ease of incorporation
• Identify the primary disadvantages of the corporate form of business compared to a sole proprietorship or partnership. (check all that apply)
  • Ownership limitations
  • double taxation
  • Personal liability
  • more paperwork
• Shares actually sold, which includes treasury stock
  • issued stock
  • outstanding stock
  • Authorized stock
• Total number of shares available to sell
  • issued stock
  • outstanding stock
  • Authorized stock
• Shares held by investors
  • issued stock
  • outstanding stock
  • Authorized stock
• There is a direct relationship between the par value and market value of common stock: stocks with a low par value have a low market value, while stocks with a high par value have a high market value.
  • true
  • false
• Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:
  • increase assets and increases liabilities
  • increases assets and decreases liabilities
  • Increases assets and increases stockholders equity
  • increases assets and decreases stockholders equity
• On January 1, Year 1, Davidson Corporation issues 1,000 shares of $1 par value common stock for $20 per share. Complete the necessary journal entry for the issuance of common stock by indicating the relevant account names and dollar amounts below. If more than one account title is debited or credited, enter the account titles in their alphabetical order.
  • journal enetry (record the issue of additional common stock
• The shares of preferred stock issued by Saturn Corporation can be exchanged for common stock. However, any dividends in arrears are lost. Which of the following features are present in the preferred stock issued by Saturn?
  
  Select all answers that apply to this question.
  • Convertible
  • redeemable
  • cumulative
  • Noncumulative
• EyeCare Corporation issued 10,000 shares of 7%, $100 par value preferred stock at the beginning of Year 1. The company did not pay dividends in Year 1. However, preferred stockholders received dividends for Year 1 and Year 2, when the company declared dividends in Year 2. Preferred stockholders also have the option, under specified conditions, to return their shares for a predetermined price. Which of the following features are in present the preferred stock issued by EyeCare?
  
  Select all answers that apply to this question.
  • Convertible
  • redeemable
  • cumulative
  • Noncumulative
• Preferred stock is “preferred” to common stock two ways: (1) preferred stockholders have first rights to dividends, and (2) in the event the company is dissolved, preferred stockholders receive preference over common stockholders in the distribution of assets.
  • True
  • False
• Innovative Media issues 1,000 shares of 8%, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue?
  • a credit to additional paid-in capital for $10,000
  • a debit to cash for $50,000
  • a credit to preferred stock for $10,000
  • a creaser to preferred tock for $60,000
• On January 1, Year 3, Boxwood, Inc. issues 1,000 shares of $1 par value common stock for $30 per share. Later that year, the company issues 1,000 shares of $10 par value preferred stock for $80 per share. The company’s balance sheet as of December 31, Year 3, will show total paid-in capital of:
  • $11,000
  • $30,000
  • $99,000
  • $110,000
• Lego, Inc., issued common stock in Year 1. It issued 10,000 shares of 8%, $100 par value cumulative preferred stock for $110 per share at the beginning of Year 4. It did not pay any dividends during Year 4. In December of Year 5, it declares total dividends of $200,000. How much will the preferred stockholders of Lego receive as dividends in Year 5?
  • $200,000
  • $160,000
  • $80,000
  • $40,000
• Marine Corporation issued common stock in Year 1. It issued 10,000 shares of 10%, $100 par value noncumulative preferred stock for $110 per share at the beginning of Year 3. It did not pay any dividends in Year 3 or Year 4. In December of Year 5, it declares total dividends of $250,000. How much will the common stockholders of Marine Corporation receive as dividends in Year 5?
  • $150,000
  • $250,000
  • $50,000
  • $100,000
• When a corporation acquires shares of its own common stock, it records a:
  • debit to common stock for par value
  • debit to common stock for cost
  • debit to treasury stock par value
  • debit to treasury stock for cost
• Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a:
  • Debit to common stock for $10,000
  • debit to common stock for $100,000
  • Debit to treasury stock for $10,000
  • debit to treasury stock for 100,000
• The Common Stock account increases when treasury stock is resold for more than its original cost.
  • true
  • false
• Marina, Inc., acquires 1 million shares of its own $1 par value common stock at $70 per share. It later resells the 1 million shares of treasury stock for $75. We record the $5 difference per share as a:
  • gain in the income statement
  • revenue in the income statement
  • credit to additional paid-in capital
  • credit to common stock
• Delta Corporation acquires 10,000 shares of its own $0.01 par value common stock at $10 per share. It later resells the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve a:
  • debit to cash for $100,000
  • credit to additional paid-in capital for $20,000
  • credit to common stock for $100
  • Credit to treasury stock for $120,000

Answer 1

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All of the following are components of stockholders’ equity, except-
Notes payable
Earnings not distributed as dividends to stockholders is known as
Retained earnings
When comparing the typical sole proprietorship and corporation, the form of business having higher assets and earnings is the corporation.
True.
A corporation’s officers are appointed by the:
Board of directors
Companies usually rely on angel investors and venture capital firms following an initial public offering.
False.
When a corporation issues stock to the general public for the first time, it is known as a(n)
Initial public offering
All privately held corporations are regulated by the Securities and Exchange Commission.
False.
The general public is entitled to invest in a privately held corporation.
False.
Identify the primary advantages of the corporate form of business compared to a sole proprietorship or partnership.
Limited liability
Ability to raise capital
Identify the primary disadvantages of the corporate form of business compared to a sole proprietorship or partnership.
Double taxation
More paperwork
Shares actually sold, which includes treasury stock
Outstanding stock
Total number of shares available to sell
Authorized stock
Shares held by investors
Issued stock
There is a direct relationship between the par value and market value of common stock: stocks with a low par value have a low market value, while stocks with a high par value have a high market value.
False.
Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:
Increases assets and increases stockholders equity
Davidson Corporation	Amount $
Number of shares issued	1,000.00
Issue price	20.00
Cash received	20,000.00
Par value per share	1.00
Common stock	1,000.00
Difference between par and issue price	19.00
Additional paid in capital- Common stock	19,000.00
Account	Debit $
Cash	20,000.00
Common stock
Additional paid in capital- Common stock
Saturn Corporation
Convertible
Noncumulative
Eye Care Corporation
Redeemable
Cumulative
Preferred stock
True.
Innovative Media
A credit to additional paid-in capital for $10,000.
Boxwood	Amount $
Issue price	30.00
Par value per share	1.00
Difference between par and issue price	29.00
Number of shares issued	1,000.00
Additional paid in capital- Common stock	29,000.00
Issue price	80.00
Par value per share	10.00
Difference between par and issue price	70.00
Number of shares issued	1,000.00
Additional paid in capital- Preferred stock	70,000.00
Total paid-in capital	99,000.00
Lego, Inc.	Amount $
Par value per Preferred share	100.00
Dividend rate	8%
Dividend per share	8.00
Number of shares issued	10,000.00
Annual Dividend	80,000.00
Dividend for year 1	80,000.00
Dividend for year 2	80,000.00
Total Dividend received in year 2	160,000.00
Marine Corporation
Par value per Preferred share	100.00
Dividend rate	10%
Dividend per share	10.00
Number of shares issued	10,000.00
Preferred Dividend	100,000.00
Total dividends	250,000.00
Common Dividend	150,000.00
When a corporation acquires shares of its own common stock, it records as:
Debit to treasury stock for cost
Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a:
Purchase price	10.00
Number of shares acquired	10,000.00
Treasury stock	100,000.00
Debit to treasury stock for 100,000.
The Common Stock account increases when treasury stock is resold for more than its original cost.
False. Additional paid in capital increase not Common stock.
Marina, Inc.
Credit to additional paid-in capital
Delta Corporation
Sell price	12.00
Purchase price	10.00
Additional paid in capital per unit	2.00
Number of shares resoled	10,000.00
Credit to additional paid-in capital	20,000.00