Question 1

A liquidating dividend is:

Accepted Answer

A)   Only declared when a corporation closes down.
B)   A return of a portion of the original investment back to the stockholders.
C)   Only paid in shares of stock.
D)   Only paid in assets other than cash.
E)   Not allowed under federal law.F) B) and E)
G) D) and E)

Question 2

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the payment of the cash dividend is:

Accepted Answer

A)   Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.
B)   Debit Dividend Expense $12,000; credit Cash $12,000.
C)   Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
D)   Debit Common Dividend Payable $12,000; credit Cash $12,000.
E)   Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.F) None of the above
G) B) and C)

Question 3

If a corporation is authorized to issue 1,000 shares of $5 common stock, it is said to have $5,000 of stock outstanding.

Accepted Answer

A) True 
 B)False

Question 4

Growth stocks generally pay large dividends on a regular basis.

Accepted Answer

A) True 
 B)False

Question 5

Common Stock Dividend Distributable is an equity account.

Accepted Answer

A) True 
 B)False

Question 6

Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

Accepted Answer

A) True 
 B)False

Question 7

Corporations may buy back their own stock for any of the following reasons except to:

Accepted Answer

A)   Allow management to assume the voting rights.
B)   Avoid a hostile take-over.
C)   Maintain market value for the company stock.
D)   Have shares available for a merger or acquisition.
E)   Have shares available for employee compensation.F) C) and D)
G) B) and E)

Question 8

The date the directors vote to declare and pay a dividend is called the:

Accepted Answer

A)   Date of declaration.
B)   Date of payment.
C)   Date of stockholders' meeting.
D)   Date of record.
E)   Liquidating date.F) C) and E)
G) A) and D)

Question 9

The ________ protects stockholders' proportional interest in a corporation by allowing them to purchase their proportional share of any common stock later issued by the corporation.

Accepted Answer

The answer of The ________ protects stockholders' proportional interest in...

Question 10

Book value per share:

Accepted Answer

A)   Measures the worth of assets.
B)   Is assets divided by the number of common shares outstanding.
C)   Is equal to par value per share.
D)   Reflects the value per share if a company is liquidated at balance sheet amounts.
E)   Is assets divided by equity.F) A) and D)
G) A) and E)

Question 11

_________is a general term that refers to any shares issued to obtain owner financing in a corporation.

Accepted Answer

The answer of _________is a general term that refers to...

Question 12

Common shareholders always share equally with all other shareholders in dividends.

Accepted Answer

A) True 
 B)False

Question 13

A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:

Accepted Answer

A)   No-par stock.
B)   Discounted stock.
C)   Convertible stock.
D)   Noncumulative stock.
E)   Callable stock.F) A) and B)
G) All of the above

Question 14

The least amount that the buyers of stock must contribute to the corporation or be subject to paying at a future date is called ________.

Accepted Answer

minimum le...

Question 15

Declaration of a stock dividend results in a liability being recorded.

Accepted Answer

A) True 
 B)False

Question 16

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:

Accepted Answer

A)   Right to call.
B)   Proxy right.
C)   Voting right.
D)   Preemptive right.
E)   Financial leverage.F) C) and D)
G) A) and B)

Question 17

________ is the amount of income earned per share of a company's outstanding common stock.

Accepted Answer

The answer of ________ is the amount of income earned...

Question 18

Dividing stockholders' equity applicable to common shares by the number of common shares outstanding yields the book value per common share.

Accepted Answer

A) True 
 B)False

Question 19

Eastline Corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record this dividend is:

Accepted Answer

A)   Debit Common Stock Dividend Distributable $36,000; credit Retained Earnings $36,000.
B)   Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $36,000.
C)   Debit Retained Earnings $30,000; credit Common Stock Dividend Distributable $30,000.
D)   No entry is needed.
E)   Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable $30,000; credit Paid-In Capital in Excess of Par Value, Common Stock $6,000.F) B) and C)
G) A) and E)

Question 20

Minimum legal capital requirements are intended to protect creditors.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

Common Stock Dividend Distributable is an equity account.

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Eastline Corporation had 10,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 3,000 shares. At the time of the stock dividend, the market value per share was $12. The entry to record this dividend is:

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Dividing stockholders' equity applicable to common shares by the number of common shares outstanding yields the book value per common share.

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_________is a general term that refers to any shares issued to obtain owner financing in a corporation.

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________ is the amount of income earned per share of a company's outstanding common stock.

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If a corporation is authorized to issue 1,000 shares of $5 common stock, it is said to have $5,000 of stock outstanding.

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Corporations may buy back their own stock for any of the following reasons except to:

Correct AnswerverifiedShow Answer

The ________ protects stockholders' proportional interest in a corporation by allowing them to purchase their proportional share of any common stock later issued by the corporation.

Correct AnswerverifiedShow Answer

Common shareholders always share equally with all other shareholders in dividends.

Correct AnswerverifiedShow Answer

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the payment of the cash dividend is:

Correct AnswerverifiedShow Answer

Growth stocks generally pay large dividends on a regular basis.

Correct AnswerverifiedShow Answer

A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:

Correct AnswerverifiedShow Answer

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:

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A liquidating dividend is:

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Declaration of a stock dividend results in a liability being recorded.

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Book value per share:

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Minimum legal capital requirements are intended to protect creditors.

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Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

Correct AnswerverifiedShow Answer

The least amount that the buyers of stock must contribute to the corporation or be subject to paying at a future date is called ________.

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The date the directors vote to declare and pay a dividend is called the:

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