Reference no: EM132835405

Problem 1: Petro Corporation has total paid-in capital of $40,000 and retained earnings of $30,000. It has 100 shares of $100 preferred stock with no dividends in arrears and 1,000 shares of $10 par value common stock. The book value of each share of common stock is:

a) $60.

b) $30.

c) $10.

d) $70.

Problem 2: Retained earnings equal:

a) the amount stockholders have invested in the business.

b) the accumulated profits that are kept in the business.

c) the amount listed in the charter.

d) an amount a corporation must retain in the business for protection of creditors.

Problem 3: To record the purchase of treasury stock,

a) debit Treasury Stock - Common (par value), credit Cash (same).

b) debit Treasury Stock - Common (purchase price), credit Cash (same).

c) debit Treasury Stock - Common (par value), any difference to Paid-In Capital, credit Cash (purchase price).

d) None of these answers is correct.