Question 1

Which of the following is NOT an advantage of the corporate form of business?

Accepted Answer

Double taxation of distributed profits

Question 2

A corporation issues 10 million shares of $$1 par common stock at 10 $$per share. What is the correct journal entry for the issuance?

Accepted Answer

Debit Cash $$100,000,000; Credit Common Stock 10$$,000,000; Credit Paid-in Capital in Excess of Par $90,000,000

Question 3

Which right allows a stockholder to maintain their proportionate ownership in a corporation when new shares are issued?

Accepted Answer

Preemptive right

Question 4

If a corporation reacquires its own stock, how is treasury stock recorded?

Accepted Answer

At cost as a debit to a contra stockholders’ equity account

Question 5

Which of the following statements about the sale of stock by a corporation is correct?

Accepted Answer

The sale of stock increases assets and equity but does not result in a profit or loss

Question 6

A company issues 15,000 shares of $$1 par common stock for equipment valued at 4$$,000 and a building valued at $120,000. What is the total amount credited to Common Stock?

Accepted Answer

$15,000

Question 7

Which of the following is TRUE regarding preferred stock?

Accepted Answer

Preferred stockholders receive assets first in liquidation

Question 8

A corporation has 1,000,000 shares issued and 100,000 shares of treasury stock. How many shares are outstanding?

Accepted Answer

900,000

Question 9

Which of the following is NOT a reason for a corporation to buy back its own stock (treasury stock)?

Accepted Answer

To record a gain on resale

Question 10

When treasury stock is resold for more than its cost, how is the excess recorded?

Accepted Answer

As Paid-in Capital from Treasury Stock Transactions

Question 11

Which of the following increases Retained Earnings?

Accepted Answer

Net income

Question 12

A company declares a $50,000 cash dividend on June 19, with a record date of July 1 and payment date of July 10. On which date is the liability for dividends first recorded?

Accepted Answer

June 19

Question 13

Avant Garde, Inc. has cumulative preferred stock and passed a $$150,000 dividend in 2020. In 2021, before paying common stockholders, how much must be paid to preferred stockholders if the annual dividend is 150$$,000?

Accepted Answer

$300,000

Question 14

Which of the following is TRUE about stock dividends?

Accepted Answer

Stock dividends increase Common Stock and Paid-in Capital in Excess of Par

Question 15

A company declares a 10% stock dividend when it has 519 million shares outstanding and the market price is $37 per share. What is the total value transferred from Retained Earnings for this dividend?

Accepted Answer

$1,922,300,000

Question 16

Which of the following is affected by a stock split?

Accepted Answer

Number of shares outstanding

Question 17

Which order is correct for reporting stockholders’ equity accounts on the balance sheet?

Accepted Answer

Preferred stock, Common stock, Additional paid-in capital, Retained earnings

Question 18

Which of the following is a financing activity on the statement of cash flows?

Accepted Answer

Issuance of stock

Question 19

A company issues 2,500 shares of $$1 par common stock to settle a 25$$,000 legal bill. The fair market value of the stock is $10 per share. What amount is credited to Paid-in Capital in Excess of Par?

Accepted Answer

$22,500

Question 20

Which of the following statements about dividends is correct?

Accepted Answer

Dividends are only paid after being declared by the board of directors

Stockholders’ Equity – Financial Accounting Chapter 10 Study Notes

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