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| 1 | |
Which one of the following characteristics applies to both a sole proprietor and a general partnership but not a corporation? |
| | A) | Continuous life. |
| | B) | A separate legal entity. |
| | C) | Unlimited liability. |
| | D) | Limited liability. |
| | E) | None of the above. |
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| 2 | |
What is the accounting treatment for corporate organization costs? |
| | A) | Corporate organization costs are debited to an expense account when they are incurred. |
| | B) | Corporate organization costs are debited to an asset account and are never expensed to the income statement until the corporation goes out of existence. |
| | C) | Corporate organization costs are debited to an asset account when they are incurred. A portion of these costs are written-off to the income statement each accounting period. |
| | D) | Both A and C are permissible. |
| | E) | Both B and C are permissible. |
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| 3 | |
Stock splits are different from stock dividends but both of them result in an increase in the number of outstanding shares. A corporation has 10,000 shares of outstanding stock. Which of the following pairs of numbers will yield the same number of new shares outstanding? |
| | A) | A 5 for 4 stock split is the same as a 33% stock dividend. |
| | B) | A 5 for 4 stock split is the same as a 20% stock dividend. |
| | C) | A 5 for 4 stock split is the same as a 30% stock dividend. |
| | D) | A 5 for 4 stock split is the same as a 25% stock dividend. |
| | E) | A 5 for 4 stock split is the same as a 15% stock dividend. |
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| 4 | |
A company has 10,000 shares of $100 par, 6% cumulative preferred stock outstanding. If the company declares a total of $200,000 of cash dividends for the year for both its common and preferred stock and the preferred stock is two years in arrears, how much will be allocated to the (1) preferred stockholders and (2) the common stockholders? |
| | A) | (1) $60,000 and (2) $140,000. |
| | B) | (1) $120,000 and $80,000. |
| | C) | (1) $180,000 and $20,000. |
| | D) | (1) $200,000 and (2) $0. |
| | E) | None of the above. |
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| 5 | |
A corporation has 50,000 shares of $10 par common stock authorized. Twenty-thousand shares have been issued. Which of the following statements concerning treasury stock is correct? |
| | A) | The corporation can only reacquire its own stock if it pays more than the par value for it. |
| | B) | By law, corporations cannot hold more than 10% of any given class of stock as treasury stock. |
| | C) | Treasury stock held by a corporation can be reissued at any price. |
| | D) | Treasury stock, once acquired by the corporation, cannot be canceled by the corporation, but must be reissued at some future date. |
| | E) | None of the above. |
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| 6 | |
A corporation issued 20,000 shares of $12 par value common stock for $15 per share. The journal entry to record the issue of the stock would include which of the following? |
| | A) | A credit to Gain On Sale of Common Stock, $240,000. |
| | B) | A debit to Paid-In Capital in Excess of Par Value, Common Stock, $50,000. |
| | C) | A credit to Common Stock, $240,000. |
| | D) | A credit to Common Stock, $300,000. |
| | E) | None of the above. |
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| 7 | |
Squirt Company sold 3,000 shares of $15 par value common stock for $55,000. In recording this transaction, Squirt should credit Common Stock for what amount? |
| | A) | $10,000. |
| | B) | $25,000. |
| | C) | $45,000. |
| | D) | $25,000. |
| | E) | None of the above. |
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| 8 | |
On May 4, the Rogers Corporation's board of directors declared a 15% stock dividend. The market price of the 40,000 outstanding shares of $5 par value common stock was $7 per share. Which of the following is true? |
| | A) | Retained earnings decreased by $42,000. |
| | B) | Retained earnings decreased by $30,000. |
| | C) | Retained earnings increased by $32,000. |
| | D) | Total contributed capital increased by $280,000. |
| | E) | Total contributed capital increased by $200,000. |
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| 9 | |
June Enterprises holds 11,000 shares of treasury stock that it purchased at $7 per share. After June reissues 20 percent of the treasury stock at $12 per share, what will be the effect on the total stockholders' equity? |
| | A) | It will remain the same as it was before the reissue. |
| | B) | It will increase by $11,000. |
| | C) | It will increase by $26,400. |
| | D) | It will decrease by $15,400. |
| | E) | It will decrease by $12,000. |
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| 10 | |
Company A has a capital structure of 60,000 shares of $10 par common stock, no preferred stock, and retained earnings of $400,000. The company made no sales or purchases of its common stock. Earnings per share is $1.45. What is the amount of net income? |
| | A) | $77,000. |
| | B) | $88,000. |
| | C) | $87,000. |
| | D) | $65,000. |
| | E) | Cannot be determined. |
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| 11 | |
Net income for the period is $200,000. Preferred dividends of $15,000 and common dividends of $50,000 were paid. If there were 100,000 common shares outstanding throughout the year, what is the earnings per common share? |
| | A) | $1.25. |
| | B) | $1.10. |
| | C) | $1.85. |
| | D) | $1.50. |
| | E) | Cannot be determined. |
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| 12 | |
Which of the following groups possesses the authority to make declarations of dividends? |
| | A) | Board of directors. |
| | B) | Stockholders. |
| | C) | Registrar and transfer agent. |
| | D) | Operations officers. |
| | E) | Employees of the corporation. |
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| 13 | |
Which of the following is true about the par value of a share of stock? |
| | A) | The par value is a reliable measure of the market value of the stock. |
| | B) | The par value is assigned after it has been voted on by the stockholders. |
| | C) | The par value assigned must be between $1 and $10. |
| | D) | The par value is used to determine the legal capital of the corporation. |
| | E) | None of the above. |
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| 14 | |
The date on which the board of directors votes whether or not to distribute a dividend is called which of the following? |
| | A) | Date of payment. |
| | B) | Date of record. |
| | C) | Date of vote. |
| | D) | Date of declaration. |
| | E) | None of the above. |
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| 15 | |
A stock split will do which of the following? |
| | A) | Affect a stockholder's percentage interest in the corporation. |
| | B) | Decrease the par value of the stock. |
| | C) | Increase the par value of the stock. |
| | D) | Decrease the number of shares outstanding. |
| | E) | Increase total stockholders' equity. |
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