Accounting 201Chapter 10 Practice Test

Question 1

Petite Fashions issued 500,000 of its 2 million shares of authorized common stock. At the end of the accounting period, 450,000 shares are outstanding. How many shares of treasury stock does Petite Fashions have? A) 1.5 million shares. B) 450,000 shares. C) 50,000 shares. D) 0 shares.

Answer 1

C

Question 2

The advantages of owning a corporation include: A) Lower total taxes. B) The ability of stockholders to make operating decisions for their company. C) Limited liability. D) Less paper work.

Answer 2

C

Question 3

Cash dividends are initially recorded on which date? A) Date of declaration. B) Date of record. C) Date of payment. D) Balance sheet date.

Answer 3

A

Question 4

What is the effect of a stock dividend on total stockholders’ equity? A) Stockholders’ equity increases. B) Stockholders’ equity decreases. C) Stockholders’ equity does not change. D) The effect on stockholders’ equity depends on the size of the stock dividend.

Answer 4

C

Question 5

When treasury stock is resold, total stockholders’ equity: A) Increases. B) Decreases. C) Does not change. D) The effect depends on the relationship between the purchase price and resale price.

Answer 5

A

Question 6

Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to: A) Dividends and voting rights. B) Par value and dividends. C) The preemptive right and voting rights. D) Dividends and distribution of assets if the corporation is dissolved.

Answer 6

D

Question 7

Earnings per share measures: A) Cash earned per share of common stock. B) Cash earned per share of common and preferred stock. C) Net income earned per share of common stock. D) Net income earned per share of common and preferred stock.

Answer 7

C

Question 8

Treasury stock is recorded as: A) An asset. B) A liability. C) An increase in stockholders’ equity. D) A decrease in stockholders’ equity.

Answer 8

D

Question 9

If a company issues par-value stock, the amount credited to common stock will be: A) The total market value of all the shares issued. B) The par value per share times the number of shares issued. C) The difference between the market and the par value per share times the total number of shares issued. D) The amount the board of directors chooses to assign to the shares.

Answer 9

B

Question 10

What is the effect of a 2-for-1 stock split on total paid-in capital? A) Total paid-in capital increases. B) Total paid-in capital decreases. C) Total paid-in capital does not change. D) Total paid-in capital will double.

Answer 10

C