ACCT 201A Exam 3 QUESTIONS &
ANSWERS(RATED A+)
Common shareholders do not have the rights to: - ANSWERTo participate in the
day-to-day operations
The advantages of a corporation compared to a sole proprietorship or partnership
include: - ANSWERLimited Liability
The disadvantages of a corporation compared to a sole proprietorship or partnership
include: - ANSWERDouble Taxation
Primary reason for declaring a Stock Split - ANSWERLower trading price of stock
into a more acceptable range
Effect of a stock dividend on total stockholders' equity? - ANSWERStockholders'
equity does not change.
Salaries expense for the year equals $240,000. Salaries payable at the beginning of
the year were $25,000, and at the end of the year were $15,000. Calculate cash paid
for salaries during the year. - ANSWER$250,000
The correct order from the largest number of shares to the smallest number of
shares is: - ANSWERAuthorized, Issued, and Outstanding
Petite Fashions issued 500,000 of its 2 million shares of authorized common stock.
At the end of the accounting period, 450,000 shares are outstanding. How many
shares of treasury stock does Petite Fashions have? - ANSWER50,000 shares.
If a company issues par-value stock, the amount credited to common stock will be: -
ANSWERThe par value per share X the number of shares issued
A company issues 100,000 shares of $1 par value common stock for $17 per share.
To record this transaction, the company would credit Common Stock for: -
ANSWER$100,000
A company issues 100,000 shares of $1 par value common stock for $17 per share.
To record this transaction, the company would credit Additional Paid-in Capital for: -
ANSWER$1,600,000
How does the stockholders' equity section in the balance sheet differ from the
statement of stockholders' equity? - ANSWERThe stockholder's equity section
shows balances at a point in time, whereas the statement of stockholders' equity
shows activity over a period of time
Both cash dividends and stock dividends - ANSWERreduce retained earnings
, Suppose a company declares a dividend of $0.50 per share. At the time of
declaration, the company has 100,000 shares issued and 90,000 shares
outstanding. On the declaration date, Dividends would be recorded for -
ANSWER$45,000.
We credit Dividends Payable on - ANSWERdeclaration date
Suppose a company purchases 2,000 shares of its own $1 par value common stock
for $16 per share. Which of the following is recorded at the time of the purchase? -
ANSWERDebit Treasury Stock for $32,000.
Preferred Stock - ANSWERcan have features of both liabilities and stockholders'
equity
When treasury stock is resold, total stockholders' equity: - ANSWERincreases
A stock dividend occurs when: - ANSWERa company distributes to shareholders
additional shares of its own stock
The balance of cash at the beginning of the year was $120,000, and at the end of
the year was $140,000. Assuming operating cash flows equal $90,000 and investing
cash flows equal $(40,000), calculate financing cash flows for the year. -
ANSWER$(30,000)
Example of cash outflow from a financing activity: - ANSWERpayment of cash
dividends
calculate net cash flows from investing activities. - ANSWER$(15,000); Subtract total
outflows from total inflows
Calculate cash flow from operating activites: - ANSWER$145,000; Net income +/-
changes in assets and liabilities + noncash expenses
An example of a noncash activity - ANSWERPurchase of land by issuing common
stock to seller
Smith Company's sales revenues for the year are $200,000 and its accounts
receivable balance increased by $10,000. How much is "cash collected from
customers"? - ANSWER$190,000
identify financing activities from additional information and changes in: -
ANSWERLong-term liability and stockholders' equity accounts.
identify investing activities from additional information and changes in: -
ANSWERLong-term asset accounts
In preparing a statement of cash flows under the indirect method, an increase in
accounts payable would be reported or included as a(n): - ANSWERAddition to net
income in the operating activities section
ANSWERS(RATED A+)
Common shareholders do not have the rights to: - ANSWERTo participate in the
day-to-day operations
The advantages of a corporation compared to a sole proprietorship or partnership
include: - ANSWERLimited Liability
The disadvantages of a corporation compared to a sole proprietorship or partnership
include: - ANSWERDouble Taxation
Primary reason for declaring a Stock Split - ANSWERLower trading price of stock
into a more acceptable range
Effect of a stock dividend on total stockholders' equity? - ANSWERStockholders'
equity does not change.
Salaries expense for the year equals $240,000. Salaries payable at the beginning of
the year were $25,000, and at the end of the year were $15,000. Calculate cash paid
for salaries during the year. - ANSWER$250,000
The correct order from the largest number of shares to the smallest number of
shares is: - ANSWERAuthorized, Issued, and Outstanding
Petite Fashions issued 500,000 of its 2 million shares of authorized common stock.
At the end of the accounting period, 450,000 shares are outstanding. How many
shares of treasury stock does Petite Fashions have? - ANSWER50,000 shares.
If a company issues par-value stock, the amount credited to common stock will be: -
ANSWERThe par value per share X the number of shares issued
A company issues 100,000 shares of $1 par value common stock for $17 per share.
To record this transaction, the company would credit Common Stock for: -
ANSWER$100,000
A company issues 100,000 shares of $1 par value common stock for $17 per share.
To record this transaction, the company would credit Additional Paid-in Capital for: -
ANSWER$1,600,000
How does the stockholders' equity section in the balance sheet differ from the
statement of stockholders' equity? - ANSWERThe stockholder's equity section
shows balances at a point in time, whereas the statement of stockholders' equity
shows activity over a period of time
Both cash dividends and stock dividends - ANSWERreduce retained earnings
, Suppose a company declares a dividend of $0.50 per share. At the time of
declaration, the company has 100,000 shares issued and 90,000 shares
outstanding. On the declaration date, Dividends would be recorded for -
ANSWER$45,000.
We credit Dividends Payable on - ANSWERdeclaration date
Suppose a company purchases 2,000 shares of its own $1 par value common stock
for $16 per share. Which of the following is recorded at the time of the purchase? -
ANSWERDebit Treasury Stock for $32,000.
Preferred Stock - ANSWERcan have features of both liabilities and stockholders'
equity
When treasury stock is resold, total stockholders' equity: - ANSWERincreases
A stock dividend occurs when: - ANSWERa company distributes to shareholders
additional shares of its own stock
The balance of cash at the beginning of the year was $120,000, and at the end of
the year was $140,000. Assuming operating cash flows equal $90,000 and investing
cash flows equal $(40,000), calculate financing cash flows for the year. -
ANSWER$(30,000)
Example of cash outflow from a financing activity: - ANSWERpayment of cash
dividends
calculate net cash flows from investing activities. - ANSWER$(15,000); Subtract total
outflows from total inflows
Calculate cash flow from operating activites: - ANSWER$145,000; Net income +/-
changes in assets and liabilities + noncash expenses
An example of a noncash activity - ANSWERPurchase of land by issuing common
stock to seller
Smith Company's sales revenues for the year are $200,000 and its accounts
receivable balance increased by $10,000. How much is "cash collected from
customers"? - ANSWER$190,000
identify financing activities from additional information and changes in: -
ANSWERLong-term liability and stockholders' equity accounts.
identify investing activities from additional information and changes in: -
ANSWERLong-term asset accounts
In preparing a statement of cash flows under the indirect method, an increase in
accounts payable would be reported or included as a(n): - ANSWERAddition to net
income in the operating activities section
