Bakersfield College

ACG 2021

1)When stock is issued in exchange for property, the best evidence of fair value might be any of the following except:

1. 1. The appraised value of the property received.
   2. The selling price of the stock in a recent transaction.
   3. The price of the stock quoted on the stock exchange.
   4. The average book value of outstanding stock.

2. When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on:
   1. Relative book values.
   2. Par values.
   3. Relative market values.
   4. The earnings per share.

3. The owners of a corporation are its shareholders. If a corporation has only one class of shares, they typically are labeled common shares. Each of the following are ownership rights held by common shareholders, unless specifically withheld by agreement, except:
   1. The right to vote on policy issues.
   2. The right to share in profits when dividends are declared (in proportion to the percentage of shares owned by the shareholder).
   3. The right to dividends equal to a stated rate time par value (if dividends are paid).
   4. The right to share in the distribution of any assets remaining at liquidation after other claims are satisfied.

Use the following to answer questions

The 12/31/2016 balance sheet of Despot Inc. included the following:

Common stock, 25 million shares at $20 par               $500 million Paid-in capital—excess of par                                                        3,000 million

Retained earnings                                                                    980 million

4. In January 2016, Despot recorded a transaction with this journal entry:

The transaction was for the:

1. 1. Issue of 2 million shares of common stock at par value.
   2. Issue of common stock for $150 million in cash.
   3. Receipt of $20 per share for a new stock issue.
   4. All of these answer choices are correct.

5. In February 2016, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts?
   1. Decreased assets and liabilities.
   2. Decreased assets and shareholders' equity.
   3. Increased liabilities and decreased shareholders' equity.
   4. None of these answer choices is correct.

6. Despot declared a property dividend to give marketable securities to its common stockholders. The securities had cost Despot $7 million and currently have a fair value of $16 million. Which of the following would be included in recording the property dividend declaration?
   1. Increase in a liability for $16 million.
   2. Decrease in retained earnings for $7 million.

1. 3. Decrease in marketable securities by $16 million.
   4. All of these answer choices are correct.

7. The shareholders’ equity of Green Corporation includes $200,000 of $1 par common stock and

$400,000 par value of 6% cumulative preferred stock. The board of directors of Green declared cash dividends of $50,000 in 2016 after paying $20,000 cash dividends in each of 2015 and 2014. What is the amount of dividends common shareholders will receive in 2016?

a.    $18,000.

b.   $26,000.

c.     $28,000.

d.   $32,000.

8. The shareholders’ equity of Red Corporation includes $200,000 of $1 par common stock and

$400,000 par value of 6% cumulative preferred stock. The board of directors of Red declared cash dividends of $50,000 in 2016 after paying $20,000 cash dividends in 2015 and $40,000 in 2014. What is the amount of dividends common shareholders will receive in 2016?

a.    $18,000.

b.   $22,000.

c.     $26,000.

d.   $28,000.

9. Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2016. In October 2016, Rick Co.’s Board of Directors declared and distributed a 1% common stock dividend when the market value of its common stock was $60 per share. In recording this transaction, Rick would:
   1. Debit retained earnings for $18 million.
   2. Credit paid-in capital—excess of par for $18 million.
   3. Credit common stock for $18 million.
   4. None of these answer choices correct.

10. Which of the following transactions decreases retained earnings?

1. 1. A property dividend.
   2. A stock dividend.
   3. A cash dividend.
   4. All of these answer choices are correct.

11. Poodle Corporation was organized on January 3, 2016. The firm was authorized to issue 100,000 shares of $5 par common stock. During 2016, Poodle had the following transactions relating to shareholders' equity:

Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000.

Paid dividends of $50,000.

What is total paid-in capital at the end of 2016? a.         $420,000.

b.     $370,000.

c.     $470,000.

d.     $320,000.

12. Olsson Corporation received a check from its underwriters for $72 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $72 per share. Which is the correct entry to record the issue of the stock?

a.      Cash                                                               72,000,00

0

Stock issue expense                                                        20,000,000

13. Montgomery & Co., a well-established law firm, provided 500 hours of its time to Fink Corporation in exchange for 1,000 shares of Fink's $5 par common stock. Montgomery’s usual billing rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will Fink's paid-in capital—excess of par increase for this transaction?

a.     $345,000.

b.     $295,000.

c.     $350,000.

d.     $300,000.

14. In 2014, Winn, Inc., issued $1 par value common stock for $35 per share. No other common stock transactions occurred until July 31, 2016, when Winn acquired some of the issued shares for $30 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?
    1. 2016 net income is decreased.
    2. Additional paid-in capital is decreased.
    3. 2016 net income is increased.
    4. Retained earnings is increased.