Acct 301b ch 15

The residual interest in a corporation belongs to the
a. management.
b. creditors.
c. common stockholders.
d. preferred stockholders.

C

The pre-emptive right of a common stockholder is the right to
a. share proportionately in corporate assets upon liquidation.
b. share proportionately in any new issues of stock of the same class.
c. receive cash dividends before they are distributed to pr

B

The pre-emptive right enables a stockholder to
a. share proportionately in any new issues of stock of the same class.
b. receive cash dividends before other classes of stock without the pre-emptive right.
c. sell capital stock back to the corporation at t

A

In a corporate form of business organization, legal capital is best defined as
a. the amount of capital the state of incorporation allows the company to accumulate
over its existence.
b. the par value of all capital stock issued.
c. the amount of capital

B

Stockholders of a business enterprise are said to be the residual owners. The term
residual owner means that shareholders
a. are entitled to a dividend every year in which the business earns a profit.
b. have the rights to specific assets of the business.

C

Total stockholders' equity represents
a. a claim to specific assets contributed by the owners.
b. the maximum amount that can be borrowed by the enterprise.
c. a claim against a portion of the total assets of an enterprise.
d. only the amount of earnings

C

A primary source of stockholders' equity is
a. income retained by the corporation.
b. appropriated retained earnings.
c. contributions by stockholders.
d. both income retained by the corporation and contributions by stockholders.

D

Stockholders' equity is generally classified into two major categories:
a. contributed capital and appropriated capital.
b. appropriated capital and retained earnings.
c. retained earnings and unappropriated capital.
d. earned capital and contributed capi

D

The accounting problem in a lump sum issuance is the allocation of proceeds between the
classes of securities. An acceptable method of allocation is the
a. pro forma method.
b. proportional method.
c. incremental method.
d. either the proportional method

D

When a corporation issues its capital stock in payment for services, the least appropriate
basis for recording the transaction is the
a. market value of the services received.
b. par value of the shares issued.
c. market value of the shares issued.
d. Any

b

Direct costs incurred to sell stock such as underwriting costs should be accounted for as
1. a reduction of additional paid-in capital.
2. an expense of the period in which the stock is issued.
3. an intangible asset.
a. 1
b. 2
c. 3
d. 1 or 3

a

A "secret reserve" will be created if
a. inadequate depreciation is charged to income.
b. a capital expenditure is charged to expense.
c. liabilities are understated.
d. stockholders' equity is overstated.

b

Which of the following represents the total number of shares that a corporation may issue
under the terms of its charter?
a. authorized shares
b. issued shares
c. unissued shares
d. outstanding shares

a

Stock that has a fixed per-share amount printed on each stock certificate is called
a. stated value stock.
b. fixed value stock.
c. uniform value stock.
d. par value stock.

d

Which of the following is not a legal restriction related to profit distributions by a
corporation?
a. The amount distributed to owners must be in compliance with the state laws governing
corporations.
b. The amount distributed in any one year can never e

b

In January 2012, Finley Corporation, a newly formed company, issued 10,000 shares of
its $10 par common stock for $15 per share. On July 1, 2012, Finley Corporation
reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of
the

a

Treasury shares are
a. shares held as an investment by the treasurer of the corporation.
b. shares held as an investment of the corporation.
c. issued and outstanding shares.
d. issued but not outstanding shares.

d

When treasury stock is purchased for more than the par value of the stock and the cost
method is used to account for treasury stock, what account(s) should be debited?
a. Treasury stock for the par value and paid-in capital in excess of par for the excess

c

Gains" on sales of treasury stock (using the cost method) should be credited to
a. paid-in capital from treasury stock.
b. capital stock.
c. retained earnings.
d. other income.

a

Porter Corp. purchased its own par value stock on January 1, 2012 for $20,000 and
debited the treasury stock account for the purchase price. The stock was subsequently
sold for $12,000. The $8,000 difference between the cost and sales price should be
reco

a

How should a "gain" from the sale of treasury stock be reflected when using the cost
method of recording treasury stock transactions?
a. As ordinary earnings shown on the income statement.
b. As paid-in capital from treasury stock transactions.
c. As an i

b

Which of the following best describes a possible result of treasury stock transactions by a
corporation?
a. May increase but not decrease retained earnings.
b. May increase net income if the cost method is used.
c. May decrease but not increase retained e

c

Which of the following features of preferred stock makes the security more like debt than
an equity instrument?
a. Participating
b. Voting
c. Redeemable
d. Noncumulative

c

The cumulative feature of preferred stock
a. limits the amount of cumulative dividends to the par value of the preferred stock.
b. requires that dividends not paid in any year must be made up in a later year before
dividends are distributed to common shar

b

According to the FASB, redeemable preferred stock should be
a. included with common stock.
b. included as a liability.
c. excluded from the stockholders' equity heading.
d. included as a contra item in stockholders' equity.

b

Cumulative preferred dividends in arrears should be shown in a corporation's balance
sheet as
a. an increase in current liabilities.
b. an increase in stockholders' equity.
c. a footnote.
d. an increase in current liabilities for the current portion and l

c

120. A corporation was organized in January 2009 with authorized capital of $10 par value common stock. On February 1, 2012, shares were issued at par for cash. On March 1, 2012, the corporation's attorney accepted 7,000 shares of common stock in settleme

d

121. On July 1, 2012, Nall Co. issued 2,500 shares of its $10 par common stock and 5,000 shares of its $10 par convertible preferred stock for a lump sum of $140,000. At this date Nall's common stock was selling for $24 per share and the convertible prefe

b

Horton Co. was organized on January 2, 2012, with 500,000 authorized shares of $10 par value common stock. During 2012, Horton had the following capital transactions:
January 5�issued 375,000 shares at $14 per share.
July 27�purchased 25,000 shares at $11

c

In 2012, Hobbs Corp. acquired 9,000 shares of its own $1 par value common stock at $18 per share. In 2013, Hobbs issued 6,000 of these shares at $25 per share. Hobbs uses the cost method to account for its treasury stock transactions. What accounts and wh

b

At its date of incorporation, Sauder, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, Sauder acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method

c