BusinessAccounting2Test

School: Polytechnic University of the Philippines - Course: BSBA 0000 - Subject: Accounting

Multiple Choice1.Acorporationhasthefollowing account balances:Common stock, P1 par value,P30,000; Paid-in Capital inExcessofParValue,P1,350,000. Based on thisinformation, thea. legal capital is P1,380,000.b. number of shares issued are30,000.c.number of shares outstanding are1,380,000.d. average price per shareissued is P4.60.Ans. b2.The authorized stock of acorporationa. only reflects the initial capitalneeds of the company.b. is indicated in its by-laws.c. is indicated in its charter.d. must be recorded in a formalaccounting entry.Ans. c3.Retained earningsa. is unique to the corporate form ofbusiness.b. is an optional account in thepartnership form of business.c. reflects cash paid in byshareholders to date.d. is closed at the end of theyear.Ans. a4.Dividends are declared out ofa. Capital Stock.b. Paid-in Capital in Excess of ParValue.c. Retained Earnings.d. Treasury Stock.Ans. c5.Retained earnings isa. always equal to the amount ofcash that thecorporation hasgenerated from operations.b. a part of the paid-in capital of thecorporation.c. a part of the stockholders' claimon the total assetsof thecorporation. d. closed at the end of each accounting period. Ans. c 6.When stock is issued for legal services, the transaction is recorded by debiting Organization Expense for the a. stated value of the stock. b. par value of the stock c. market value of the stock. d. book value of the stock. Ans. c 7.If Vickers Company issues 2,000 shares of P5 par value common stock for P140,000, a. Common Stock will be credited for P140,000. b. Paid-In Capital in Excess of Par Value will be credited for P10,000 c. Paid-In Capital in Excess of Par Value will be credited for P130,000 d. Cash will be debited for P130,000. Ans. c 8.If stock is issued for a non cash asset, the asset should be recorded on the books of the corporation at a. fair market value. b. cost. c. zero. d. a nominal amount. Ans. a 9.If stock is issued for less than par value, the account a. Paid-In Capital in Excess of Par Value is credited b. Paid-In Capital in Excess of Par Value is debited if a debit balance exists in the account. c. Paid-In Capital in Excess of Par Value is debited if a credit balance exists in the account. d. Retained Earnings is credited. Ans. c 10.The sale of common stock below par a. is a common occurrence in most states.

b. is not permitted in moststates.c. is a practice that mostshareholders encourage.d. requires that a liability be recordedfor the difference between the salesprice and the par value of theshares.Ans. b11.Paid-In Capital in Excess ofStated Valuea. is credited when no-par stockdoes not have a stated value.b. is reported as part of paid-incapital on the balance sheet.c. represents the amount of legalcapital.d. normally has a debit balance.Ans. b12.A separate paid-in capitalaccount is used to record each of thefollowing except the issuance ofa. no-par stock.b. par value stock.c. stated value stock.d. treasury stock above cost.Ans. a13.Becker Company is a publiclyheld corporation whose P1 par valuestock is actively traded at P20 pershare. The company issued 2,000shares of stock to acquire landrecentlyadvertised at P50,000.When recording this transaction,Becker Company willa. debit Land for P50,000.b. credit Common Stock forP40,000.c. debit Land for P40.000.d. credit Paid-In Capital in Excess ofPar Value for P48.000.Ans. c14.If Kiner Company issues 1,000shares of P5 par value commonstock for P70,000, the accounta. Common Stock will be credited forP5,000.b. Paid-in Capital in Excess of ParValue will be credited for P5,000.c. Paid-in Capital in Excess of ParValue will be credited for P70,000. d.Cash will be debited for P65,000. Ans. a 15.Jansen Packaging Corporation began business in 2008 by issuing 40,000 shares of P5 par common stock for P8 per share and 10,000 shares of 6%, P10 par preferred stock for par. At year end the common stock had a market value of P10. On its December 31, 2008 balance sheet, Jansen Packaging would report a. Common Stock of P400,000. b. Common Stock of P200.000 c. Common Stock of P320,000. d. Paid-In Capital of P300,000. Ans.b 16.Kim, Inc. issued 5,000 shares of stock at a statedvalue of P10/share. The total issue of stock sold for P15/share. The journal entry to record this transaction would include a a. debit to Cash for P50,000. b. credit to Common Stock for P50,000. c. credit to Paid-in Capital in Excess of Par Value for P25,000. d. credit to Common Stock for P75,000. Ans. b 17.Rebel Inc. issued 2,000 shares of no-par common stock with a stated value of P3 per share. The market price of the stock on the date of issuance was P12 per share. The entryto record this transaction includes a a. debit to Cash for P6,000. b. credit to Common Stock for P24,000. c. credit to Common Stock for P6,000. d. debit to Paid-in Capital in Excess of Par Value for P24,000. Ans. c 18.Rancho Corporation sold 100 shares of treasury stock for P40 per