True/False
Indicate whether the statement is true or
false.
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1.
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In some states, a stockholder may be liable for the amount of discount on par
value stock if a corporation is unable to pay its creditors.
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2.
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When treasury stock transactions occur, no entry is made in the accounts Capital
Stock–Preferred or Capital Stock–Common.
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3.
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A corporation usually sells all the bonds in a bond issue to one bank or to its
stockholders.
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4.
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The interest earned on a bond sinking fund reduces the amount that must be
deposited in the fund.
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5.
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When a corporation buys treasury stock, the number of shares outstanding
increases.
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6.
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When preferred stock is issued at par value, the amount to be recorded as
Capital Stock–Preferred equals the number of shares times the par value of the shares.
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7.
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The amount recorded in Capital Stock–Preferred remains the same regardless
of whether the preferred stock is sold for less than par value, par value, or more than par
value.
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8.
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If a bond issue was for $500,000.00, the amount to be deposited in the bond
sinking fund equals $500,000.00.
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9.
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When treasury stock is sold, the difference between the amount received and the
original cost of the shares is recorded as Paid-in Capital from Sale of Treasury Stock.
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10.
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When stated-value common stock is sold for cash, the accounts affected are
Treasury Stock and Capital Stock–Common.
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Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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When calculating the number of shares of stock outstanding, treasury stock is
____.
A. | added to the number of shares issued | B. | subtracted from the number of shares
issued | C. | added or subtracted from the number of shares issued depending on the market price of
the stock | D. | not a factor in determining the number of shares
outstanding |
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2.
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Mathai, Inc., issued 1,000 shares of $100.00 par value preferred stock at
$110.00 per share. The total amount received is ____.
A. | $100.00 | C. | $100,000.00 | B. | $10,000.00 | D. | $110,000.00 |
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3.
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A bond sinking fund is classified as a(n) ____.
A. | asset | C. | stockholders' equity | B. | liability | D. | revenue |
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4.
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If preferred stock is issued for more than par value, Capital
Stock–Preferred is credited for the ____.
A. | total amount received | B. | par value of the stock | C. | amount received in
excess of par value | D. | par value less the
discount |
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5.
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Inman Financial issued 1,000 shares of $100.00 preferred stock for $90.00. The
amount of the discount recorded is ____.
A. | $0.00 | C. | $10,000.00 | B. | $9,000.00 | D. | $90,000.00 |
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6.
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Discount on Sale of Preferred Stock is classified as a contra ____.
A. | asset account | C. | liability account | B. | expense account | D. | stockholders' equity
account |
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7.
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The concept that is being applied when a corporation records treasury stock at
the price paid regardless of the stock's par or stated value is ____.
A. | Business Entity | C. | Revenue Recognition | B. | Historical Cost | D. | Materiality |
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8.
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Optimum Corp. issued 500 shares of $100.00 preferred stock for $90.00 per share.
The total amount received by Optimum is ____.
A. | $4,500.00 | C. | $45,000.00 | B. | $5,000.00 | D. | $50,000.00 |
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9.
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When no-par value common stock is issued, the amount credited to Capital
Stock–Common is the ____.
A. | total amount received | B. | stated par value of the
stock | C. | amount stated on the stock certificate | D. | par value less the imputed
discount |
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10.
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If treasury stock is sold for more than book value, the credits are made to
Treasury Stock and ____.
A. | Paid-in Capital in Excess of Par Value–Treasury | B. | Paid-in Capital in
Excess of Stated Value–Treasury | C. | Paid-in Capital from Sale of Treasury
Stock | D. | Paid-in Capital–Treasury Stock |
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11.
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Razor's Edge issued 5,000 shares of $100.00 par value preferred stock at
$110.00 per share. The amount received in excess of par value is ____.
A. | $5,000.00 | C. | $500,000.00 | B. | $50,000.00 | D. | $5,000,000.00 |
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12.
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A corporation's own stock that has been issued and reacquired is called
____.
A. | common stock | C. | reacquired stock | B. | preferred stock | D. | treasury stock |
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13.
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Portions of bond issues that mature at different dates are ____.
A. | term bonds | C. | indenture bonds | B. | serial bonds | D. | cereal bonds |
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14.
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The entry to record the sale of no-par value common stock is a ____.
A. | debit to Cash and a credit to Capital Stock–Common | B. | debit to Cash and a
credit to Paid-in Capital from Sale of Common Stock | C. | debit to Capital Stock–Common and a
credit to Cash | D. | debit to Paid-in Capital from Sale of Common Stock and a credit to
Cash |
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15.
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The entry to record the use of the bond sinking fund to retire a bond issue is a
____.
A. | debit to Bonds Payable and a credit to Cash | B. | debit to Bonds
Payable and a credit to Bond Sinking Fund | C. | debit to Bond Sinking Fund and a credit to
Cash | D. | debit to Bond Sinking Fund and a credit to Bonds
Payable |
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