ACCOUNTING

1. Practice Question 01

In every corporation the one class of stock that represents the basic ownership interest is called

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common stock.
preferred stock.
cumulative stock.
owners’ stock.

Practice Question 03

Presented below is information related to Schoenthaler Corporation:

Common Stock , $5 par $1,100,000
Paid-in Capital in Excess of Par – Common Stock 400,000
Preferred 5 ½% Stock, $100 par 1,500,000
Paid-in Capital in Excess of Par—Preferred Stock 500,000
Retained Earnings 2,000,000
Paid-in Capital from Treasury Stock 150,000

The total stockholders’ equity of Schoenthaler Corporation is

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$5,500,000.
$3,650,000.
$5,350,000.
$5,650,000.

Practice Question 05

Which of the following type of stock will not increase Additional Paid-in Capital when issued?

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No-par value stock.
No-par with a stated value stock.
Preferred stock.
Par value stock.

Practice Question 07

Treasury stock sold for less than its cost decreases net income.

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True
False

Practice Question 09

Cumulative preferred dividends in arrears should be shown in a corporation’s financial statements as

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an increase in stockholders’ equity.
an increase in current liabilities for the current portion and long-term liabilities for the long-term portion.
a footnote.
an increase in current liabilities.

Practice Question 11

Which of the following statements related to dividends is incorrect?

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Before declaring a dividend, management must consider availability of funds to pay the dividend.
Dividends must be paid in the period declared.
Distributions to owners must be in compliance with the state laws.
Dividends must be declared by the Board of Directors.

Practice Question 13

Cash dividends are paid on the basis of the number of shares

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outstanding less the number of treasury shares.
issued.
outstanding.
authorized.

Practice Question 15

Redeemable preferred stock should be classified as a liability on the balance sheet.

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True
False

Practice Question 17

Blowing Rock Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 30,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $45,000 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?

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$0
$45,000
$15,000
$25,000

Practice Question 19

Which one of the following is not a right of common stockholders?

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To share proportionately in corporate assets upon liquidation.
To share proportionately in any new issues of stock of the same class.
To share proportionately in all management decisions.
To share proportionately in profits and losses.

Practice Question 21

Presented below is information related to Kaenzig Corporation:

Common Stock , $1 par $2,100,000
Paid-in Capital in Excess of Par – Common Stock 550,000
Preferred 8 ½% Stock, $50 par 1,700,000
Paid-in Capital in Excess of Par—Preferred Stock 950,000
Retained Earnings 2,350,000
Treasury Common Stock (at cost) 250,000

The total stockholders’ equity of Kaenzig Corporation is

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$2,300,000.
$7,400,000.
$7,900,000.
$5,300,000.

Practice Question 23

Gulfport Corporation was organized in January 2017 with authorized capital of $.0001 par value common stock. On February 1, 2017, shares were issued at par for cash. On March 1, 2017, the corporation’s attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $25,250. Additional paid-in capital would increase on

  2/1/2017 3/1/2017
1) Yes No
2) Yes Yes
3) No No
4) No Yes

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2
4
3
1

Practice Question 25

On September 14, 2017, Gayot Company reacquired 12,000 shares of its $1 par value common stock for $40 per share. Gayot uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit

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Treasury Stock for $480,000.
Common Stock for $24,000 and Paid-in Capital in Excess of Par for $456,000.
Treasury Stock for $24,000.
Common Stock for $480,000.

Practice Question 27

Hise Inc., has 4,000 shares of 9%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. The board of directors declared and paid a $25,000 dividend in 2016. In 2017, $74,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2017?

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$47,000
$36,000
$74,000
$11,000

Practice Question 29

Which of the following features of preferred stock makes the security more like debt than an equity instrument?

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Noncumulative
Participating
Redeemable
Voting

Practice Question 31

McCaffrey Corporation owned 15,000 shares of Harper Corporation’s $5 par value common stock. These shares were purchased in 2015 for $326,000. On May 4, 2017, McCaffrey declared a property dividend of one share of Harper for every twenty shares of McCaffrey stock held by a stockholder. On that date, when the market price of Harper was $34 per share, there were 280,000 shares of McCaffrey outstanding. What net reduction in retained earnings would result from this property dividend?

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$150,000
$304,220
$176,000
$476,000

Practice Question 33

Stock splits increase total stockholders’ equity.

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True
False

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