Bakersfield College

ACG 2021

1)When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity?

1. 1. Increase.
   2. Decrease.
   3. No effect.
   4. Cannot tell from the given information.

 

 

 

 

2. When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:
   1. Increases net income for the year.
   2. Increases retained earnings.
   3. Increases revenue for the year.
   4. Increases paid-in capital share repurchase.

 

 

 

 

3. Retained earnings represent:
   1. Earned capital.
   2. Cash.
   3. Assets.
   4. Net assets.

 

 

 

 

4. Retained earnings represent a company's:
   1. Undistributed net income.
   2. Undistributed net assets.
   3. Extra paid-in capital.

1. 4. Undistributed cash.

 

 

 

5. The retained earnings balance reported in the balance sheet typically is not affected by:
   1. Net income.
   2. A prior period adjustment.
   3. Dividends paid.
   4. Restrictions.

 

 

 

 

6. Boxer Company owned 20,000 shares of King Company that were purchased in 2014 for

$500,000. On May 1, 2016, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was $30 per share on the date of declaration and $32 per share on the date of distribution. By how much is retained earnings reduced by the property dividend?

a.     $0.

b.     $150,000.

c.     $160,000.

d.     $300,000.

 

 

 

 

7. On October 1, 2016, Chief Corporation declared and issued a 10% stock dividend. Before this date, Chief had 80,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief's retained earnings will:
   1. Decrease by $80,000.
   2. Not change.

Decrease by $40,000. Increase by $80,000.

 

 

8. Preferred stock is called preferred because it usually has two preferences. These preferences relate to:
   1. Dividends and voting rights.
   2. Par value and dividends.
   3. The preemptive right and voting rights.
   4. Assets at liquidation and dividends.

 

 

 

 

9. When dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the:
   1. Date the dividend is declared.
   2. Last day of the fiscal year.
   3. Date of record.
   4. Date of payment.

 

 

 

 

10. Any dividend that is considered to be a liquidating dividend will:
    1. Reduce retained earnings.

1. 2. Reduce paid-in capital.
   3. Increase paid-in capital.
   4. Reduce the common stock account.

 

 

 

 

11. On June 1, 2016, Blue Co. distributed to its common stockholders 200,000 outstanding common shares of its investment in Red, Inc., an unrelated party. The book value on Blue’s books of Red’s

$1 par common stock was $2 per share. Immediately after the declaration, the market price of Red’s stock was $2.50 per share. In its income statement for the year ended June 30, 2016, what amount should Blue report as gain before income taxes on disposal of the stock?

a.    $             0.

b.   $100,000.

c.     $400,000.

d.   $500,000.

 

 

 

 

12. Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?
    1. The shareholders must be allowed to convert their shares to common stock.
    2. The unpaid dividends are accrued as a liability.
    3. The unpaid dividends are reported in a note to the financial statements.
    4. The unpaid dividends accrue interest until paid.

 

 

 

13. Preferred shares that are participating may:
    1. Vote for the board of directors.
    2. Be exchanged for common stock.
    3. Receive extra cash during corporate liquidation.
    4. Receive additional dividends beyond the stated amount.

 

 

 

 

14. When a property dividend is declared, the reduction in retained earnings is for:
    1. The book value of the property on the date of declaration.
    2. The book value of the property on the date of distribution.
    3. The fair value of the property on the date of distribution.
    4. The fair value of the property on the date of declaration.

 

 

 

 

15. When a property dividend is declared, the property to be distributed should be revalued to fair value as of the:
    1. Record date.
    2. Date of distribution.
    3. Date of declaration.
    4. Announcement date.

 

 

 

 

16. At the beginning of 2014, Emily Corporation issued 10,000 shares of $100 par, 5%, cumulative, preferred stock for $110 per share. No dividends have been paid to preferred or common shareholders. What amount of dividends will a preferred shareholder owning 100 shares receive in 2016 if Emily pays $1,000,000 in dividends?

a.     $      500.

b.     $ 1,500.

c.     $ 1,650.

d.     $10,000.

 

 

 

 

17. Pug Corporation has 10,000 shares of $10 par common stock outstanding and 20,000 shares of

$100 par, 6% noncumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $150,000 dividend will be paid. What are the dividends per share for preferred and common, respectively?

a.     $7.50; $0.

b.     $6; $3.

c.     $6; $1.50.

d.     None of these answer choices is correct.

 

 

 

 

18. Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of

$100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively?

a.     $6; $12.

b.     $18; $6.

c.     $6; $6.

d.     None of these answer choices is correct.

 

 

 

 

19. On January 1, 2016, the board of directors of Goby Inc. declared a $540,000 dividend. The following data is from the balance sheet of Goby on that date:

 

Common stock                                                                           $500,000

Paid-in capital—excess of par                                              $300,000

Retained earnings                                                                     $400,000

Paid-in capital from sale of treasury stock                      $ 50,000

 

How much is the liquidating dividend? a.         $140,000.

b.     $240,000.

c.     $290,000.

d.     None of these answer choices is correct.

 

 

 

 

20. ABC declared a property dividend. The dividend consisted of 10,000 common shares of its investment in XYZ Company. The shares had originally been purchased at $4 per share and had a

$1 par value. The value of the shares on the declaration date is $7 per share. What is the first entry that should be recorded related to this dividend?

Retained earnings Property dividends payable Retained earnings Property dividends payable	70,000   70,000	70,000   40,000
Gain		30,000
c.       Investment in XYZ	30,000
Retained earnings		30,000

d.      Investment in XYZ                                 30,000

Gain on investment                                                 30,000

 

 

 

21. The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend declaration?

a.      Retained earnings	9,000
Dividends payable		9,000
b.      Retained earnings	9,000
Cash		9,000
c.      Retained earnings	10,000
Dividends payable		10,000
d.      Retained earnings	10,000
Cash		10,000

 

 

22. Lucid Company declared a property dividend of 20,000 shares of $1 par Polk Company common stock. The Polk stock was purchased for $5 per share. Market value was $10 per share on the declaration date and $11 per share on the distribution date. What is the amount of the dividend? a.                $100,000.

b.     $200,000.

c.     $220,000.

d.     $300,000.

 

 

 

 

23. The declaration and issuance of a stock dividend on shares of common stock:
    1. Has no effect on assets, liabilities, or total shareholders' equity.
    2. Decreases total shareholders' equity and increases common stock.
    3. Decreases assets and decreases total shareholders' equity.
    4. Does not change retained earnings or paid-in capital.

 

 

 

 

24. Stock splits are issued primarily to:
    1. Increase the number of outstanding shares.
    2. Increase the number of authorized shares.
    3. Increase legal capital.
    4. Induce a decline in market value per share.

 

 

 

 

25. A small stock dividend is defined as one that is:
    1. Less than or equal to 40%.
    2. Less than 40%.
    3. Less than or equal to 10%.
    4. Less than 25%.