Achievement Test 7
Achievement Test 7: Chapters 13 and 14
PART I — MULTIPLE CHOICE (34 points)
Instructions: Designate the best answer for each of the following questions.
____ 1.Restrictions of retained earnings may result from each of the following except:
d.prior period adjustment restrictions.
____ 2.Jamie, Inc. has 10,000 shares of 6%, $100 par value, noncumulative preferred stock and 30,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2016. The board of directors declares and pays a $150,000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017?
____ 3.Tina Corporation issued 4,000 shares of $10 par value common stock in exchange for a truck. The truck had a fair value of $65,000. The entry to record this transaction includes a credit to Paid-in Capital in Excess of Par – CS for:
____ 4.Trinity Manufacturing declared a 10% stock dividend when it had 150,000 shares of $3 par value common stock outstanding. The market price per common share was $11 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to:
a.Retained Earnings for $45,000.
b.Common Stock for $45,000.
c.Paid-in Capital in Excess of Par – CS for $120,000.
d.Common Stock Dividends Distributable for $180,000.
____ 5.Arthur Company paid $39,000 to buy 3,000 shares of its $5 par value common stock for the treasury. The stock was originally sold for $27,000. The entry to record the purchase includes a:
a.debit to Treasury Stock for $15,000.
b.credit to Treasury Stock for $27,000.
c.debit to Treasury Stock for $39,000.
d.credit to Common Stock for $27,000.
____ 6.The officer who is responsible for maintaining the company’s cash position is the:
a.vice-president of finance.
____ 7.Hallery Corporation issued 600 shares of 10% $15 par convertible preferred stock for $12,000. The entry to record the declaration of the annual cash dividend is:
a.debit Cash Dividends $900 and credit Cash $900.
b.debit Cash Dividends $1,200 and credit Cash $1,200.
c.debit Cash Dividends $1,200 and credit Dividends Payable $1,200.
d.debit Cash Dividends $900 and credit Dividends Payable $900.
____ 8.The purchase of treasury stock:
a.decreases total assets and decreases total stockholders’ equity.
b.increases total assets and decreases total stockholders’ equity.
c.increases total assets and increases total stockholders’ equity.
d.decreases total assets and increases total stockholders’ equity.
____ 9.The resale of treasury stock for an amount greater than its cost:
a.increases net income.
b.increases total assets and increases total stockholders’ equity.
c.decreases total assets and increases total stockholders’ equity.
d.increases total assets and decreases total stockholders’ equity.
____ 10.Each of the following decreases retained earnings except:
b.large stock dividends.
c.small stock dividends.
____ 11.Treasury stock is reported in the balance sheet as a deduction from:
b.additional paid-in capital.
d.paid-in capital and retained earnings.
____ 12.Watkins, Inc. paid $48,000 to buy back 9,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a:
a.credit to Common Stock for $6,000.
b.credit to Paid-in Capital from Treasury Stock for $6,000.
c.debit to Paid-in Capital from Treasury Stock for $45,000.
d.debit to Retained Earnings for $48,000.
____ 13.Restrictions of retained earnings:
a.do not change total stockholders’ equity.
b.are reported on the balance sheet as liabilities.
c.provide insurance coverage for contingencies.
d.are reported as expenses on the income statement.
____ 14.Ownership of common stock ordinarily carries the right to:
b.vote on corporate actions that require stockholder approval.
c.enter into contracts for the corporation.
d.establish a drawing account.
____ 15.A corporation is formed when:
a.it borrows money.
b.it receives a charter from its president.
c.it is granted by-laws by the federal government.
d.None of the above.
____ 16.Which of the following may either increase or decrease retained earnings?
b.Disposals of treasury stock.
c.Prior period adjustments.
____ 17.Common Stock Dividends Distributable is reported in the balance sheet:
a.as an addition to retained earnings.
b.as an asset.
c.as a liability.
d.in paid-in capital as an addition to common stock issued.
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