ch 15 quiz

Question 1 - FIN Study Unit 14: Equity
Treasury stock was acquired for cash at a price in excess of its original issue price. The treasury stock was subsequently
reissued for cash at a price in excess of its acquisition price. Assuming that the par value method of accounting for treasury
stock transactions is used, what is the effect on total equity of each of the following events?

Acquisition of Treasury Stock | Reissuance of Treasury Stock

Question 2 - FIN Study Unit 14: Equity
The number of common stock shares outstanding will be decreased by the

Declaration of a Stock Dividend | Purchase of Treasury Stock

Question 3 - FIN Study Unit 14: Equity
Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued for
cash at a price in excess of its acquisition price. Assuming that the cost method of accounting for treasury stock transactions
is used, what is the effect of the subsequent reissuance of the treasury stock on each of the following?

Additional Paid-in Capital | Retained Earnings | Total Equity

Question 4 - FIN Study Unit 14: Equity
On December 1, Year 4, Line Corp. received a contribution of 2,000 shares of its $5 par value common stock from a
shareholder. On that date, the stock’s fair value was $35 per share. The stock was originally issued for $25 per share. By what amount will this contribution cause total equity to decrease if Line accounts for treasury stock using the cost method?

Question 5 - FIN Study Unit 14: Equity
Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of $2 par value common stock, which
had a fair value of $5 per share before the stock dividend was declared. This stock dividend was distributed 60 days after the
declaration date. By what amount did Ray’s current liabilities increase as a result of the stock dividend declaration?

Question 6 - FIN Study Unit 14: Equity
Rudd Corp. had 700,000 shares of common stock authorized and 300,000 shares outstanding at December 31, Year 3. The
following events occurred during Year 4:
January 31 - Declared 10% stock dividend
June 30 - Purchased 100,000 shares
August 1 - Reissued 50,000 shares
November 30 - Declared 2-for-1 stock split

At December 31, Year 4, how many shares of common stock did Rudd have outstanding?

Question 7 - FIN Study Unit 14: Equity
Selected information from the accounts of Row Co. at December 31, Year 4, follows:
Total income since incorporation: $420,000
Total cash dividends paid: 130,000
Total value of property dividends distributed: 30,000
Excess of proceeds over cost of treasury
stock sold, accounted for using the cost
method: 110,000

In its December 31, Year 4, financial statements, what amount should Row report as retained earnings?

Question 8 - FIN Study Unit 14: Equity
On July 1, Rya Corporation issued 1,000 shares of its $20 par common and 2,000 shares of its $20 par convertible preferred
stock for a lump sum of $80,000. At this date, Rya’s common stock was selling for $36 per share and the convertible
preferred stock for $27 per share. The amount of proceeds allocated to Rya’s preferred stock should be

Question 9 - FIN Study Unit 14: Equity
Long Co. had 100,000 shares of common stock issued and outstanding at January 1. During the year, Long took the following
actions:
March 15 -- declared a 2-for-1 stock split, when the fair value of the stock was $80 per share
December 15 -- declared a $.50 per share cash dividend

In Long’s statement of changes in equity for the year, what amount should Long report as dividends?

Question 10 - FIN Study Unit 14: Equity
On May 1, Rhud Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Rhud had 100,000 shares
of $1 par value common stock issued and outstanding. The fair value of Rhud’s common stock was $30 per share on May 1.
As a result of the stock dividend, Rhud’s total equity

Question 11 - FIN Study Unit 14: Equity
Porter Co. began its business last year and issued 10,000 shares of common stock at $3 per share. The par value of the
stock is $1 per share. During January of the current year, Porter bought back 500 shares at $6 per share, which were
reported by Porter as treasury stock. The treasury stock shares were reissued later in the current year at $10 per share.
Porter used the cost method to account for its equity transactions. What amount should Porter report as paid-in capital related to its treasury stock transactions on its balance sheet for the current year?

Question 12 - FIN Study Unit 14: Equity
At December 31, Year 3 and Year 4, Carr Corp. had outstanding 4,000 shares of $100 par value, 6% cumulative preferred
stock and 20,000 shares of $10 par value common stock. At December 31, Year 3, dividends in arrears on the preferred
stock were $12,000. Cash dividends declared in Year 4 totaled $44,000. What amounts were payable on each class of stock?

Preferred Stock | Common Stock

Question 13 - FIN Study Unit 14: Equity
An entity declared a cash dividend on its common stock on December 15, Year 1, payable on January 12, Year 2. How would
this dividend affect equity on the following dates?
December 15, Year 1 | December 31, Year 1 | January 12, Year 2

Question 14 - FIN Study Unit 14: Equity
Effective April 27, the shareholders of Dorr Corp. approved a 2-for-1 split of its common stock and an increase in authorized
common shares from 100,000 shares (par value $20 per share) to 200,000 shares (par value $10 per share). Dorr’s equity
accounts immediately before issuance of the stock-split shares were as follows:
Common stock, par value $20;
100,000 shares authorized;
50,000 shares outstanding
$1,000,000
Additional paid-in capital ($3 per
share on issuance of common
stock)
150,000
Retained earnings 1,350,000
The stock-split shares were issued on June 30. In Dorr’s June 30 statement of equity, the balances of additional paid-in
capital and retained earnings are

Additional Paid-in Capital | Retained Earnings

Question 15 - FIN Study Unit 14: Equity
Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued for
cash at a price in excess of its acquisition price. Assuming that the cost method of accounting for treasury stock transactions
is used, what is the effect on retained earnings?

Acquisition of Treasury Stock | Reissuance of Treasury Stock

Question 16 - FIN Study Unit 14: Equity
Earl was engaged by Farm Corp. to perform consulting services. Earl’s compensation for these services consisted of 1,000
shares of Farm’s $10 par value common stock, to be issued to Earl on completion of Earl’s services. On the execution date of
Earl’s employment contract, Farm’s stock had a market value of $40 per share. Six months later, when Earl’s services were
completed and the stock issued, the stock’s market value was $50 per share. Farm’s management estimated that Earl’s
services were worth $100,000 in cost savings to the company. As a result of this transaction, additional paid-in capital should
increase by

Question 17 - FIN Study Unit 14: Equity
Beck Corp. issued 200,000 shares of common stock when it began operations in Year 1 and issued an additional 100,000
shares in Year 2. Beck also issued preferred stock convertible to 100,000 shares of common stock. In Year 3, Beck
purchased 75,000 shares of its common stock and held it in treasury. At the end of Year 3, how many shares of Beck’s
common stock were outstanding?

Question 18 - FIN Study Unit 14: Equity
Clay Township owned an idle parcel of real estate consisting of land and a factory. Clay gave title to this realty to Wolf Co. as
an incentive for Wolf to establish a factory in the Township. Wolf paid nothing for this realty, which had a fair value of
$200,000 at the date of the grant. In accordance with traditional practice, Wolf should record this nonmonetary transaction as
a

Question 19 - FIN Study Unit 14: Equity
At its date of incorporation, Glean, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the
current year, Glean acquired 30,000 shares of its common stock at a price of $16 per share and accounted for them by the
cost method. Subsequently, these shares were reissued at a price of $12 per share. Glean had made no other issuances or
acquisitions of its own common stock. What effect does the reissuance of the stock have on the following accounts?

Retained Earnings | Additional Paid-in Capital

Question 20 - FIN Study Unit 14: Equity
When collectibility is reasonably assured, the excess of the subscription price over the stated value of no-par common stock subscribed should be recorded as

Question 21 - FIN Study Unit 14: Equity
If a corporation sells some of its treasury stock at a price that exceeds its cost, this excess should be

Question 22 - FIN Study Unit 14: Equity
An entity declared a cash dividend on its common stock in December Year 1, payable in January Year 2. Retained earnings
will

Question 23 - FIN Study Unit 14: Equity
Ashe Corp. was organized on January 1, with authorized capital of 100,000 shares of $20 par value common stock. During the year, Ashe had the following transactions affecting equity:

January 10 -- issued 25,000 shares at $22 a share
March 25 -- issued 1,000 shares for legal services when the fair value was $24 a share
September 30 -- issued 5,000 shares for a tract of land when the fair value was $26 a share

What amount should Ashe report for additional paid-in capital at December 31?

Question 24 - FIN Study Unit 14: Equity
Band Co. uses the equity method to account for its investment in Guard, Inc. common stock. How should Band record a 2%
stock dividend received from Guard?

Question 25 - FIN Study Unit 14: Equity
At December 31, Year 3 and Year 4, Apex Co. had 3,000 shares of $100 par, 5% cumulative preferred stock outstanding. No dividends were in arrears as of December 31, Year 2. Apex did not declare a dividend during Year 3. During Year 4, Apex paid a cash dividend of $10,000 on its preferred stock. Apex should report dividends in arrears in its Year 4 financial statements as a(n)

Question 26 - FIN Study Unit 14: Equity
Albert Co. acquired 4,000 shares of Nolan, Inc. common stock on October 20, Year 2 for $66,000. On November 30, Year 4,
Nolan distributed a 10% common stock dividend when the market price of the stock was $25 per share. On December 20,
Year 4, Albert sold 400 shares of its Nolan stock for $10,600. For the year ended December 31, Year 4, how much should
Albert report as dividend revenue?

Question 27 - FIN Study Unit 14: Equity
On May 18, Sol Corp.’s board of directors declared a 10% stock dividend. The market price of Sol’s 3,000 outstanding shares
of $2 par value common stock was $9 per share on that date. The stock dividend was distributed on July 21, when the stock’s
market price was $10 per share. What amount should Sol credit to additional paid-in capital for this stock dividend?

Question 28 - FIN Study Unit 14: Equity
On December 1, Year 4, shares of authorized common stock were issued on a subscription basis at a price in excess of par value. A total of 20% of the subscription price of each share was collected as a down payment on December 1, Year 4, with the remaining 80% of the subscription price of each share due in Year 5. Collectibility was reasonably assured. At December
31, Year 4, the equity section of the balance sheet should report additional paid-in capital for the excess of the subscription price over the par value of the shares of common stock subscribed and

Question 29 - FIN Study Unit 14: Equity
Baker Co. issued 100,000 shares of common stock in the current year. On October 1, Baker repurchased 20,000 shares of its common stock on the open market for $50.00 per share. At that date, the stock’s par value was $1.00 and the average issue price was $40.00 per share. Baker uses the cost method for treasury stock transactions. On December 1, Baker reissued the stock for $60.00 per share. What amount should Baker report as treasury stock gain at December 31?

Question 30 - FIN Study Unit 14: Equity
When an entity declares a cash dividend, retained earnings is decreased by the amount of the dividend on the date of

Question 31 - FIN Study Unit 14: Equity
Grid Corp. acquired some of its own common shares at a price greater than both their par value and original issue price but less than their book value. Grid uses the cost method of accounting for treasury stock. What is the impact of this acquisition on total equity and the book value per common share?

Total Equity | Book Value per Share

Question 32 - FIN Study Unit 14: Equity
For the last 10 years, Woody Co. has owned cumulative preferred stock issued by Hadley, Inc. During Year 2, Hadley declared and paid both the Year 2 dividend and the Year 1 dividend in arrears. How should Woody report the Year 1 dividend in arrears that was received in Year 2?

Question 33 - FIN Study Unit 14: Equity
Day Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in Year 2 for $120,000. On December 12, Year 4, Day reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in a credit to

Question 34 - FIN Study Unit 14: Equity
Cyan Corp. issued 20,000 shares of $5 par common stock at $10 per share. On December 31, Year 3, Cyan’s retained earnings were $300,000. In March Year 4, Cyan reacquired 5,000 shares of its common stock at $20 per share. In June Year 4, Cyan sold 1,000 of these shares to its corporate officers for $25 per share. Cyan uses the cost method to record treasury stock. Net income for the year ended December 31, Year 4 was $60,000. At December 31, Year 4, what amount should Cyan report as retained earnings?