SHE MCQ

1. Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000 Paid-in Capital in Excess of Par—Common Stock 550,000 Preferred 8 1/2% Stock, $50 par 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock S tock 400,000 Retained Earnings 1,500,000 Treasury Common Stock (at cost) 150,000 The total paid-in capital (cash collected) related to the common stock is A. $4,300,000. C. $4,850,000 $4,850,000.. B. $5,250,000. D. $4,700,000. 2. Sei-san Corporation issued 200,000 ordinary shares when it began operations in 2008 and issued an additional 100,000 ordinary ordinary shares in 2009. O Sei-san also issued preference share capital convertible to 100,000 ordinary shares. In 2011, O Sei-san purchased 75,000 ordinary shares and held as treasury. At December 31, 2011, how many shares of O Sei- san’s ordinary shares were outstanding? A. 400,000 C. 325,000 B. 300,000 D. 225,000 3. Negros Company was incorporated on January 1, 2011, with the following authorized capitalization: 200,000 ordinary shares, no par, stated value P100 per share. 200,000 preference shares, 10%, par value P50 per share. During 2011 Negros issued 150,000 ordinary shares for a total of P18,000,000 and 50,000 preference shares at P60 per share. In addition, on December 15, 2011, subscriptions for 20,000 preference shares were taken at a purchase price of P100. These subscribed shares were paid for on January 15, 2012. Net income for 2007 was P5,000,000. What should Negros report as total contributed capital on its December 31, 2011 balance sheet? A. 28,000,000 C. 21,000,000 B. 23,000,000 D. 26,000,000 4. Gannon Company acquired 6,000 shares of its own common stock at $20 per share on February 5, 2006, and sold 3,000 of these shares at $27 per share on August 9, 2007. The market value of Gannon's common stock was $24 per share at December 31, 2006, and $25 per share at December 31, 2007. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2007 to record the sale of 3,000 shares? A. Treasury Stock for $81,000. B. Treasury Stock for $60,000 and Paid-in Capital from Treasury Stock for $21,000. C. Treasury Stock for $60,000 and Retained Earnings for $21,000. D. Treasury Stock for $72,000 and Retained Earnings for $9,000. 5. An analysis of stockholders' equity of Jinn Corporation as of January 1, 2007, is as follows: Common stock, par value $20; authorized 100,000 shares; issued and outstanding outstandi ng 90,000 shares $1,800,000 Paid-in capital in excess of par 900,000 Retained earnings 760,000 Total $3,460,000 Jinn uses the cost method of accounting for treasury stock and during 2007 entered into the following transactions: Acquired 2,500 shares of its stock for $75,000.

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Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury shares at $20 per share. Assuming no other equity transactions occurred during 2007, what should Jinn report at December 31, 2007, as total additional paid-in capital? A. $895,000 C. $900,000 B. $905,000 D. $915,000 6. In 2010, Cee Corporation issued 50,000 shares P10 par value capital for P100 per share. In 2011, Cee acquired 2,000 of its shares at P150 per share and immediately canceled these 2,000 shares. In connection with the retirement of these 2,000 shares, Cee should debit Share premium Retained earnings A. 20,000 280,000 B. 100,000 180,000 C. 180,000 100,000 D. 280,000 0 7. HSV Corporation’s shareholders’ equity accounts at January 1, 2011 were as follows: Share capital, P20 par 8,000,000 Share premium 2,550,000 Retained earnings 1,275,000 All shares outstanding at January 1, 2011 were issued in 2008 for P26 a share. On January 4, 2011, HSV reacquired 20,000 shares at P24 a share and retired them. Immediately after the shares were retired, the balance in the “share premium” would be

A. 2,430,000 B. 2,510,000

C. 2,470,000 D. 2,590,000

8. Nerve Company was organized on January 1, 2010. On that date it issued 200,000 shares at P15 per share (400,000 shares was authorized). During the period January 1, 2010, through December 31, 2011, Nerve reported net income of P750,000 and paid cash dividends of P380,000. On January 5, 2011, Nerve purchased 12,000 treasury shares at P12 per share. On December 31, 2011, 8,000 treasury shares were sold at P8 per share and retired the remaining 4,000 shares. What is the total shareholders’ equity on December 31, 2011?

A. 3,290,000 B. 3,338,000

C. 3,306,000 D. 3,370,000

9. Cyan Corp. issued 20,000 shares of $5 par common stock at $10 per share. On December 31, 20 10, Cyan's retained earnings were $300,000. In March 2011, Cyan reacquired 5,000 shares of its common stock at $20per share. In June 20] 1, 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. 2011, was $60,000. At December 31, 2011, what amount should Cyan report as retained earnings? A. $360,000 C. $365,000 B. $375,000 D. $380,000 10. Long Co. had 100,000 shares of common stock issued and outstanding at January 1,2011. During 2011, 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.

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In Long's statement of stockholders' equity for 2011, what amount should Long report as dividends? A. $ 50,000 C. $100,000 B. $850,000 D. $950,000 11. The following stock dividends were declared and distributed by Sol Corp.: Percentage of common share outstanding at declaration date Fair value 10 $15,000 28 40,000

Par Value $10,000 30,800

What aggregate amount should be debited to retained earnings for these' stock dividends? A. $40,800 C. $45,800 B. $50,000 D. $55,000 12. Vittly Corporation owned 900,000 shares of Nixon Corporation stock. On December 31, 2007, when Vittly's account "Investment in Common Stock of Nixon Corporation" had a carrying value of $5 per share, Vittly distributed these shares to its stockholders as a dividend. Vittly originally paid $8 for each share. Nixon has 3,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Nixon share was $7 on the declaration date and $9 on the distribution date. What would be the reduction in Vittly's stockholders' equity as a result of the above transactions? A. $3,600,000. C. $4,500,000. B. $7,200,000. D. $8,100,000. 13. Gonzalez Company has 350,000 shares of $10 par value common stock outstanding. During the year, Gonzalez declared a 10% stock dividend when the market price of the stock was $30 per share. Four months later Gonzalez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by A. $1,242,500. C. $525,000. B. $192,500. D. $175,000. 14. On June 30, 2007, when Vietti Co.'s stock was selling at $65 per share, its capital accounts were as follows: Capital stock (par value $50; 60,000 shares issued) $3,000,000 Premium on capital stock 600,000 Retained earnings 4,200,000 If a 100% stock dividend were declared and distributed, capital stock would be A. $3,000,000. C. $3,600,000. B. $6,000,000. D. $7,800,000. 15. The stockholders' equity section of Lawton Corporation as of December 31, 2006, was as follows: Common stock, par value $2; authorized 20,000 shares; issued and outstanding 10,000 shares $ 20,000 Paid-in capital in excess of par 30,000 Retained earnings 75,000 $125,000 On March 1, 2007, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2007, the fair market value of the stock was $6 per share. For the two months ended February 28, 2007, Lawton sustained a net loss of $10,000. What amount should Lawton report as retained earnings as of March 1, 2007?

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A. $56,000. B. $66,000.

C. $62,000. D. $72,000.

16. Effective April 1, 2011, the shareholders of Harville Company approved a two-for-one split of the company’s share capital, and an increase in authorized shares from 100, 000 shares (par value P20 per share) to 200,000 shar es (par value P10). Harville’s shareholders’ equity accounts immediately before

issuance of the share split shares were as follows: Share capital, par value P20; 100,000 shares authorized; 50,000 shares outstanding Share premium (P3 per share on issuance) Retained earnings

1,000,000 150,000 1,350,000

What should be the balance in Harville’s share premium and retained e arnings accounts

immediately after the share split is effected? Additional paid-in-capital Retained earnings A. 500,000 B. 150,000 350,000 C. 150,000 1,350,000 D. 1,150,000 350,000 17. On January 1, 2011, Lexter Corporation granted an employee an option to purchase 20,000 ordinary shares with P5 par value at P20 per share. The option became exercisable on December 31, 2012, after the employee completed two years of service. The fair value of the stock option is P15. The option was exercised on January 10, 2013. The share prices were as follows: January 1, 2011 30 December 31, 2012 50 January 10, 2013 60 For 2011, Lexter shall recognize compensation expense of A. 150,000 C. 100,500 B. 300,000 D. 400,000 18. On January 1, 2011, Rex Company granted shares options to key employees for the purchase of 40,000 shares of the company’s share capital at P25 per share. The options are intended to compensate

employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2013 by grantees still in the employ of the c ompany. The market price of Rex’s share was P40 at the date of grant. The fair value of each stock option is P20. No share options were terminated during the year. What amount should Rex charge to compensation expense for the year ended December 31, 2011? A. 600,000 C. 300,000 B. 800,000 D. 400,000 19. On January 1, 2011, Exelsior Company offered its chief executive officer share appreciation rights with the following terms: Predetermined price on January 1, 2011 P100 per share Number of shares 10,000 shares Service period 3 years Exercise date December 31, 2013 The share appreciation rights are exercised on December 31, 2013. The quoted price per share is as follows:

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January 1, 2011 December 31, 2011 December 31, 2012 December 31, 2013

100 118 112 124

What is the compensation expense that should be recognized for the year 2012? A. 160,000 C. 60,000 B. 80,000 D. 20,000 20. Hoyt Corporation’s current balance sheet reports the following stockholders’ equity: 5% cumulative preferred stock, par value P100 per share; 25,000 shares issued and outstanding 2,500,000 Common stock, par value P35 per share, 100,000 shares issued and outstanding 3,500,000 Additional paid-in capital 1,250,000 Retained earnings 3,000,000 Dividends in arrears on the preferred stock amount to P250,000. If Hoyt were to be liquidated, the preferred stockholders would receive par value plus a premium of P500,000. The book value per share of common stock is A. 77.50 C. 75.00 B. 72.50 D. 70.00 21. Boe Corporation stockholders’ equity at December 31, 2007 was as follows: 6% noncumulative preferred stock, P100 par (liquidation value P105 per share) 1,000,000 Common stock, P100 par 3,000,000 Retained earnings 950,000 Preferred dividends have been paid up to December 31, 2007. At December 31, 2007, Boe’s book

value per common share was A. 131.70 B. 129.70

C. 130.00 D. 128.00

22. Gaza Company has an authorized capital of 10,000 shares of P100 par, 8% cumulative preferred stock and 100,000 shares of P10 par common. The equity balance at December 31, 2007 are: Preferred stock 500,000 Common stock 900,000 Additional paid-in capital 90,000 Retained earnings 138,000 Treasury stock, common 1,000 shares, at cost ( 20,000) 1,608,000 Dividends on preferred are on arrears for the year 2007. What should be the book value on the common stock per share? A. 12.00 C. 11.87 B. 18.08 D. 12.45

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