A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?

A) Debit Preferred Stock $5,000.

B) Credit Cash $5,000.

C) Credit Preferred Stock $5,000.

D) Credit Additional Paid-In Capital $4,000.

Answer: D

Which of the following has the lowest expected return to the investor?

A) Bonds.

B) Preferred Stock.

C) Common Stock.

D) They all have similar expected returns.

Answer: A

Which of the following is not a potential feature of preferred stock?

A) Convertible.

B) Redeemable.

C) Cumulative.

D) They all are potential features of preferred stock.

Answer: D

Hayes Corporation issues 100 shares of its $1 par value common stock for $15 per share. The entry to record the issuance will not 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 the other answer choices are correct.

Answer: D

Which of the following is the most likely to have voting rights?

A) Common Stock.

B) Preferred Stock.

C) Bonds.

D) They all have similar voting rights.

Answer: A

Preferred stock:

A) Is always recorded as a liability.

B) Is always recorded as part of stockholders' equity.

C) Can have features of both liabilities and stockholders' equity.

D) Is not included in either liabilities or stockholders' equity.

Answer: C

Wright Inc. issued 20,000 shares of $1 par value common stock for $80,000. The journal entry to record this issuance includes a:

A) Credit to Common Stock for $80,000.

B) Debit to Additional Paid-In Capital for $60,000.

C) Credit to Cash for $80,000.

D) Credit to Common Stock for $20,000.

Answer: D

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share. What is true about the journal entry to record the issuance?

A) Credit Common Stock $300,000.

B) Credit Cash $300,000.

C) Credit Common Stock $15,000.

D) Debit Additional Paid-In Capital $285,000.

Answer: C

Which of the following has the highest expected return to the investor?

A) Common Stock.

B) Preferred Stock.

C) Bonds.

D) They all have similar expected returns.

Answer: A

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance?

A) Debit Common Stock $10,000.

B) Credit Cash $50,000.

C) Credit Common Stock $50,000.

D) Credit Additional Paid-In Capital $40,000.

Answer: D

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.

Answer: D

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 Additional Paid-in Capital for $250,000.

D) A credit to Common Stock for $25,000.

Answer: D

If a company issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting equation?

A) Increase assets and increase liabilities.

B) Increase assets and increase revenue.

C) Increase assets and increase stockholders' equity.

D) Increase assets and decrease stockholders' equity.

Answer: C

If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

A) Treasury Stock

B) Cash

C) Additional Paid-in Capital

D) Retained Earnings

Answer: C

The correct order from the smallest number of shares to the largest number of shares is:

A) Authorized, issued, and outstanding.

B) Outstanding, issued, and authorized.

C) Issued, outstanding, and authorized.

D) Issued, authorized, and outstanding.

Answer: B

If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

A) Treasury Stock

B) Cash

C) Additional Paid-in Capital

D) Retained Earnings

Answer: C

The correct order from the smallest number of shares to the largest number of shares is:

A) Authorized, issued, and outstanding.

B) Outstanding, issued, and authorized.

C) Issued, outstanding, and authorized.

D) Issued, authorized, and outstanding.

Answer: B

Outstanding common stock specifically refers to:

A) Stock that is performing well.

B) Stock that has been authorized for issuance.

C) Stock issued plus treasury stock.

D) Stock in the hands of stockholders.

Answer: D

Advantages of the corporate form of business include which of the following?

I. Double taxation

II. Ability to raise capital

III. Ability to transfer ownership

IV. More paperwork

V. Limited liability

A) II.

B) II., III., V.

C) I., II., III.

D) II., IV., V.

Answer: B

Which of the following statements regarding the corporate form of business is correct?

A) The disadvantages are that generating capital is difficult and that owners have limited liability.

B) Disadvantages are that the business is subject to government regulations and double taxation on its income.

C) One disadvantage is that ownership is easy to transfer.

D) All of the other answer choices are correct.

Answer: B

The articles of incorporation describe:

A) The nature of the firm's business activities.

B) The shares of stock to be issued.

C) The initial board of directors.

D) All of the other answer choices are correct.

Answer: D