MGMT 200 PURDUE 2026 STUDY GUIDE EXAM QUESTIONS
AND SOLUTIONS GRADED A+
✔✔The par value of shares issued is normally recorded
in the
a. Additional Paid‐in Capital account.
b. Retained Earnings account.
c. Common Stock account.
d. asset account Common Stock. - ✔✔c. Common Stock account
✔✔Hayne Corporation issues 100 shares of its $1 par
value common stock for $15 per share. The entry to
record the issuance will include a:
a. Debit to Cash $1,500
b. Credit to Additional Paid‐In Capital $1,400
c. Credit to Common Stock of $100
d. All of these - ✔✔d. All of these
Dr. Cash 1500
Cr. Common Stock 100
Cr. Additional Paid-in Capital 1400
(Additional paid in capital is just as it sounds; the ADDITIONAL amount of money that
comes from selling common stock. So you take the amount of stock issued times the
price of those shares, less the common stock amount.)
✔✔When a company issues 25,000 shares of $1 par
value common stock for $10 per share, the journal
entry for this issuance would include:
a. A debit to Cash for $25,000
b. A debit to Additional Paid‐in Capital for
$25,000
c. A credit to Common Stock for $250,000
d. A credit to Additional Paid‐in Capital for
$225,000 - ✔✔d. A credit to Additional-paid in capital for $225,000
(Additional paid in capital is just as it sounds; the ADDITIONAL amount of money that
comes from selling common stock. So you take the amount of stock issued times the
price of those shares, less the common stock amount.)
✔✔Thiel, Inc. issued 5,000 shares of $1 par value stock
for $5 per share. What is true about the journal
entry to record the issuance?
a. Debit Cash $25,000
b. Credit Common Stock $25,000
, c. Debit Additional Paid‐In Capital $20,000
d. Debit Common Stock $5,000 - ✔✔a. Debit Cash $25,000
(Cash amounted received is recorded as the number of shares sold times the amount
they were sold for)
✔✔Dividends in arrears pertain to noncumulative
preferred stock.
A. True
B. False - ✔✔B. If you're ever unsure whether it's true or false, guess false. Like 75% of
these T/F questions are false.
(arrears means: money that is owed and should have been paid earlier)
(I'm going to assume that dividends in arrears do NOT pertain to non-cumulative
preferred stock because non-cumulative preferred stock receives priority over common
shares for dividends declared in the CURRENT accounting period therefore they won't
ever be "arreared")
✔✔Preferred stock is least likely to have which of the
following characteristics?
A. Preference as to dividends.
B. The right of the holder to vote at stockholders'
meetings.
C. Preference as to assets upon liquidation of the
corporation.
D. The right of the holder to convert to common
stock. - ✔✔B. The right of the holder to vote at stockholders' meetings
(voting rights are typically reserved for those who own common stock, as it is the
highest risk / highest reward category of stock)
✔✔Preferred stock is called preferred because it usually
has two preferences over common stock. These
preferences relate to
a. dividends and distribution of assets if the
corporation is dissolved.
b. dividends and voting rights.
c. par value and dividends.
d. the conversion to a bond and voting rights. - ✔✔A. Dividends and distribution of
assets if the corporation is dissolved.
✔✔The Golden, Inc. issues 1,000 shares of 3%, $100 par value
preferred stock at the beginning of 2017. All remaining shares are
common stock. Golden was not able to pay dividends in 2017, but
AND SOLUTIONS GRADED A+
✔✔The par value of shares issued is normally recorded
in the
a. Additional Paid‐in Capital account.
b. Retained Earnings account.
c. Common Stock account.
d. asset account Common Stock. - ✔✔c. Common Stock account
✔✔Hayne Corporation issues 100 shares of its $1 par
value common stock for $15 per share. The entry to
record the issuance will include a:
a. Debit to Cash $1,500
b. Credit to Additional Paid‐In Capital $1,400
c. Credit to Common Stock of $100
d. All of these - ✔✔d. All of these
Dr. Cash 1500
Cr. Common Stock 100
Cr. Additional Paid-in Capital 1400
(Additional paid in capital is just as it sounds; the ADDITIONAL amount of money that
comes from selling common stock. So you take the amount of stock issued times the
price of those shares, less the common stock amount.)
✔✔When a company issues 25,000 shares of $1 par
value common stock for $10 per share, the journal
entry for this issuance would include:
a. A debit to Cash for $25,000
b. A debit to Additional Paid‐in Capital for
$25,000
c. A credit to Common Stock for $250,000
d. A credit to Additional Paid‐in Capital for
$225,000 - ✔✔d. A credit to Additional-paid in capital for $225,000
(Additional paid in capital is just as it sounds; the ADDITIONAL amount of money that
comes from selling common stock. So you take the amount of stock issued times the
price of those shares, less the common stock amount.)
✔✔Thiel, Inc. issued 5,000 shares of $1 par value stock
for $5 per share. What is true about the journal
entry to record the issuance?
a. Debit Cash $25,000
b. Credit Common Stock $25,000
, c. Debit Additional Paid‐In Capital $20,000
d. Debit Common Stock $5,000 - ✔✔a. Debit Cash $25,000
(Cash amounted received is recorded as the number of shares sold times the amount
they were sold for)
✔✔Dividends in arrears pertain to noncumulative
preferred stock.
A. True
B. False - ✔✔B. If you're ever unsure whether it's true or false, guess false. Like 75% of
these T/F questions are false.
(arrears means: money that is owed and should have been paid earlier)
(I'm going to assume that dividends in arrears do NOT pertain to non-cumulative
preferred stock because non-cumulative preferred stock receives priority over common
shares for dividends declared in the CURRENT accounting period therefore they won't
ever be "arreared")
✔✔Preferred stock is least likely to have which of the
following characteristics?
A. Preference as to dividends.
B. The right of the holder to vote at stockholders'
meetings.
C. Preference as to assets upon liquidation of the
corporation.
D. The right of the holder to convert to common
stock. - ✔✔B. The right of the holder to vote at stockholders' meetings
(voting rights are typically reserved for those who own common stock, as it is the
highest risk / highest reward category of stock)
✔✔Preferred stock is called preferred because it usually
has two preferences over common stock. These
preferences relate to
a. dividends and distribution of assets if the
corporation is dissolved.
b. dividends and voting rights.
c. par value and dividends.
d. the conversion to a bond and voting rights. - ✔✔A. Dividends and distribution of
assets if the corporation is dissolved.
✔✔The Golden, Inc. issues 1,000 shares of 3%, $100 par value
preferred stock at the beginning of 2017. All remaining shares are
common stock. Golden was not able to pay dividends in 2017, but
