# Accounting: Chapter 13

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1. The journal entry to issue 1,000,000 shares of \$6 par common stock for \$8.00 per share on January 2nd would be:

a. Jan 2 Cash 6,000,000
Paid-In Capital in Excess of Par - C/S 2,000,000
Common Stock 8,000,000

b. Jan 2 Cash 8,000,000
Common Stock 6,000,000
Paid-In Capital in Excess of Par - C/S 2,000,000

c. Jan 2 Cash 6,000,000
Common Stock 6,000,000

d.
Jan 2 Cash 1,000,000
Common Stock 1,000.000
• b. Jan 2 Cash 8,000,000
• Common Stock 6,000,000
• Paid-In Capital in Excess of Par - C/S 2,000,000
• (Cash: 1,000,000 x \$8.00)
• (Common Stock: 1,000,000 x \$6)
2. A corporation issues 1,500 shares of common stock for \$ 32,000. The stock has a stated value of \$10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for:

a. \$32,000

b. \$17,000

c. \$15,000

d. \$2,000
c. \$15,000
3. The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.

True or False
False
4. Miriah Inc. has 6,000 shares of 5%, \$100 par value, cumulative preferred stock and 50,000 shares of \$1 par value common stock outstanding at December 31, 2006. What is the annual dividend on the preferred stock?

a. \$300 in total

b. \$30,000 in total

c. \$0.50 per share

d. \$50 per share
b. \$30,000 in total
5. A company with 100,000 authorized shares of \$4 par common stock issued 40,000 shares at \$8. Subsequently, the company declared a 2% stock dividend on a date when the market price was \$11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

a. \$6,400

b. \$4,800

c. \$8,800

d. \$3,200
• c. \$8,800
• (40,000 x 11 x .02)
6. Characteristics of a corporation include:

a. its inability to own property

b. shareholders who have limited liability

c. shareholders who are mutual agents
d. direct management by the shareholders (owners)
b. shareholders who have limited liability
7. Treasury stock that had been purchased for \$4,285 last month was reissued this month for \$5,229. What would the journal entry to record the reissuance include?

a. Paid-In Capital from Treasury Stock for \$4,285

b. Paid-In Capital from Treasury Stock for \$944

c. Paid-In Capital in Excess of Par/Common for \$944

d. Treasury Stock for \$4,285
b. Paid-In Capital from Treasury Stock for \$944
8. The charter of a corporation provides for the issuance of 116,772 shares of common stock. Assume that 36,203 shares were originally issued and 4,162 were subsequently reacquired. What is the amount of cash dividends to be paid if a \$1 per share dividend is declared?

a. \$36,203

b. \$4,162

c. \$116,772

d. \$32,041
• d. \$32,041
• (36,203-4,162)
9. A company with 106,479 authorized shares of \$7 par common stock issued 32,677 shares at \$16. Subsequently, the company declared a 2% stock dividend on a date when the market price was \$35 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

a. \$4,575

b. \$22,874

c. \$74,535

d. \$18,299
• b. \$22,874
• (32,677 x 35 x .02)
10. What is the journal entry to issue 913,000 shares of \$8 par common stock for \$13 per share on January 2nd?

a. Jan 2 Cash \$7,304,000
Common Stock \$7,304,000

b. Jan 2 Cash \$4,565,000
Common Stock \$4,565,000

c. Jan 2 Cash \$11,869,000
Common Stock \$7,304,000
Paid-In Capital in Excess of Par - C/S \$4,565,000

d. Jan 2 Cash \$7,304,000
Paid-In Capital in Excess of Par - C/S \$4,565,000
Common Stock \$11,869,000
• c. Jan 2 Cash \$11,869,000
• Common Stock \$7,304,000 Paid-In Capital in Excess of Par - C/S \$4,565,000
• (Cash: 913,000 x 13)
• (Common Stock: 913,000 x 8)
11. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the number of shares outstanding?

a. 60,000

b. 40,000

c. 50,000

d. 70,000
• c. 50,000
• (60,000-10,000)
12. The charter of a corporation provides for the issuance of 111,000 shares of common stock. Assume that 54,000 shares were originally issued and 5,600 were subsequently reacquired. What is the number of shares outstanding?

a. 54,000

b. 48,400

c. 5,600

d. 59,600
• b. 48,400
• (54,000-5,600)
13. If a corporation is liquidated, preferred stockholders are paid before the creditors and before the common stockholders.

True or False
False
14. The par value of stock is an arbitrary per share amount defined in many states as legal capital.

True or False
True
15. A corporation has 45,811 shares of \$16 par value stock outstanding that has a current market value of \$136. If the corporation issues a 5-for-1 stock split, determine the number of shares outstanding.

a. 229,055

b. 45,811

c. 366,488

d. unchanged
• a. 229,055
• (45,811 x 5)
16. A corporation issues 4,450 shares of common stock for \$142,400. The stock has a stated value of \$11 per share. What amount of credit to Common Stock would the journal entry to record the stock issuance include?

a. \$142,400

b. \$48,950

c. \$4,450

d. \$93,450
• b. \$48,950
• (4,450 x 11)
17. Which one of the following would not be considered an advantage of the corporate form of organization?

a. Separate legal existence

b. Government regulation

c. Continuous life

d. Limited liability of stockholders
b. Government regulation
18. Which of the following statements is not true about a 2-for-1 split?

a. Total contributed capital increases.

b. The market price will probably decrease.

c. Par value per share is reduced to half of what it was before the split.

d. A stockholder with ten shares before the split owns twenty shares after the split.
a. Total contributed capital increases.
19. On January 1, 20xx, Sunshine Corporation had 38,800 shares of \$11 par value common stock issued and outstanding. All 38,800 shares had been issued in a prior period at \$20 per share. On February 1, 20xx, Sunshine purchased 1,070 shares of treasury stock for \$25 per share and later sold the treasury shares for \$18 per share on March 1, 20xx.

Which of the following would be included in the journal entry to record the purchase of the treasury shares on February 1, 20xx?

a. debit to Treasury Stock for \$26,750.

b. credit to a gain account for \$5,350.

c. credit to Treasury Stock for \$26,750.
d. debit to a loss account for \$5,350.
a. debit to Treasury Stock for \$26,750.
20. The two ways that a corporation can be classified by ownership are

a. majority and minority.

b. for profit or not-for-profit.

c. stock and non-stock.

d. inside and outside.
b. for profit or not-for-profit.
 Author: bepena09 ID: 91194 Card Set: Accounting: Chapter 13 Updated: 2011-06-19 04:24:45 Tags: accounting Folders: Description: Chapter 13 Show Answers: