Question

Our company has the following partial Balance Sheet:

Cash	$1,000,000
Unearned Revenue	$70,000
Common Stock $1 par 2,000,000 shares issued	$2,000,000
Paid in Capital in excess of par – Common Stock	$500,000
Treasury Stock $10 cost	$150,000
Paid in Capital in excess of cost basis – Treasury Stock	$15,000
Retained Earnings	$640,000
Preferred Stock $1000 par 6%	$600,000
Paid in Capital in excess of par – Preferred Stock	$200,000

1. What is our total stock holders’ equity?

1. $3,785,000
2. $4,105,000
3. $3,805,000
4. $8,605,000

2. How many Common shares are issued and outstanding?

1. 2,000,000 and 1,850,000
2. 2,000,000 and 2,000,000
3. 2,000,000 and 1,985,000
4. 1,985,000 and 1,985,000

3. If we sell the existing Treasury stock for $135,000 we should record:

1. A loss on sale of $15,000.
2. A credit to Paid in Capital in excess of cost for $15,000.
3. A debit to Retained Earnings of $15,000
4. A debit to Paid in Capital in excess of cost for $15,000.

4. Our stock has a Fair market Value of $12 per share on the day we exchange it for $600,000 of legal services. The journal entry to record this would include a:

1. Credit to the Common Stock account for $600,000
2. Credit to the Common Stock account for $550,000
3. Credit to the Paid-in-capital in excess of par account for $550,000
4. Credit to the Paid-in-capital in excess of par account for $50,000

5. We generated $120,000 of net income for 2011. How much of this should go to the preferred share holders?

1. $120,000
2. $114,000
3. $100,000
4. $36,000

6. We decide to issue a 50 percent stock split. The effect on our financial statements will be:

1. A decrease in Retained Earnings
2. An increase in Retained Earnings
3. An increase in total stock holders equity
4. No effect

7. We decide to sell an additional 10,000 Common shares that are authorized. The fair market value of the shares on the sale date is $13 per share. The effect on the financial statements is:

1. An increase in total assets of $130,000
2. An increase in the common stock account of $130,000
3. An increase in the gain on sale of stock account of $120,000
4. An increase in the paid-in-capital in excess of par account of $30,000

Answer 1