Reference no: EM13481695
True or false:
1. The cost method of accounting for the purchase & sale of treasury stock is a commonly used method.
2. If 100 shares of treasury stock were purchased for$50 per share and then sold @ $60 per share, $1,000 of income isreported in the income statement.
3. The paid-in capital from sale of treasury stockaccount is debited if the sales price of the treasury stock sold isgreater than its cost.
4. Treasury stock is listed in the stockholders' equitysection on the balance sheet.
5. The cost of treasury stock is deducted from totalpaid-in capital and retained earnings in determining totalstockholder's equity.
6. The divident yield indicates the rate of return tostockholders in terms of cash divident distributions.
7. A corporation has $10,000 shares of $100 par valuestock outstanding. If the corporation issues a 5-for-1 stocksplit, the number of shares outstanding after the split will be40,000.
8. The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.
9. The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of addditional shares, is called a stock split.
10. A stock split results in a transfer at market valuefrom retained earnings to paid-in capital.
Multiple Choice:
11. treasury stock shares are:
a. shares held by the u.s treasury department
b. part of the total outstanding shares but not part ofthe total issued shares of a corporation
c. unissued shares that are held by the treasurer of thecorporation
d. issued shares that are held by the treasurer of thecorporation
12. How is treasury stock shown on the balancesheet?
a. as an asset
b. as a decrease in stockholders' equity
c. as an increase in stockholders' equity
d. treasury stock is not shown on the balancesheet
13. What is the total stockholders' equity based on the following account balances?
CommonStock $400,000
Paid-in Capital in Excess ofPar 40,000
RetainedEarnings 190,000
TreasuryStock 20,000
a. $640,000
b. $630,000
c. $610,000
d. $650,000
14. A corporation purchased 1,000 shares of its $5 parcommon stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?
15. The excess of cost over sales price of treasurystock should be debited to:
a. Loss from Sale of Treasury Stock
b. Oranizational Expenses
c. Gain from the sale of Treasury Stock
d. Paid-in Capital from the Sale of Treasury Stock
16. All of the following are normall found in acorporation stockholders equity section except:
a. Common Stock
b. Paid-In Capital in Excess of Par
c. Dividends in Arrears
d. Retained Earnings
17. Significant changes in stockholders equity arereported in:
a. income statement
b. retained earnings statement
c. statement of stockholders equity
d. statement of cash flows
18. Which of the following would appear as aprior-period adjustment?
a. losss resulting from the sale of fixed assets
b. difference between the actual and estimateduncollectible accounts receivable
c. error in the computation of depreciation expense inthe preceding year
d. loss from the restructuring of assets
19. Dividend yield is most often computed on:
a. all common stock
b. all preferred stock
c. both common and preferred stock
d. only common stock sold above par
20. Based on the following information, calculate thedividend yield on common stock:
market price pershare $40.00
earnings pershare 4.00
dividends pershare 1.00
investors cost pershare 30.00
a. 0.075
b. 0.025
c. 0.133
d. 0.033
21. The reduction of par or stated value of stock byissuance of a proportionate number of additional shares is termeda
a. liquidating divident
b. stock split
c. stock option
d. preferred dividend
22. A corporation has 50,000 shares of $28 par valuestock outstanding that has a current market value of $160. Ifthe corporation issues a 4-for-1f stock split, the market value ofthe stock will fall to approximately
a. $7
b. $112
c. $40
d. $640
23. A company with 100,000 authorized shares of $4 parcommon stock issued 50,000 shares at $9. Subsequently, thecompany declared a 2% stock dividend on a date when the marketprice was $10 a share. The effect of the declaration andissuance of the stock dividend is to:
a. decrease retained earnings, increase common stock,and increase paid-in capital
b. increase retained earnings, decrease common stock,and decrease paid-in capital
c. increase retained earnings, decrease common stock,and increase paid-in capital
d. decrease retained earnings, increase common stock,and decrease paid-in capital
24. Which of the following statement is not true about a2-for-1 split?
a. Par value per share is reduced to half of what it wasbefore the split.
b. Total contributed capital increases.
c. The market price will probably decrease.
d. A stockholder with ten shares before the split ownstwenty shares after the split.
25. A corporation has 50,000 shares of $25 par valuestock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the market value ofthe stock will fall approximately:
a. $5
b. no changed
c. $60
d. $24