College Accounting - Ch 13

Retained earnings represents amounts received from stockholders of a corporation in exchange for stock.

• True

• False

The two basic sources of stockholders' equity are:

• paid-in capital and retained earnings.

• common stock and bonds.

• common stock and preferred stock.

• loans from banks and gifts from donors.

Stock sold for amounts in excess of par value results in a gain reported on the income statement.

• True

• False

The declaration of a cash dividend does not create an obligation​ (liability) for the corporation.

• True

• False

Which of the following is the correct description of dividends in​ arrears, as it applies to cumulative preferred​ stock?

• the amount of dividends that will be paid in the coming year

• the cumulative amount of dividends that were not paid in previous years

• the cumulative amount of dividends that were paid in previous years

• the amount of dividends that were paid late

Which of the following statements is true of the date of​ record?

• The company transfers cash to a brokerage firm on the date of record.

• The liability must be recorded on the date of record.

• No journal entry is made on the date of record.

• Cash is disbursed to shareholders on the date of record.

Which of the following occurs when a corporation distributes a stock​ dividend?

• Total​ stockholders' equity increases.

• Total assets decrease.

• Total liabilities increase.

• Total​ stockholders' equity remains unchanged.

Which of the following best describes the appropriation of retained​ earnings?

• restricting a certain amount of retained earnings for expansion or contingencies

• cash set aside for expansion

• limiting company transactions in order to boost earnings and profits

• designating certain amounts of retained earnings for cash dividends to be paid out to shareholders

A reason a company may purchase treasury stock is to​ __________.

• issue additional shares to current common stockholders

• support the​ company's stock price

• decrease net assets by buying high and selling low

• decrease the amount of common stock issued

Treasury stock has​ ________.

• a normal credit balance and is a contra asset account

• a normal debit balance and is a contra equity account

• a normal debit balance and is a contra asset account

• a normal credit balance and is a contra equity account