ACC206 quiz A

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1. If a company does not have enough cash to pay out regular dividends, but still wishes to give the shareholders something that they would consider of value, the company should consider doing a stock split. (Points : 1)
True
False

2. Please refer to the following information for Peartree Company:

Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
Paid-in capital in excess of par: $2,150,000
Retained earnings: $910,000
Treasury stock: 5,000 shares purchased at $20 per share


If Peartree resold 1,000 shares of treasury stock for $24 per share, the company would record a gain on sale of treasury stock for $4,000 (Points : 1)
True
False

3. When a corporation sells 10,000 shares of $10 par value common stock for $120,000, the Common stock account is credited for $100,000. (Points : 1)
True
False

4. The account to be debited when a stock dividend is declared and distributed on the same date would be: (Points : 1)
Common stock.
Retained earnings.
Dividends.
Paid in capital in excess of par.

5. Which of the following statements is TRUE? (Points : 1)
The purchase of treasury stock decreases assets and decreases stockholders' equity.
The purchase of treasury stock increases assets and increases stockholders' equity.
The purchase of treasury stock increases assets and decreases stockholders' equity.
The purchase of treasury stock decreases assets and increases stockholders' equity.

6. A corporation must record a gain on sale for the sale of treasury stock at an amount greater than its purchase price. (Points : 1)
True
False

7. The two basic sources of equity are: (Points : 1)
common stock and bonds.
common stock and preferred stock.
paid-in capital and retained earnings.
loans from banks and gifts from donors.

8. Osbourne Company issued 50,000 shares of common stock in exchange for manufacturing equipment. The equipment was valued at $1,000,000. The stock has par value of $0.01 per share. Osbourne should record a gain on the sale of stock for the difference between the equipment’s market value and the stock’s current market value. (Points : 1)
True
False

9. On June 30, 2014, Stephans Company showed the following data on the equity section of their balance sheet:


Stockholders' equity
Common stock, $1 par 100,000 shares authorized $40,000
40,000 shares issued
Paid-in capital in excess of par 260,000
Retained earnings 940,000
Total stockholder's equity $1,240,000


On July 1, 2014, Stephans distributed a 5% stock dividend. The market value of the stock at that time was $13 per share. Following this transaction, the total shareholders’ equity would go down by $26,000. (Points : 1)
True
False

10. Which of the following is a TRUE statement about a corporation? (Points : 1)
The owners of a corporation have co-ownership of the property of the corporation.
A corporation is not taxed on the corporation's business income.
A corporation has a limited life.
The owners of a corporation have limited liability for the corporation's debts.