The purchase of treasury stock can boost earnings per share by:

A) Increasing the number of shares outstanding.

B) Increasing profits.

C) Reducing the number of shares outstanding.

D) Decreasing the company's obligation to pay dividends.

Answer: C

Why would a corporation purchase its own stock?

A) To distribute surplus cash without paying dividends.

B) To boost earnings per share.

C) To satisfy employee stock ownership plans.

D) All of the other answer choices are correct.

Answer: D

Which of the following statements about treasury stock transactions is true?

A) Treasury stock is recorded as an asset by the acquiring company.

B) Only losses on the sale of treasury stock are recorded in the income statement.

C) Stockholders' equity is reduced when treasury stock is acquired.

D) Gains and losses on the sale of treasury stock are recorded in the income statement.

Answer: C

What would be the impact on the accounting equation when a company acquires treasury stock?

A) Increase assets and increase stockholders' equity.

B) Decrease assets and increase stockholders' equity.

C) Decrease assets and decrease stockholders' equity.

D) No effect on the accounting equation.

Answer: C

When treasury stock is resold at a price above cost:

A) A gain account is credited.

B) A loss is reported.

C) A revenue account is credited.

D) Additional Paid-in Capital is increased.

Answer: D

Which of the following is TRUE regarding the accounting for treasury stock?

A) Treasury stock is reported on the balance sheet in the equity section.

B) The purchase and sale of treasury stock has no impact on the income statement.

C) Treasury stock represents a negative equity account.

D) All of the other answer choices are correct.

Answer: D

When an investment is made in another corporation's common stock, what is the effect on total stockholders' equity?

A) Decrease.

B) Increase.

C) No effect.

D) Cannot determine from the given information.

Answer: C

Which of the following financing alternatives has the highest preference for dividends/interest payments?

A) Common Stock.

B) Preferred Stock.

C) Bonds.

D) The other answer choices have equal preference.

Answer: C

When treasury stock is acquired, what is the effect on total stockholders' equity?

A) Decrease.

B) Increase.

C) No effect.

D) Cannot determine from the given information.

Answer: A

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