ACC 563 Week 10 Quiz – Strayer NEW
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Week
10 Quiz 8: Chapters 15 and 16
Chapter 15
Multiple Choice
1. For
a compensatory stock option plan for which the date of grant and measurement
date are the same, compensation cost
should be recognized in the income statement
a. At the date of retirement
b. Of each period in which services are rendered
c. At the exercise date
d. At the adoption date of the plan
Answer
2. Payment of a dividend in stock
a.
Increases the current ratio
b.
Decreases the amount of working capital
c.
Increases total stockholders’ equity
d. Decreases book value per share of
stock outstanding
Answer
3.
The directors of Corel Corporation, whose $40 par value common stock is
currently selling at $50 per share, have decided to issue a stock dividend. The
corporation has an authorization for 200,000 shares of common, has issued
110,000 shares of which 10,000 shares are now held as treasury stock, and
desires to capitalize $400,000 of the retained earnings balance. To accomplish
this, the percentage of stock dividend that the directors should declare is
a.
10
b.
8
c.
5
d.
2
Answer
4. When
a stock dividend is small, for example a 10% stock dividend,
a. Retained
earnings is not reduced because the dividend is immaterial .
b. Retained
earnings is reduced by the fair value of the stock.
c. Retained
earnings is reduced to the par value of the stock.
d. Paid-in
capital in excess of par value is unaffected.
Answer
5.
The par value method of reporting a
treasury stock transaction
a. Will
be reported in the balance sheet as a reduction of total stockholders’ equity.
b. Results
in no change to total stockholders’ equity.
c. Results
in a reduction in the number of shares that are available to be sold to
prospective investors.
d. Assumes
constructive retirement of the treasury shares.
Answer
6. On December 31, 2010, when the Conn Company’s
stock was selling at $36 per share, its capital accounts were as follows
Capital stock (par value $20,
100,000 shares issued) $2,000,000
Premium on capital stock 800,000
Retained Earnings 4,550,000
If a 100 percent stock dividend were
declared and the par value per share remained at
$20
a. No entry would need to be made to record the
dividend
b. Capital stock would increase to $5,600,000
c. Capital stock would increase to $4,000,000
d. Total capital would decrease
Answer
7. A company has not paid dividends on its
cumulative nonvoting preferred stock for 20 years.
Healthy earnings have been reported each
year, but they have been retained to support the growth of the company. The
board of directors appropriately authorized management to offer the preferred
shareholders an exchange of bonds and common stock for all the preferred stock.
The exchange is about to be consummated. Which of the following best describes
the effect of the exchange on the company?
a. The
statute of limitations applies; hence, cumulative dividends of only seven years
need to be paid on the preferred stock exchanged.
b. The
company should record an extraordinary gain for income determination purposes
to the extent that dividends in arrears do not have to be paid in the exchange
transaction.
c. Gain
or loss should be recognized on the exchange by the company, and the exchange
would have to be approved by the Securities and Exchange Commission.
d. Regardless of the market value of the bonds
and common stock, no gain or loss should be recognized by the company on the
exchange, and no dividends need to be paid on the preferred stock exchanged.
Answer
8.
A
restriction of retained earnings is most likely to be required by the
a. Exhaustion of potential benefits
of the investment credit
b. Purchase of treasury stock
c. Payment of last maturing series
of a serial bond issue
d. Amortization of past service
costs related to a pension plan
Answer
9. A
feature common to both stock splits and stock dividends is
a.
A reduction in total capital of a corporation
b.
A transfer from earned capital to paid-in capital
c.
A reduction in book value per share
d.
Inclusion in conventional statement of source and application of funds
Answer
10. Assuming the issuing company has only one
class of stock, a transfer from retained earnings to capital stock equal to the market value of
the shares issued is ordinarily a characteristic of
a. Either a stock dividend or a stock split
b. Neither a stock dividend nor a stock split
c. A stock split but not a stock dividend
d. A stock dividend but not a stock split
Answer
11. When a stock option plan for employees is
compensatory, the measurement date for determining compensation cost is the
a. Date
the option plan is adopted, provided it precedes the date on which the options
may first be exercised by less than one operating cycle
b. Date
on which the options may first be exercised (if the first actual exercise is
within the same operating period) or the date on which a recipient first
exercises any of his options
c. First
date on which are known both the number of shares than an individual employee
is entitled to receive and the option or purchase price, if any
d. Date each option is granted
Answer
12. As
a minimum, how large in relation to total outstanding shares may a stock
distribution be before it should be accounted for as a stock split instead of a
stock dividend?
a. No less than 2 to 5 percent
b. No less than 10 to 15 percent
c. No less than 20 to 25 percent
d. No less than 45 to 50 percent
Answer
13. The
dollar amount of total stockholders’ equity remains the same when there is a
(an)
a. Issuance of preferred stock in exchange for
convertible debentures
b. Issuance of nonconvertible bonds with
detachable stock purchase warrants
c. Declaration of a stock dividend
d. Declaration of a cash dividend
Answer
14. A
company with a substantial deficit undertakes
a quasi-reorganization. Certain assets will be written down to their
present fair market value. Liabilities will remain the same. How would the
entries to record the quasi-reorganization affect each of the following?
Contributed Capital Retained Earnings
a.
Increase
Decrease
b.
Decrease
No effect
c.
Decrease
Increase
d.
No effect
Increase
Answer
15. What
is the most likely effect of a stock split on the par value per share and the
number of shares outstanding?
Par Value
Number of shares
Per shareoutstanding
a.
Decrease
Increase
b.
Decrease No effect
c.
Increase
Increase
d.
No
effect
No effect
Answer
16. Gilbert
Corporation issued a 40percent stock split-up of its common stock that had a
par value of $10 before and after the
split-up. At what amount should retained earnings be capitalized for the
additional shares issued?
a. There should be no capitalization of retained
earnings
b. Par value
c. Market value on the declaration date
d. Market value on the payment date
Answer
17. How
would the declaration and subsequent issuance of a 10 percent stock dividend by
the issuer affect each of the following when the market value of the shares
exceeds the par value of the stock?
Common Stock Additional Paid-in Capital
a.
No effect No
effect
b.
No effect Increase
c.
Increase No effect
d.
Increase Increase
Answer
18. A
company with a $2,000,000 deficit undertakes a quasi-reorganization on November
1, 2010. Certain assets will be written
down by $400, 000 to their present fair market value. Liabilities will remain
the same. Capital stock was $3,000,000 and additional paid-in capital was
$1,000,000 before the quasi-reorganization. How would the entries to accomplish
these changes on November 1, 2010, affect each of the following?
Capital
Stock Total
Stockholders’ Equity
a.
No
effect No
effect
b.
No
effect Decrease
c.
Decrease Decrease
d.
Decrease No
effect
Answer
19. How
would a stock split affect each of the following?
Total
Stockholders’ Additional
AssetsEquityPaid-in Capital
a.
Increase Increase No effect
b.
No effect No effect No effect
c.
No effect No effect Increase
d.
Decrease Decrease Decrease
Answer
20. The purchase of treasury stock
a. Decreases common stock authorized
b. Decreases common stock issued
c. Decreases common stock outstanding
d. Has no effect on common stock outstanding
Answer
21. The
equation, assets = equities, expresses which of the following theories of
equity?
a. Proprietary
theory.
b. Commander
theory.
c. Entity
theory.
d. Enterprise
theory.
Answer
22. Under
the residual equity theory
a. A
business is viewed as a social institution.
b. Management
is responsible for maximizing the wealth of common stockholders.
c. A
manager’s goals are considered as important as those of the common
stockholders.
d. Equities
are viewed as restrictions on assets..
Answer
23. Under
which of the theories of equity is a manager’s goals considered as important as
those of the common stockholder.
a. Proprietary
theory.
b. Commander
theory.
c. Entity
theory.
d. Enterprise
theory.
Answer
24. Which
of the theories of equity is consistent with the definition of equity that is
found in Statement of Financial
Accounting ConceptsNo. 6?
a. Proprietary
theory.
b. Commander
theory.
c. Entity
theory.
d. Enterprise
theory.
Answer
25. Which
of the following securities must be reported as a liability because they have
the characteristics of both liabilities and equity, but the liability
characteristic is dominant?
a. Redeemable
preferred stock.
b. Stock
options issued with a debt security .
c. Detachable
stock options.
d. Mandatorily
redeemable preferred stock.
Answer
26. When
a dividend paid to stockholders who own mandatorily redeemable preferred stock,
the company must report the dividend
a. As
an adjustment to retained earnings in its statement of owners’ equity .
b. As
an expense in the income statement.
c. As
a reduction to other comprehensive income.
d. In
the financing activities section of the statement of cash flows.
Answer
27. When
preferred stock is converted to common stock
a. The
debt-to-equity ratio decreases.
b. The
debt-to-equity ratio increases.
c. The
debt-to-equity ratio is unchanged.
d. A
gain or loss is reported in earnings for the difference between the fair value
of the common stock and the book value of the preferred stock that was
converted .
Answer
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