ACC 255 Chp 11 – Flashcards
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Which one of the following is a major disadvantage of a corporation? Entry field with correct answer Limited liability of stockholders Transferable ownership rights Limited life Additional taxes
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Additional taxes
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Which of the following is not a characteristic of a corporation? Entry field with correct answer Unlimited liability for stockholders Separate legal existence Easy transfer of ownership interests Ability to acquire capital easily
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Unlimited liability for stockholders
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Correct answer. Correct! Because a corporation is a separate legal entity and because of the government's desire to protect stockholders, corporations are heavily regulated. Which of the following is a disadvantage of the corporate business form? Entry field with correct answer Easy acquisition of capital No income taxes Government regulation Continuous life
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Government regulation
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Which of the following is not a stockholder's right? Entry field with correct answer The preemptive right The right to share in dividends The right to vote in the election for the board of directors The right to participate in management decisions
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The right to participate in management decisions
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Which of these statements is false? Entry field with correct answer The stockholders' equity section begins with paid-in capital amounts. Legal capital is intended to protect stockholders. The authorization of capital stock does not result in a formal accounting entry. Ownership of common stock gives the owner a voting right.
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Legal capital is intended to protect stockholders.
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Which of the following represents the maximum number of shares a corporation can issue? Entry field with correct answer Treasury shares Outstanding shares Issued shares Authorized shares
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Authorized shares
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DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance? Entry field with correct answer Debit to Cash for $15,000 Debit to Paid-in Capital in Excess of Par Value for $3,000 Credit to Common Stock for $15,000 Credit to Common Stock for $18,000
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Credit to Common Stock for $15,000
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Wynola, Inc. issued 1,000 shares of common stock at $10 per share. If the stock has a par value of $4 per share, which of the following will be part of the journal entry to record the issuance? Entry field with correct answer Debit to Cash for $4,000 Credit to Paid-in Capital in Excess of Par Value for $10,000 Debit to Retained Earnings for $6,000 Credit to Common Stock for $4,000
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Credit to Common Stock for $4,000
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The Streetaddress13th Street Grill issued 10,000 of $1 par value common stock for $5 per share. Which of the following will be part of the journal entry to record the issuance? Entry field with correct answer A debit of $10,000 to Common Stock A debit of $50,000 to Common Stock A credit of $10,000 to Common Stock A credit of $50,000 to Common Stock
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A credit of $10,000 to Common Stock
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Dynatech issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, which accounts are credited? Entry field with correct answer Common Stock $12,000 Common Stock $10,000 and Gain on Stock CityplaceSale $2,000 Common Stock $10,000 and Retained Earnings $2,000 Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000
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Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000
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For what reason might a company acquire treasury stock? Entry field with correct answer To increase profit To increase the number of shares of stock outstanding To reissue the shares to officers and employees under bonus and stock compensation plans To signal to the stock market that management believes the stock is overpriced
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To reissue the shares to officers and employees under bonus and stock compensation plans
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Which one of the following decreases when a corporation purchases treasury stock? Entry field with correct answer Outstanding shares Issued shares Authorized shares Treasury shares
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Outstanding shares
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What method is normally used to account for treasury stock? Entry field with correct answer Cost method Stated value method Par value method Legal value method
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Cost method
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If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders' equity be reduced? Entry field with incorrect answer $7,000 $5,000 $12,000 $0
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$12,000
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A corporation sold 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $12.00 per share. Which of the following will be debited to record the repurchase of the 100 shares? Entry field with correct answer Treasury Stock for $1,200 Treasury Stock for $200 Cash for $1,200 Common Stock for $1,200
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Treasury Stock for $1,200
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Which of the following is a feature associated only with preferred stock? Entry field with correct answer Dividend preference Cumulative dividends Preference to assets in the event of liquidation All of the answer choices are correct
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All of the answer choices are correct
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On which date are entries for cash dividends required? Entry field with correct answer Record date and the payment date Declaration date and the payment date Declaration date and the record date Declaration date, record date, and payment date
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Declaration date and the payment date
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Which one of the following is not true concerning a retained earnings restriction? Entry field with incorrect answer It is reported as a loss on the income statement. It makes a portion of the balance of retained earnings unavailable for dividends. It may arise from legal, contractual, or voluntary causes. It generally is disclosed in the notes to the financial statements.
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It is reported as a loss on the income statement.
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Which of the following does not affect retained earnings? Entry field with correct answer Net income Dividends Additional investment by stockholders Net loss
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Additional investment by stockholders
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How is common stock listed in the stockholders' equity section of the balance sheet? Entry field with correct answer Before preferred stock As part of paid-in capital After retained earnings Subtracted from treasury stock
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As part of paid-in capital
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corporation shows the following account balances: Retained earnings $300,000 Treasury stock 10,000 Dividends payable 20,000 Paid-in capital in excess of par value 55,000 Common stock 200,000 How much is total stockholders' equity? Entry field with correct answer $565,000 $545,000 $525,000 $555,000
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$545,000
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A corporation shows the following account balances: Retained earnings $400,000 Treasury stock?common 20,000 Paid-in capital in excess of par value?common 55,000 Treasury stock?preferred 30,000 Common stock 200,000 Preferred stock 180,000 Paid-in capital in excess of par value?preferred 60,000 How much is total stockholders' equity? Entry field with correct answer $845,000 $885,000 $895,000 $945,000
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$845,000
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Consider the following data for a corporation: Net income $800,000 Preferred stock dividends $50,000 Market price per share of stock $25 Average common stockholders' equity $4,000,000 Cash dividends declared on common stock $20,000 What is the return on common stockholders' equity? Entry field with correct answer 20.00% 21.25% 19.50% 18.75%
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18.75%
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Jaylo Inc. had net income of $500,000, net sales of $10,000,000 and paid cash dividends of $200,000 to the common stockholders. How much is Jaylo's payout ratio? Entry field with incorrect answer 2% 4% 20% 40%
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40%
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Rynadune Inc. reported net income of $186,000 during 2014 and paid dividends of $26,000 on common stock. It also paid dividends on its 10,000 shares of 6%, $100 par value, noncumulative preferred stock. Common stockholders' equity was $1,200,000 on January 1, 2014, and $1,600,000 on December 31, 2014. How much is the company's return on common stockholders' equity for 2014? Entry field with correct answer 7.1% 13.3% 10.0% 9.0%
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9.0%
