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ch15.doc-CHAPTER 15 STOCKHOLDERS’ EQUITY IFRS ques...
ch15.doc-CHAPTER 15 STOCKHOLDERS’ EQUITY IFRS questions
ch15.doc-CHAPTER 15 STOCKHOLDERS’ E...
ch15.doc-CHAPTER 15 STOCKHOLDERS’ EQUITY IFRS questions
Page 10
Test Bank for Intermediate Accounting, Thirteenth Edition
32.
A "secret reserve" will be created if
a.
inadequate depreciation is charged to income.
b.
a capital expenditure is charged to expense.
c.
liabilities are understated.
d.
stockholders' equity is overstated.
P
33.
Which of the following represents the total number of shares that a corporation may issue
under the terms of its charter?
a.
authorized shares
b.
issued shares
c.
unissued shares
d.
outstanding shares
S
34.
Stock that has a fixed per-share amount printed on each stock certificate is called
a.
stated value stock.
b.
fixed value stock.
c.
uniform value stock.
d.
par value stock.
S
35.
Which of the following is not a legal restriction related to profit distributions by a
corporation?
a.
The amount distributed to owners must be in compliance with the state laws governing
corporations.
b.
The amount distributed in any one year can never exceed the net income reported for
that year.
c.
Profit distributions must be formally approved by the board of directors.
d.
Dividends must be in full agreement with the capital stock contracts as to preferences
and participation.
S
36.
In January 2010, Finley Corporation, a newly formed company, issued 10,000 shares of
its $10 par common stock for $15 per share. On July 1, 2010, Finley Corporation
reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of
these treasury shares
a.
decreased total stockholders' equity.
b.
increased total stockholders' equity.
c.
did not change total stockholders' equity.
d.
decreased the number of issued shares.
P
37.
Treasury shares are
a.
shares held as an investment by the treasurer of the corporation.
b.
shares held as an investment of the corporation.
c.
issued and outstanding shares.
d.
issued but not outstanding shares.
38.
When treasury stock is purchased for more than the par value of the stock and the cost
method is used to account for treasury stock, what account(s) should be debited?
a.
Treasury stock for the par value and paid-in capital in excess of par for the excess of
the purchase price over the par value.
b.
Paid-in capital in excess of par for the purchase price.
c.
Treasury stock for the purchase price.
d.
Treasury stock for the par value and retained earnings for the excess of the purchase
price over the par value.
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Page 11
Stockholders’ Equity
39.
“Gains" on sales of treasury stock (using the cost method) should be credited to
a.
paid-in capital from treasury stock.
b.
capital stock.
c.
retained earnings.
d.
other income.
40.
Porter Corp. purchased its own par value stock on January 1, 2010 for $20,000 and
debited the treasury stock account for the purchase price. The stock was subsequently
sold for $12,000. The $8,000 difference between the cost and sales price should be
recorded as a deduction from
a.
additional paid-in capital to the extent that previous net "gains" from sales of the same
class of stock are included therein; otherwise, from retained earnings.
b.
additional paid-in capital without regard as to whether or not there have been previous
net "gains" from sales of the same class of stock included therein.
c.
retained earnings.
d.
net income.
41.
How should a "gain" from the sale of treasury stock be reflected when using the cost
method of recording treasury stock transactions?
a.
As ordinary earnings shown on the income statement.
b.
As paid-in capital from treasury stock transactions.
c.
As an increase in the amount shown for common stock.
d.
As an extraordinary item shown on the income statement.
42.
Which of the following best describes a possible result of treasury stock transactions by a
corporation?
a.
May increase but not decrease retained earnings.
b.
May increase net income if the cost method is used.
c.
May decrease but not increase retained earnings.
d.
May decrease but not increase net income.
43.
Which of the following features of preferred stock makes the security more like debt than
an equity instrument?
a.
Participating
b.
Voting
c.
Redeemable
d.
Noncumulative
44.
The cumulative feature of preferred stock
a.
limits the amount of cumulative dividends to the par value of the preferred stock.
b.
requires that dividends not paid in any year must be made up in a later year before
dividends are distributed to common shareholders.
c.
means that the shareholder can accumulate preferred stock until it is equal to the par
value of common stock at which time it can be converted into common stock.
d.
enables a preferred stockholder to accumulate dividends until they equal the par value
of the stock and receive the stock in place of the cash dividends.
P
45.
According to the FASB, redeemable preferred stock should be
a.
included with common stock.
b.
included as a liability.
c.
excluded from the stockholders’ equity heading.
d.
included as a contra item in stockholders' equity.
15 - 11
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