ACC 206 Week 6 Quiz – Strayer

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Quiz 4 Chapter14

CORPORATIONS:DIVIDENDS,RETAINEDEARNINGS,ANDINCOMEREPORTING

CHAPTERSTUDYOBJECTIVES

1.Preparetheentriesforcashdividendsandstockdividends.

2.Identifytheitemsreportedinaretainedearningsstatement.

3.Prepareandanalyzeacomprehensivestockholders'equitysection.

4.Describetheformandcontentofcorporationincomestatements.

5.Computeearningspershare.

TRUE-FALSESTATEMENTS

1.         Dividendsmaybedeclaredandpaidincashor stock.

2.     Cashdividends arenotaliability ofthecorporationuntiltheyaredeclaredbytheboardof directors.

3.     Theamountofacashdividendliabilityisrecordedonthedateofrecordbecauseitison that datethatthepersonsor entitieswhowillreceivethedividendare identified.

4.     A10%stockdividendwillincreasethenumberofsharesoutstandingbutthebookvalue pershare willdecrease.

5.     A3for1commonstocksplitwillincreasetotalstockholders'equitybutreducetheparor stated valuepershareofcommonstock.

6.     Retainedearningsrepresentstheamount of cashavailablefordividends.

7.     Netincomeofacorporationshouldbeclosedtoretainedearningsandnetlossesshould be closed to paid-incapitalaccounts.

8.     A debitbalanceintheRetained Earningsaccountis identifiedasadeficit.

9.     AcorrectioninincomeofapriorperiodinvolveseitheradebitorcredittotheRetained Earningsaccount.

10.     Priorperiodadjustmentsto incomearereportedinthecurrentyear'sincomestatement.

11.     Retainedearningsthat are restrictedareunavailablefordividends.

12.     Restrictedretainedearnings areavailableforpreferredstockdividendsbutunavailablefor commonstockdividends.

13.     Aretainedearningsstatementshowsthesameinformationasacorporationincome statement.

14.     Adetailedstockholders'equitysectioninthebalancesheetwilllistthenamesof individualswhoare eligibletoreceivedividendsonthedateofrecord.

15.     CommonStockDividendsDistributableisshownwithinthePaid-inCapitalsubdivisionof thestockholders'equitysectionof thebalancesheet.

16.     Returnoncommonstockholders’equityiscomputedbydividingnetincomebyending stockholders’ equity.

17.     Manycompaniesprepareastockholders’equitystatementinsteadofpresentinga detailed stockholders’ equity sectioninthebalancesheet.

18.     Amajordifferenceamongcorporations,proprietorships,andpartnershipsisthata corporation's incomestatementreportsincometaxexpense.

19.     A corporationincursincometaxexpense onlyifitpaysdividendsto stockholders.

Corporations:Dividends,RetainedEarnings,andIncomeReporting          14-5

20.     Incometaxexpenseusuallyappearsasaseparatesectiononacorporationincome statement.

21.     Earningspershareiscalculatedbydividingnetincomebytheweightedaveragenumber ofshares ofpreferredstock and commonstockoutstanding.

22.     Preferreddividendspaidareaddedbacktonetincomeincalculatingearningspershare for commonstockholders.

23.     Earningspershareindicatesthenetincomeearnedbyeachshareofoutstanding commonstock.

24.     Earningsper shareis reportedfor both preferredandcommonstock.

25.     Mostcompaniesarerequiredtoreportearningspershareonthefaceoftheincome statement.

Additional True-FalseQuestions

26.     A dividendbasedonpaid-incapitalis termeda liquidatingdividend.

27.     CommonStockDividendsDistributableisreportedasadditionalpaid-incapitalinthe stockholders' equitysection.

28.     Apriorperiodadjustmentisreportedasanadjustmentofthebeginningbalanceof RetainedEarnings.

29.     Incometaxexpenseandtherelatedliabilityforincometaxespayablearerecordedwhen taxes are paid.

30.     Earningsper shareis reportedonlyforcommonstock.

MULTIPLECHOICEQUESTIONS

31.     Eachof thefollowingdecreasesretainedearningsexcepta a.cashdividend.

b.liquidatingdividend. c.stockdividend.

d.All of thesedecreaseretainedearnings.

32.     Eachof thefollowingdecreasestotal stockholders'equityexcepta a.cashdividend.

b.liquidatingdividend. c.stockdividend.

d.Allof thesedecreasetotalstockholders'equity.

33.     Whichoneofthefollowingisnotnecessaryinorderforacorporationtopayacash dividend?

a.Adequatecash

b.Approvalof stockholders

c.Declarationof dividendsbytheboardof directors d.Retainedearnings

34.     Ifa corporationdeclaresa dividendbasedupon paid-in capital,it isknownasa a.scrip dividend.

b.propertydividend. c.paiddividend.

d.liquidatingdividend.

35.     Thedateonwhichacashdividendbecomesabindinglegalobligationison the a.declarationdate.

b.date of record. c.paymentdate.

d.lastdayofthefiscalyear-end.

36.     The effectofthedeclarationofacashdividendbytheboardof directorsis to

         Increase         

a.Stockholders'equity b.          Assets

c.            Liabilities d. Liabilities

         Decrease         

Assets Liabilities

Stockholders'equity Assets

37.     Thecumulativeeffectofthedeclarationandpaymentofacashdividendonacompany's financial statementsis to

a.decreasetotal liabilitiesandstockholders'equity. b.increasetotalexpensesandtotal liabilities.

c.increasetotal assetsand stockholders'equity. d.decreasetotalassetsandstockholders'equity.

Corporations:Dividends,RetainedEarnings,andIncomeReporting          14-7

38.     CommonStock DividendsDistributableisclassifiedasa(n) a.assetaccount.

b.stockholders'equityaccount. c.expenseaccount.

d.liabilityaccount.

39.     The effectofastockdividend isto

a.decreasetotalassetsandstockholders'equity. b.change thecompositionofstockholders'equity. c.decreasetotal assetsandtotal liabilities.

d.increasethebook valuepershareofcommonstock.

40.     Ifacorporationdeclaresa10%stockdividendonitscommonstock,theaccounttobe debited onthedateofdeclaration is

a.CommonStock DividendsDistributable. b.CommonStock.

c.Paid-inCapitalinExcessofPar. d.RetainedEarnings.

41.     Whichoneofthefollowingeventswouldnotrequireaformaljournalentryona corporation's books?

a.2for 1 stocksplit

b.100%stockdividend c.2%stockdividend

d.$1 persharecashdividend

42.     Stockdividendsandstocksplitshavethefollowingeffectsonretainedearnings:

StockSplits a.         Increaseb.    Nochange c.     Decreased.    Nochange

StockDividendsNochange

Decrease Decrease Nochange

43.     Dividendsarepredominantlypaidin a.scrip.

b.property. c.cash.

d.stock.

44.     Ifastockholderreceivesadividendconsistingofapromissorynote,thestockholderhas received a

a.stockdividend. b.cashdividend.

c.contingentdividend. d.scripdividend.

45.     Of thefourdividendstypes,thetwomostcommontypesinpracticeare a.cashandscrip.

b.cashand property. c.cashandstock.

d.propertyandstock.

14-8       

46.     Regulardividendsaredeclared outof

a.Paid-inCapitalinExcessofPar Value. b.TreasuryStock.

c.CommonStock.

d.RetainedEarnings.

47.     A corporationiscommittedto alegalobligationwhen it declares a.acashdividend.

b.eitheracashdividendorastockdividend. c.astockdividend.

d.astocksplit.

48.     Whichofthefollowingisnot asignificantdate withrespectto dividends? a.Thedeclarationdate

b.The incorporationdate c.Therecorddate

d.Thepaymentdate

49.     Onthedividendrecorddate,

a.a dividendbecomesa currentobligation. b.noentryisrequired.

c.anentrymaybe requiredifit isastockdividend. d.DividendsPayableis debited.

50.     Whichofthefollowingstatementsregarding thedateofacashdividenddeclaration isnot accurate?

a.Thedividendcan berescindedonceit hasbeendeclared. b.Thecorporationiscommittedto alegal,bindingobligation.

c.Theboard of directorsformallyauthorizesthecashdividend. d.A liabilityaccountmustbe increased.

51.     DividendsPayableisclassifiedas a a.long-termliability.

b.contrastockholders'equityaccountto RetainedEarnings. c.currentliability.

d.stockholders'equityaccount.

52.     Indicatetherespectiveeffectsofthedeclarationofacashdividendonthefollowing balance sheet sections:

Total Assets a.       Increaseb.    Nochange c.     Decrease d.     Decrease

Total LiabilitiesDecrease Increase IncreaseNochange

Total Stockholders'EquityNochange

Decrease Decrease Increase

53.     Whichofthefollowingstatements aboutdividendsisnotaccurate? a.Manycompanies declareandpaycashquarterlydividends.

b.Lowdividendsmaymeanhigh stockreturns.

c.Theboard of directorsis obligatedtodeclaredividends. d.A legaldividendmaynot beafeasibleone.

Corporations:Dividends,RetainedEarnings,andIncomeReporting          14-9

54.     Thecumulativeeffectofthedeclarationandpaymentofacashdividendonacompany's balance sheet isto

a.decreasecurrent liabilitiesand stockholders'equity. b.increasetotalassetsandstockholders'equity.

c.increasecurrentliabilitiesandstockholders'equity. d.decreasestockholders' equityandtotalassets.

55.     Thedeclarationanddistributionof a stockdividendwill a.increasetotalstockholders'equity.

b.increasetotalassets. c.decreasetotal assets.

d.havenoeffectontotalassets.

56.     ABC,Inc.has1,000sharesof4%,$100parvalue,cumulativepreferredstockand50,000 sharesof$1parvaluecommonstockoutstandingatDecember31,2008.Whatisthe annual dividend on thepreferred stock?

a.$40pershare b.$4,000intotal c.$400intotald.$.40pershare

57.     Agler,Inc.has10,000sharesof6%,$100parvalue,cumulativepreferredstockand 100,000sharesof$1parvaluecommonstockoutstandingatDecember31,2008.Ifthe board ofdirectors declaresa$50,000dividend,the

a.preferredshareholderswillreceive1/10thofwhatthecommonshareholderswill receive.

b.preferredshareholders willreceivetheentire$50,000.

c.$50,000willbeheldasrestrictedretainedearningsandpaidoutatsomefuturedate.d.preferredshareholderswill receive$25,000and the commonshareholders will receive

$25,000.

58.     Manner,Inc.has5,000sharesof6%,$100parvalue,noncumulativepreferredstockand 20,000sharesof$1parvaluecommonstockoutstandingatDecember31,2008.There werenodividendsdeclaredin2007.Theboardofdirectorsdeclaresandpaysa$55,000 dividendin2008.Whatistheamountofdividendsreceivedbythecommonstockholders in 2008?

a.$0

b.$30,000 c.$55,000 d.$25,000

59.     Lopez,Inc.has2,000sharesof6%,$50parvalue,cumulativepreferredstockand50,000 sharesof$1parvaluecommonstockoutstandingatDecember31,2007,andDecember 31,2008.Theboardofdirectorsdeclaredandpaida$4,000dividendin2007.In2008, $20,000ofdividendsaredeclaredandpaid.Whatarethedividendsreceivedbythe preferredandcommonshareholdersin2008?

Preferred a. $12,000 b.       $10,000 c.       $8,000d.          $6,000

Common $8,000 $10,000 $12,000 $14,000

14-10

60.     Norton, Inc.has10,000sharesof6%,$100 par value,noncumulativepreferredstockand 100,000sharesof$1parvaluecommonstockoutstandingatDecember31,2008,and December31,2009. Theboard ofdirectors declared andpaida$50,000dividend in2008. In2009,$100,000ofdividendsaredeclaredandpaid.What arethedividendsreceivedby thepreferredandcommonshareholdersin 2009?

Preferred a.$0

b.$60,000 c.$50,000 d.$100,000

Common $100,000 $40,000 $50,000 $0

61.     Theboardof directorsmustassignapersharevalueto a stockdividenddeclaredthat is a.greaterthantheparor statedvalue.

b.lessthanthe parorstated value. c.equaltotheparor statedvalue.

d.atleastequaltothe parorstatedvalue.

62.     Corporationsgenerallyissuestock dividendsinorderto a.increasethemarketpricepershare.

b.exceedstockholders'dividendexpectations. c.increasethemarketabilityof thestock.

d.decreasetheamountofcapitalinthe corporation.

63.     A stockholderwhoreceivesastockdividendwould a.expectthemarketpricepershareto increase. b.own moreshares ofstock.

c.expectretainedearningstoincrease.

d.expecttheparvalueof the stocktochange.

64.     Whenstockdividendsaredistributed,

a.CommonStock DividendsDistributableisdecreased. b.RetainedEarningsisdecreased.

c.Paid-inCapitalin ExcessofPar Valueisdebitedifitis a smallstockdividend. d.noentryis necessaryifit isalargestock dividend.

65.     A smallstockdividendisdefinedas

a.lessthan30%butgreaterthan25%of thecorporation's issuedstock. b.between50%and100%ofthecorporation's issuedstock.

c.morethan30%ofthecorporation's issuedstock.

d.lessthan20–25% of thecorporation'sissuedstock.

66.     Thepershareamountnormallyassignedbytheboardofdirectorstoalargestock dividend is

a.themarketvalueof thestock onthedate of declaration.

b.theaveragepricepaidbystockholdersonoutstandingshares. c.thepar or stated valueof thestock.

d.zero.

Corporations:Dividends,RetainedEarnings,andIncomeReporting          14-11

67.     Thepershareamountnormallyassignedbytheboardofdirectorstoasmallstock dividend is

a.themarketvalue of thestock onthedateof declaration.

b.theaveragepricepaidbystockholdersonoutstandingshares. c.thepar or stated valueof thestock.

d.zero.

68.     Identifytheeffectthedeclarationofastockdividendhasontheparvaluepershareand book valuepershare.

Par Valueper Share a.          Increase

b.         Noeffect c.        Decrease d.     Noeffect

Book ValueperShareDecrease Increase Decrease Decrease

69.     Thedeclarationof astockdividendwill a.increasepaid-incapital.

b.changethetotal of stockholders'equity. c.increasetotal liabilities.

d.increasetotalassets.

70.     Whichofthefollowingshowthepropereffectofastocksplitandastockdividend?

               Item                   

a.         Totalpaid-incapitalb.     Totalretainedearnings

c.Totalpar value(common) d.    Parvaluepershare

StockSplit Increase

Decrease Decrease Decrease

StockDividend Increase Decrease IncreaseNochange

71.     A stocksplit

a.mayoccurinthe absenceof retainedearnings. b.willincreasetotalpaid-incapital.

c.will increasethetotalparvalueof thestock.

d.willhavenoeffectontheparvaluepershareof stock.

72.     OutstandingstockoftheApexCorporationincluded20,000sharesof$5parcommon stockand5,000sharesof6%,$10parnoncumulativepreferredstock.In2007,Apex declaredandpaiddividendsof$2,000.In2008,Apexdeclaredandpaiddividendsof $6,000.Howmuchof the 2008dividendwasdistributedtopreferredshareholders?

a.$4,000 b.$7,000 c.$3,000

d.Noneof theabove

73.     OutstandingstockoftheBellCorporationincluded20,000sharesof$5parcommonstock and10,000sharesof6%,$10parnoncumulativepreferredstock.In2007,Belldeclared andpaiddividendsof$4,000.In2008,Belldeclaredandpaiddividendsof$12,000.How muchofthe2008 dividendwasdistributedtopreferredshareholders?

a.$8,000b.$14,000 c.$6,000

d.Noneof theabove