Ch 11: Stockholders Equity ( 9 questions)
no preferred stock questions
6) A corporation has the following account balances: Common Stock, $1 par value, $60,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the
a. legal capital is $2,760,000.
b. number of shares issued is 60,000.
c. number of shares outstanding is 2,760,000.
d. average price per share issued is $4.60.
7) Landis Company reported a net loss of $6,000 for the year ended December 31, 2012. During the year, accounts receivable decreased $14,000, merchandise inventory increased $10,000, accounts payable increased by $20,000, and depreciation expense of $10,000 was recorded. During 2012, operating activities
a. used net cash of $2,000.
b. used net cash of $28,000.
c. provided net cash of $28,000.
d. provided net cash of $18,000.
8) The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to
a. decrease total liabilities and stockholders’ equity.
b. increase total expenses and total liabilities.
c. increase total assets and stockholders’ equity.
d. decrease total assets and stockholders’ equity.
9) The date on which a cash dividend becomes a binding legal obligation is on the
a. declaration date.
b. date of record.
c. payment date.
d. last day of the fiscal year end.
10) Using the indirect method, if equipment is sold at a gain, the
a. sale proceeds received are deducted in the operating activities section.
b. sale proceeds received are added in the operating activities section.
c. amount of the gain is added in the operating activities section.
d. amount of the gain is deducted in the operating activities section.
11) On January 1, McCarver Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,
a. McCarver’s Paid-in Capital in Excess of Par Value account increased $400,000.
b. McCarver’s total stockholders’ equity was unaffected.
c. McCarver’s Stock Dividends account increased $1,200,000.
d. All of the above.
12) A company had net income of $940,000. Depreciation expense is $104,000. During the year, accounts receivable and inventory increased $60,000 and $160,000, respectively. Prepaid expenses and accounts payable decreased $8,000 and $16,000, respectively. There was also a loss on the sale of equipment of $12,000. How much cash was provided by operating activities?
a. $804,000.
b. $828,000.
c. $1,124,000.
d. $1,172,000.
a. legal capital is $2,760,000.
b. number of shares issued is 60,000.
c. number of shares outstanding is 2,760,000.
d. average price per share issued is $4.60.
7) Landis Company reported a net loss of $6,000 for the year ended December 31, 2012. During the year, accounts receivable decreased $14,000, merchandise inventory increased $10,000, accounts payable increased by $20,000, and depreciation expense of $10,000 was recorded. During 2012, operating activities
a. used net cash of $2,000.
b. used net cash of $28,000.
c. provided net cash of $28,000.
d. provided net cash of $18,000.
8) The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to
a. decrease total liabilities and stockholders’ equity.
b. increase total expenses and total liabilities.
c. increase total assets and stockholders’ equity.
d. decrease total assets and stockholders’ equity.
9) The date on which a cash dividend becomes a binding legal obligation is on the
a. declaration date.
b. date of record.
c. payment date.
d. last day of the fiscal year end.
10) Using the indirect method, if equipment is sold at a gain, the
a. sale proceeds received are deducted in the operating activities section.
b. sale proceeds received are added in the operating activities section.
c. amount of the gain is added in the operating activities section.
d. amount of the gain is deducted in the operating activities section.
11) On January 1, McCarver Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,
a. McCarver’s Paid-in Capital in Excess of Par Value account increased $400,000.
b. McCarver’s total stockholders’ equity was unaffected.
c. McCarver’s Stock Dividends account increased $1,200,000.
d. All of the above.
12) A company had net income of $940,000. Depreciation expense is $104,000. During the year, accounts receivable and inventory increased $60,000 and $160,000, respectively. Prepaid expenses and accounts payable decreased $8,000 and $16,000, respectively. There was also a loss on the sale of equipment of $12,000. How much cash was provided by operating activities?
a. $804,000.
b. $828,000.
c. $1,124,000.
d. $1,172,000.
13) Stock dividends and stock splits have the following effects on retained earnings:
Stock Splits Stock Dividends
a. Increase No change
b. No change Decrease
c. Decrease Decrease
d. No change No change
Stock Splits Stock Dividends
a. Increase No change
b. No change Decrease
c. Decrease Decrease
d. No change No change
- Stock dividends also increase paid in capital
14) The board of directors of Yancey Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2012. The dividend is to be paid on August 15, 2012, to stockholders of record on July 31, 2012. The effects of the journal entry to record the declaration of the dividend on July 15, 2012, are to
a. decrease stockholders’ equity and increase liabilities.
b. decrease stockholders’ equity and decrease assets.
c. increase stockholders’ equity and increase liabilities.
d. increase stockholders’ equity and decrease assets
a. decrease stockholders’ equity and increase liabilities.
b. decrease stockholders’ equity and decrease assets.
c. increase stockholders’ equity and increase liabilities.
d. increase stockholders’ equity and decrease assets
15) Logan Corporation issues 40,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will consist of a debit to Cash for $2,400,000 and a credit or credits to
a. Preferred Stock for $2,400,000.
b. Preferred Stock for $2,000,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $400,000.
c. Preferred Stock for $2,000,000 and Retained Earnings for $400,000.
d. Paid-in Capital from Preferred Stock for $2,400,000.
a. Preferred Stock for $2,400,000.
b. Preferred Stock for $2,000,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $400,000.
c. Preferred Stock for $2,000,000 and Retained Earnings for $400,000.
d. Paid-in Capital from Preferred Stock for $2,400,000.
17) An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is
Cost of Goods Sold Net Income
a. Understated Understated
b. Overstated Overstated
c. Understated Overstated
d. Overstated Understated
Cost of Goods Sold Net Income
a. Understated Understated
b. Overstated Overstated
c. Understated Overstated
d. Overstated Understated
18) Under the allowance method, writing off an uncollectible account
a. affects only balance sheet accounts.
b. affects both balance sheet and income statement accounts.
c. affects only income statement accounts.
d. is not acceptable practice.
a. affects only balance sheet accounts.
b. affects both balance sheet and income statement accounts.
c. affects only income statement accounts.
d. is not acceptable practice.
19) An expenditure for which of the following items would be considered a revenue expenditure?
a. Plant asset.
b. Ordinary repair.
c. Addition.
d. Improvements.
20) Which of the following statements is not true about a 2-for-1 split?
a. Par value per share is reduced to half of what it was before the split.
b. Total contributed capital increases.
c. The market price probably will decrease.
d. A stockholder with ten shares before the split owns twenty shares after the split.
a. Plant asset.
b. Ordinary repair.
c. Addition.
d. Improvements.
20) Which of the following statements is not true about a 2-for-1 split?
a. Par value per share is reduced to half of what it was before the split.
b. Total contributed capital increases.
c. The market price probably will decrease.
d. A stockholder with ten shares before the split owns twenty shares after the split.