Question 1

When Wisconsin Corporation was formed on January 1,the corporate charter provided for 100,000 share of $10 par value common stock.The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 8,500 shares of stock at a price of $16 per share. The entry to record the above transaction would include a

Accepted Answer

The answer of When Wisconsin Corporation was formed on January...

Question 2

The liability for a dividend is recorded on which of the following dates?

Accepted Answer

The liability for a dividend is recorded on the date of declaration, which is when the company's board of directors officially authorizes the payment of a dividend. The date of record is the date on which shareholders must officially own shares in order to be eligible to receive the dividend, and the date of payment is when the dividend is actually distributed to shareholders. The last day of the fiscal year is not necessarily relevant to the recording of a dividend liability.

Question 3

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired.What is the amount of cash dividends to be paid if a $2 per share dividend is declared?

Accepted Answer

The cash dividends to be paid would be based on the number of shares outstanding, which is the original issued shares minus the reacquired shares (45,000 - 5,000 = 40,000 shares). At $2 per share, the total dividends would be 40,000 shares * $2/share = $80,000.

Question 4

The date on which a cash dividend becomes a binding legal obligation is on the

Accepted Answer

The declaration date is when the board of directors announces a dividend, making it a binding legal obligation.

Question 5

Texas Inc.has 10,000 shares of 6%,$125 par value,cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31.What is the annual dividend on the preferred stock?

Accepted Answer

The annual dividend on the preferred stock is calculated as follows:
$125 par value x 6% annual dividend rate = $7.50 annual dividend per share
$7.50 annual dividend per share x 10,000 shares = $75,000 in total preferred stock dividends. Therefore, the correct choice is A.

Question 6

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Accepted Answer

The answer of The cumulative effect of the declaration and...

Question 7

Sabas Company has 20,000 shares of $100 par,2% cumulative preferred stock and 100,000 shares of $50 par common stock.The following amounts were distributed as dividends: 
$\begin{array}{rr}
\text { Year 1: } & \$ 10,000 \
\text { Year 2: } & 45,000 \
\text { Year 3: } & 90,000
\end{array}$ 
Determine the dividends per share for preferred and common stock for the first year.

Accepted Answer

In Year 1, the preferred stock dividend is $100 par * 2% = $2 per share. With 20,000 shares, the total preferred dividend is $40,000. Only $10,000 was distributed, so preferred shareholders receive $0.50 per share ($10,000/20,000 shares), and common shareholders receive $0.00.

Question 8

The entry to record the issuance of common stock at a price above par includes a debit to

Accepted Answer

The answer of The entry to record the issuance of...

Question 9

Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

Accepted Answer

When cash dividends are declared, the company decreases its retained earnings (or shareholder's equity) and increases its liability in the form of cash dividends payable. Therefore, the appropriate journal entry would be to debit Cash Dividends and credit Cash Dividends Payable. Option D correctly represents this journal entry.

Question 10

Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock.The stock is widely traded and selling for $15 per share.At what amount should the building be recorded by Kansas Company?

Accepted Answer

The building should be recorded at fair value, which is $180,000 (12,000 shares x $15 per share). The fact that the building was acquired for property tax purposes at a lower value is irrelevant for accounting purposes.

Question 11

The Sneed Corporation issues 10,000 shares of $50 par preferred stock for cash at $75 per share.The entry to record the transaction will consist of a debit to Cash for $750,000 and a credit or credits to

Accepted Answer

The preferred stock has a par value of $50 per share, and the company issued 10,000 shares for $75 per share, resulting in a total cash receipt of $750,000 ($75 x 10,000 shares). The entry to record the transaction would involve a debit to Cash for $750,000 and a credit to Preferred Stock for the par value of the shares issued, which is $500,000 ($50 x 10,000 shares). The remaining $250,000 ($750,000 cash received - $500,000 par value of stock issued) would be credited to Paid-in Capital in Excess of Par-Preferred Stock. Therefore, the correct answer is B.

Question 12

Alma Corp.issues 1,000 shares of $10 par common stock at $14 per share.When the transaction is recorded,credits are made to

Accepted Answer

The par value of each share is $10, therefore the common stock account will be credited with 1,000 shares x $10 par value = $10,000. The difference between the issue price and the par value is $14-$10=$4. This amount is credited to the account Paid-In Capital in Excess of Par Value. Therefore, the correct entry is Common Stock $10,000 and Paid-In Capital in Excess of Par Value $4,000.

Question 13

Par value

Accepted Answer

Par value is the monetary value assigned to a share of stock in the corporate charter, meaning that it is established before the stock is issued. It does not necessarily represent the current or market value of the stock.

Question 14

The authorized stock of a corporation

Accepted Answer

The authorized stock of a corporation is indicated in its charter. The charter is a legal document filed with the secretary of state when a corporation is created and includes important information such as the company's purpose, name, and stock structure.

Question 15

Nexis Corp.issues 1,000 shares of $15 par value common stock at $22 per share.When the transaction is recorded,credits are made to:

Accepted Answer

The company issued 1,000 shares of $15 par value common stock at $22 per share. This means that the total par value of the shares is 1,000 x $15 = $15,000. However, the company sold the shares for more than their par value, at $22 per share. Therefore, the excess amount over the par value is considered as paid-in capital in excess of par.

The total amount received by the company from the sale of the shares is 1,000 x $22 = $22,000. Therefore, the accounting entry to record this transaction would be:
- Debit Cash for $22,000
- Credit Common Stock for $15,000 (to record the par value of the shares)
- Credit Paid-In Capital in Excess of Par for $7,000 (to record the excess amount over the par value)

Choice A correctly reflects this accounting entry.

Question 16

If Dakota Company issues 1,500 shares of $6 par common stock for $75,000,

Accepted Answer

The par value of the shares is $6 per share, so the total par value of the shares issued is $9,000 (1,500 shares x $6 par value per share). However, the company received $75,000 in cash, which is $66,000 more than the par value of the shares. This $66,000 is the amount that the investors paid above and beyond the par value of the shares, and it represents paid-in capital in excess of par. Therefore, Paid-In Capital in Excess of Par will be credited for $66,000. The remaining $9,000 will be credited to Common Stock.

Question 17

Which of the following is not a prerequisite to paying a cash dividend?

Accepted Answer

The market value of a company's stock is not a prerequisite to paying a cash dividend. The other options listed (formal action by the board of directors, sufficient cash, and sufficient retained earnings) are all necessary prerequisites to paying a cash dividend.

Question 18

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 30,000 shares were originally issued and 5,000 were subsequently reacquired.What is the number of shares outstanding?

Accepted Answer

The answer of The charter of a corporation provides for...

Question 19

If common stock is issued for an amount greater than par value,the excess should be credited to

Accepted Answer

If common stock is issued for an amount greater than par value, the excess should be credited to "Paid-In Capital in Excess of Par." This account is a part of shareholders' equity and represents the amount of money received from investors in excess of the par value of the stock. It cannot be considered as retained earnings because it is not generated from the company's operations. Similarly, it cannot be credited to cash or legal capital, as they are not relevant accounts for this transaction.

Question 20

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 amount of cash dividends to be paid if a $2 per share dividend is declared?

Accepted Answer