Explore BrainMass
Share

Corporations, stock, dividends, equity: practice set

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

1. Characteristics of a corporation include
Shareholders who are mutual agents
Direct management by the shareholders (owners)
Its inability to own property
Shareholders who have limited liability

2. Under the corporate form of business organization
Ownership rights are easily transferred.
A stockholder is personally liable for the debts of the corporation.
Stockholders' acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation.
Stockholders wishing to sell their corporation shares must get the approval of
other stockholders.

3. The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called
Treasury stock
Issued stock
Outstanding stock
Authorized stock

4. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
5,000
45,000
40,000
50,000

5. A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
$15,000
$32,000
$17,000
$2,000

6. If Everly Company issues 1,000 shares of $5 par value common stock for $75,000, the account
Common Stock will be credited for $75,000.
Paid-in Capital in excess of Par Value will be credited for $5,000.
Paid-in Capital in excess of Par Value will be credited for $70,000.
Cash will be debited for $70,000.

7. The journal entry to issue 1,000,000 shares of $6 par common stock for $8.00 per share on January 2nd would be:

8. When Bayou Corporation was formed on January 1, 20xx, the corporate charter provided for 100,000 share of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 9,000 shares of stock at a price of $23.00 per share.

The entry to record the above transaction would include a
Debit to Cash for $90,000
Credit to Common Stock for $207,000
Credit to Paid in Capital in Excess of Par- for $117,000
Debit to Common Stock for $90,000

9. On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 3,000 shares of treasury stock for $21 per share and later sold the treasury shares for $24 per share on March 1, 20xx.

The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a
Credit to Treasury Stock for $63,000.
Debit to Treasury Stock for $63,000.
Debit to a loss account for $9,000
Credit to a gain account for $9,000.

10. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
$60,000
$5,000
$100,000
$55,000

11. The date on which a cash dividend becomes a binding legal obligation is on the
Declaration date.
Date of record.
Payment date.
Last day of the fiscal year end.

12. What is the total stockholders' equity based on the following account balances?

$740,000
$730,000
$720,000
$640,000

13. A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?
Increase, $100,000
Increase, $350,000
Decrease, $100,000
Decrease, $350,000

14. Which of the following is not classified as paid-in capital on the balance sheet?
Common stock
Common stock distributable
Donated capital
Treasury stock

15. Which of the following amounts should be disclosed in the stockholders' equity section of the balance sheet?
The number of shares of common stock outstanding
The number of shares of common stock issued
The number of shares of common stock authorized
All of the above

16. A corporation has 40,000 shares of $25 par value stock outstanding. If the corporation issues a 3-for-1 stock split, the number of shares outstanding after the split will be
120,000 shares
40,000 shares
80,000 shares
13,333 shares

Question 15:

15. Based on the following data, what is the acid-test ratio, rounded to one decimal point? (Data attached in the attached file now):

3.4
3.0
2.2
1.8

© BrainMass Inc. brainmass.com October 25, 2018, 7:26 am ad1c9bdddf
https://brainmass.com/business/stock-dividends-and-stock-splits/corporations-stock-dividends-equity-practice-set-503067

Attachments

Solution Preview

1. Characteristics of a corporation include
Shareholders who are mutual agents
Direct management by the shareholders (owners)
Its inability to own property
**Shareholders who have limited liability

Owners with limited liability and professional management.

2. Under the corporate form of business organization
**Ownership rights are easily transferred.
A stockholder is personally liable for the debts of the corporation.
Stockholders' acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation.
Stockholders wishing to sell their corporation shares must get the approval of
other stockholders.

Stock certificates make it easy to buy and sell ownership units.

3. The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called
Treasury stock
Issued stock
Outstanding stock
**Authorized stock

State authorizes shares. Issued means sold to owner and is usually only a fraction of the authorized shares.

4. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
5,000
45,000
**40,000
50,000

Issued less repurchases = outstanding

5. A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record ...

Solution Summary

Your tutorial gives you instructional comments to help you see the choice needed.

$2.19
See Also This Related BrainMass Solution

Accounting Multiple Choice Practice Set: Ratios, Adjustments, Balances, Ect.

1. Zelma Company's last financial statements provided the following ratios:
Current ratio 3:2
Quick ratio 1:2
Accounts receivable turnover 9.0 times
Inventory turnover 8.0 times
Net income percentage 12.5%
Return on equity 22.6%
Return on assets 9.8%

To the nearest day, what is the operating cycle for Zelma?
a) 80 days
b) 86 days
c) 172 days
d) 129 days

2. The following events have been projected:
A. Cash sales and collections from customers totaling $980,000
B. Cash payments for operating expenses of $560,000
C. Cash payments for income taxes and interest expense of $45,000
D. Cash payments of prior period accruals of $80,000
E. Borrowed $50,000 cash by issuing a note payable
F. Cash dividends of $20,000

The beginning balance of cash is $45,000. What is the budgeted ending balance of cash?
a. $325,000
b. $370,000
c. $275,000
d. $245,000

3. On January 1, a business exchanged a plant asset with a cost of $18,000 and accumulated depreciation of $16,500 for a similar asset that had a list price of $23,000. The business received a trade-in allowance of $2,100 on the old plant asset. What was the result of the exchange?

a. A $600 gain on the disposal of a plant asset.
b. A $1,000 unrecognized gain on the exchange of a plant asset.
c. A cost basis of $22,400 for the new plant asset
d. A cost basis of $23,600 for the new plant asset

4. Which one of the following is not an objective of a system of internal controls?

a. Safeguard company assets
b. Overstate liabilities in order to be conservative
c. Enhance the accuracy and reliability of accounting records
d. Reduce the risks of errors

5. A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5 % in the second month after the sale; the remainder is never collected. Budgeted credit sales were:

July $120,000
August 72,000
September 180,000

The cash inflow in the month of September is expected to be
a. $135,600
b. $102,600
c. $108,000
d. $129,600

6. A check for $275 is incorrectly recorded by a company as $257. On the bank reconciliation, the $18 error should be
a. Added to the balance per books.
b. Deducted from the balance per book.
c. Added to the balance per bank.
d. Deducted from the balance per bank.

7. The Allowance for Doubtful Accounts is necessary because
a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
b. uncollectible accounts that are written off must be accumulated in a separate account.
c. a liability results when a credit sale is made.
d. management needs to accumulate all the credit losses over the years.

8. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a. when a credit sale is past due.
b. at the end of each accounting period.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be uncollectible

9. Manning Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?

a. Bad Debts Expense 10,000
Allowance for Doubtful Accounts 10,000
b. Bad Debts Expense 8,000
Allowance for Doubtful Accounts 8,000
c. Bad Debts Expense 8,000
Accounts Receivable 8,000
d. Bad Debts Expense 10,000
Accounts Receivable 10,000

10. The receivables turnover ratio
a. Is computed by dividing net credit sales for the accounting period by the cash realizable value of accounts receivable on the last day of the accounting period.
b. Can be used to compute the average collection period.
c. Is a method of evaluating the solvency of net accounts receivable.
d. Is only important to internal users of accounting information.

11. A measure of a company's solvency is the
a. acid-test ratio.
b. current ratio.
c. times interest earned ratio.
d. asset turnover ratio.

12. The times interest earned ratio is computed by dividing
a. net income by interest expense.
b. income before income taxes by interest expense.
c. income before interest expense by interest expense.
d. income before interest expense and income taxes by interest expense.

13. The 2007 financial statements of Shadow Co. contain the following selected data (in millions).
Current Assets $ 75
Total Assets 120
Current Liabilities 40
Total Liabilities 85
Cash 8
Interest Expense 5
Income Taxes 10
Net Income 16
The debt to total assets ratio is
a. 70.8%
b. 53.3%
c. 1.41%
d. 6.2 times

14. The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the
a. market rate of interest increases, the contractual interest rate will decrease.
b. contractual interest rate increases, then bond prices will go down.
c. market rate of interest decreases, then bond prices will go up.
d. contractual interest rate increases, the market rate of interest will decrease.

15. A company would not acquire treasury stock

a. in order to reissue shares to officers.
b. as an asset investment.
c. in order to increase trading of the company's stock.
d. to have additional shares available to use in acquisitions of other companies.

16. Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

a. Retained Earnings
Cash
b. Dividends Payable
Cash
c. Paid-in Capital
Dividends Payable
d. Retained Earnings
Dividends Payable

17. Allstate, Inc., has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2007. If the board of directors declares a $50,000 dividend, the

a. preferred stockholders will receive 1/10th of what the common stockholders will receive.
b. preferred stockholders will receive the entire $50,000.
c. $50,000 will be held as restricted retained earnings and paid out at some future date.
d. preferred stockholders will receive $25,000 and the common stockholders will receive $25,000.

18. When a change in accounting principle occurs

a. prior years' financial statements should not be changed to reflect the newly adopted principle.
b. the new principle should be used in reporting the results of operations of the current year.
c. the cumulative effect of the change in principle should be reflected on the income statement as of the beginning of the next year.
d. the cumulative effect of the change in accounting principle should be classified as an extraordinary item on the income statement.

19. Which of the following is not an irregular item on the income statement?
a. Discontinued operations
b. Extraordinary items
c. Other revenues and expenses

20. Vertical analysis is a technique that expresses each item in a financial statement
a. in dollars and cents.
b. as a percent of the item in the previous year.
c. as a percent of a base amount.
d. starting with the highest value down to the lowest value.

View Full Posting Details