Intermediate Accounting Chapter 15

Front 1

The residual interest in a corporation belongs to the

Back 1

Common stockholders

Front 2

The pre-emptive right of a common stockholder is the right to

Back 2

Share proportionately in any new issues of stock of the same class.

Front 3

The pre-emptive right enables a stockholder to

Back 3

Share proportionately in any new issues of stock of the same class

Front 4

In a corporate form of business organization, legal capital is best defined as

Back 4

The par value of all capital stock issued.

Front 5

Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that stockholders

Back 5

Bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

Front 6

Total stockholders' equity represents

Back 6

A claim against a portion of the total assets of an enterprise.

Front 7

A primary source of stockholders' equity is

Back 7

Income retained by the corporation and contributions by stockholders.

Front 8

Stockholders' equity is generally classified into two major catagories

Back 8

Earned capital and contributed capital

Front 9

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

Back 9

Proportional or incremental method

Front 10

When a corporation issued its capital stock in payment for services, the least appropriate basis for recording the transaction is the

Back 10

Par value of the shares issued

Front 11

Direct costs incurred to sell stock such as underwriting costs should be accounted for as

Back 11

A reduction of additional paid-in capital

Front 12

A "secret reserve" will be created if

Back 12

A capital expenditure is charged to expense

Front 13

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?

Back 13

Authorized shares

Front 14

Stock that has a fixed per-share amount printed on each stock certificate is called

Back 14

Par value stock

Front 15

What is not a legal restriction related to profit distributions by a corporation?

Back 15

The amount distributed in any one year can never exceed the net income reported for that year.

Front 16

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 these treasury shares

Back 16

Decreased stockholders' equity

Front 17

Treasury shares are

Back 17

Issued but not outstanding shares

Front 18

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?

Back 18

Treasury stock for the purchase price

Front 19

Gains on sales of treasury stock (using the cost method) should be credited to

Back 19

Paid-in capital from treasury stock

Front 20

Porter Corp. purchased its own par value stock on January 1, 2012 for $20,000 and debited 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 recorded as a deduction from

Back 20

Additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings.

Front 21

How should a "gain" from the sale of treasury stock be reflected when using the cost method?

Back 21

As paid-in capital from treasury stock transactions

Front 22

What best describes a possible result of treasury stock transactions by a corporation?

Back 22

May decrease but not increase retained earnings

Front 23

What feature of preferred stock makes the security more like a debt than an equity investment?

Back 23

Redeemable

Front 24

The cumulative feature of preferred stock

Back 24

Requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common stockholders.

Front 25

According to the FASB, redeemable preferred stock should be

Back 25

Included as a liability

Front 26

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as

Back 26

A footnote

Front 27

At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the

Back 27

Purchase of treasury stock

Front 28

An entry is not made on the

Back 28

Date of record

Front 29

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

Back 29

outstanding

Front 30

What statement about property dividends is not true?

Back 30

The accounting for a property dividend should be based on the carrying value (book value) of the nonmonentary assets transferred.

Front 31

Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2012, Houser distributed these shares of stock as a divided to its stockholders. This is an example of

Back 31

Property Dividend

Front 32

A dividend which is a return to stockholders of a portion of their original investments is a

Back 32

Liquidating dividend

Front 33

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

Back 33

A paid-in capital account

Front 34

If management wishes to "capitalize" part of the earnings, it may issue a

Back 34

Stock dividend

Front 35

Which dividends do not reduce stockholders' equity?

Back 35

Stock dividends

Front 36

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

Back 36

Decreases retained earnings but does not change total stockholders' equity

Front 37

Quirk corporation issued a 100% stock dividend of its common stock which has a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

Back 37

Par value

Front 38

The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the

Back 38

Fair value of the shares issued

Front 39

At the date of declaration of a small common stock dividend, the entry should not include

Back 39

A credit to Common Stock Dividend Payable

Front 40

The balance in Common Stock Dividend Distributable should be reported as a(n)

Back 40

Addition to capital stock

Front 41

A feature common to both stock splits and stock dividends is

Back 41

There is no effect on total stockholders' equity

Front 42

What effect does the issuance of a 2 for 1 stock split have on Par Value per Share and Retained Earnings?

Back 42

Decrease par value per share and no effect on retained earnings

Front 43

What disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements?

Back 43

Liquidation preferences

Front 44

The rate of return on common stock equity is calculated by dividing

Back 44

Net income less preferred dividends by average common stockholders' equity

Front 45

The payout ratio can be calculated by dividing

Back 45

Cash dividends by net income less preferred dividends

Front 46

Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred stock is equal to its par value. The book value per share of the common stock is unaffected by

Back 46

The payment of a previously declared cash dividend on the common stock

Front 47

Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called

Back 47

Book value per share

Front 48

Dividends are not paid on

Back 48

Treasury common stock

Front 49

Noncumulative preferred dividends in arrears

Back 49

Are not paid or disclosed

Front 50

How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?

Back 50

Note disclosure

Front 51

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 if its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $520,000. How much of the proceeds would be allocated to common stock?

Back 51

10,000 x $25 = 200,000 = .45

15,000 x $25 = 3,00000 = .55

550,000

Front 52

Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $204,000. What amount of the proceeds should be allocated to the preferred stock?

Back 52

4,000 x 25 = 100,000 = .45

6,000 x 20 = 120,000 = .55 x 204,000 = 112,200

220,000

Front 53

Glavine Company issues 6000 share of its $15 par value common stock having a fair value of $25 per share and 9000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $312,000. The proceeds allocated to the common stock is:

Back 53

6000 x 25 = 150000 = .45 x 312000 = 140400

9000 x 20 = 180000

330,000

Front 54

Wheeler Company issued 5000 shares of its $5 par value common stock having a fair value of $25 per share and 7500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $260,000. The proceeds allocated to the preferred stock is

Back 54

5000 x 25 = 125000 = .45

7500 x 20 = 150000 = .55 x 260000 = 143000

275,000