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Multiple Choice Quiz
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1
Encore Industries owned investment securities with a book value of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows:

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What amount of gain should Encore recognize in earnings in connection with this property dividend?
A)$0
B)$13 million
C)$15 million
D)$17 million
2
What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following?

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A)a
B)b
C)c
D)d
3
What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

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A)a
B)b
C)c
D)d
4
What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following?

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A)a
B)b
C)c
D)d
5
Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following?

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A)a
B)b
C)c
D)d
6
Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

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A)a
B)b
C)c
D)d
7
Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

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A)a
B)b
C)c
D)d
8
The balance sheet of Epsom Services included the following shareholders' equity section at December 31, 2016:

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On January 5, 2017, Epsom purchased and retired 1 million shares for $9 million. Immediately after retirement of the shares, the balances in the paid-in capital – excess of par and retained earnings accounts are:

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A)a
B)b
C)c
D)d
9
The balance sheet of Holmes Services included the following shareholders' equity section at December 31, 2016:

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On January 5, 2017, Holmes purchased 1 million treasury shares for $9 million. Immediately after the purchase of the shares, the balances in the paid-in capital– excess of par and retained earnings accounts are:

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A)a
B)b
C)c
D)d
10
Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:
A)$8 million
B)$9 million
C)$11 million
D)$13 million
11
Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

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A)a
B)b
C)c
D)d
12
Treasury stock transactions may cause:
A)An increase in the balance of retained earnings.
B)A decrease in the balance of retained earnings.
C)An increase or a decrease in the amount of net income.
D)An increase or a decrease in the par value per share
13
Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's book value exceeded its fair value. The excess is:
A)Not reported.
B)Reported as a loss.
C)Reported as other comprehensive income.
D)Reported as a direct reduction of shareholders' equity.
14
The following data were reported in the shareholders' equity section of the Jetson Company's comparative balance sheets for the years ended December 31:

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During 2016, Jetson declared and paid cash dividends of $45 million. The company also declared and issued a stock dividend. No other changes occurred in shares outstanding during 2016. What was Jetson's net income for 2016?
A)$14 million
B)$59 million
C)$65 million
D)$89 million
15
The corporate charter of Pharaoh Tent Co. authorized the issuance of 6 million, $1 par common shares. During 2016, its first year of operations, Pharaoh had the following transactions:

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What amount should Pharaoh report as additional paid-in capital in its December 31, 2016, balance sheet?
A)$37 million
B)$56 million
C)$58 million
D)$61 million
16
The corporate charter of CD, Inc. authorized the issuance of 6 million, $1 par common shares. During 2016, its first year of operations, CD had the following transactions:

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What amount should CD report as additional paid-in capital in its December 31, 2016, balance sheet?
A)$37 million
B)$56 million
C)$58 million
D)$61 million
17
At the beginning of 2016, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2016, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2015. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?
A)$36 million
B)$56 million
C)$68 million
D)$100 million
18
When the 2016 year began, Senatobia Furniture's shareholders' equity included the following:

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The company earned $48 million during 2016. At the end of the year, the board of directors declared and paid the contracted amount of preferred dividends as well as $3 per share to common shareholders. No dividends had been declared or paid during 2015. On January 5, the company distributed a 3 for 2 common stock split effected in the form of a stock dividend. What is the balance in retained earnings to be reported on the 2016 balance sheet?
A)$143 million
B)$152 million
C)$160 million
D)$188 million
19
Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?
A)Accumulated other comprehensive income.
B)Asset revaluation reserve.
C)Share premium.
D)Ordinary shares.
20
Fancy Imports applies International Financial Reporting Standards. The company issued shares of the company's Class B stock. Fancy Imports should report the stock in the company's statement of financial position
A)as equity unless the shares are redeemable at the option of the issuer.
B)as equity unless the shares are manditorily redeemable.
C)among liabilities if the shares are manditorily redeemable or redeemable at the option of the shareholder.
D)among liabilities unless the shares are manditorily redeemable.





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