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A corporation issued 100 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state.The entry to record this transaction will include:


A) A $1,800 credit to Common Stock.
B) A $300 debit to Organization Expenses.
C) A $1,300 credit to Paid-in Capital in Excess of Par Value,Common Stock.
D) A $1,800 debit to Legal Expenses.
E) A $1,800 credit to Cash.

F) A) and B)
G) C) and D)

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Comfort Mattresses,Inc.sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share.The entry to record this transaction would be:


A) Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value,Common Stock $286,000.
B) Debit Cash for $312,000; credit Common Stock $312,000.
C) Debit Common Stock $26,000; debit Paid-in Capital in Excess of Par Value,Common Stock $286,000; credit Cash $312,000.
D) Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000.
E) Debit Common Stock $26,000; credit Cash $26,000.

F) B) and D)
G) A) and D)

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Declaration of a stock dividend results in a liability being recorded.

A) True
B) False

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Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

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Dividend yield is the ratio of annual ca...

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A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:


A) Convertible stock.
B) No-par stock.
C) Callable stock.
D) Noncumulative stock.
E) Discounted stock.

F) All of the above
G) B) and E)

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A stock dividend,declared by a corporation's directors,is a distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return.

A) True
B) False

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West Company declared a $0.50 per share cash dividend.The company has 190,000 shares issued,and 10,000 shares in treasury stock.The journal entry to record the payment of the dividend is:


A) Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.
B) Debit Common Dividends Payable $95,000; credit Cash $95,000.
C) Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
D) Debit Common Dividends Payable $90,000; credit Cash $90,000.
E) Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.

F) A) and E)
G) B) and E)

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A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13 per share.The entry to record this transaction would include:


A) A debit to Paid-in Capital in Excess of Par Value,Common Stock for $182,000.
B) A debit to Cash for $14,000.
C) A credit to Common Stock for $182,000.
D) A credit to Common Stock for $14,000.
E) A credit to Paid-in Capital in Excess of Par Value,Common Stock for $196,000.

F) A) and B)
G) C) and E)

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The board of directors of a corporation:


A) Are elected by the corporate registrar.
B) Are responsible for day-to-day operations of the business.
C) Do not have the power to bind the corporation to contracts,due to lack of mutual agency.
D) May not also be executive officers of the corporation,due to the separate entity principle.
E) Are responsible for and have final authority for managing corporate activities.

F) A) and B)
G) B) and E)

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Retained earnings are part of the stockholders' claims on the company's net assets.

A) True
B) False

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The Paid-in Capital,Treasury Stock account can have a zero or credit balance.

A) True
B) False

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The Paid-in Capital,Treasury Stock account can never have a debit balance.

A) True
B) False

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A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding.The journal entry to record the declaration of the cash dividend is:


A) Debit Dividend Expense $12,000; credit Cash $12,000.
B) Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C) Debit Common Dividend Payable $12,000; credit Cash $12,000.
D) Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E) Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

F) All of the above
G) A) and D)

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Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called:


A) Cumulative preferred stock.
B) Callable preferred stock.
C) Participating preferred stock.
D) Convertible preferred stock.
E) Preferential preferred stock.

F) B) and C)
G) A) and B)

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Stockholders' equity consists of the following:


A) Long-term assets.
B) Paid-in capital and retained earnings.
C) Paid-in capital and par value.
D) Retained earnings and cash.
E) Premiums and discounts.

F) B) and E)
G) C) and D)

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Torino Company has 10,000 shares of $5 par value,4% cumulative and nonparticipating preferred stock and 100,000 shares of $10 par value common stock outstanding.The company paid total cash dividends of $1,000 in its first year of operation.The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:


A) $1,000.
B) $2,000.
C) $3,000.
D) $4,000.
E) $0.

F) B) and E)
G) None of the above

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A corporation is a legal entity separate from its owners.

A) True
B) False

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Prior to May 1,Fortune Company has never had any treasury stock transactions.A company repurchased 100 shares of its common stock on May 1 for $5,000.On July 1,it reissued 50 of these shares at $52 per share.On August 1,it reissued the remaining treasury shares at $49 per share.What is the balance in the Paid-in Capital,Treasury Stock account on August 2?


A) $2,600 Debit.
B) $2,600 Credit.
C) $100 Credit.
D) $50 Credit.
E) $50 Debit.

F) A) and B)
G) A) and C)

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A premium on common stock:


A) Occurs when a corporation sells its stock for more than par or stated value.
B) Is the difference between par value and issue price when the amount paid is below par.
C) Represents profit from issuing stock.
D) Represents capital gain on sale of stock.
E) Is prohibited in most states.

F) A) and D)
G) C) and D)

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The total amount of cash and other assets the corporation receives from its stockholders in exchange for common stock is called ________.

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