Multiple Choice Questions

1. Lucas Foods has outstanding 600 shares of 7% preferred stock, $100 par value, and 1,600 shares of common stock, $30 par value. Lucas declares dividends of $15,800. The correct entry is:

2. A corporation has 40,000 shares of 10% preferred stock outstanding. Also, there are 40,000 shares of common stock outstanding. Par value for each is $100. If a $500,000 dividend is paid, how much goes to the preferred stockholders?

a. None

b. $400,000

c. $50,000

d. $380,000

e. $500,000

3. Assume the same facts as in question 70. What is the amount of dividends per share on common stock?

a. $1.00

b. $5.50

c. $2.50

d. $12.50

e. None of these

4. Which of the following is not true about a 10% stock dividend?

a. The market value of the stock is needed to record the stock dividend.

b. Total stockholders equity remains the same.

c. Paid-in Capital increases.

d. Retained Earnings decreases.

e. Par value decreases.

5. A company declares a 5% stock dividend. The debit to Retained Earnings is an amount equal to

a. The excess of the market price over the original issue price of the shares to be issued.

b. The market value of the shares to be issued.

c. The par value of the shares to be issued.

d. The book value of the shares to be issued.

6. Which of the following statements is not true about a 3-for-1 stock split?

a. The market price of each share of stock will decrease.

b. Total stockholders equity increases.

c. A stockholder with 10 shares before the split owns 30 shares after the split.

d. Par value is reduced to one-third of what it was before the split.

e. Retained Earnings remains the same.

7. Antonio Company’s net income and interest expense are $27,000 and $3,000, respectively, and average total assets are $600,000. How much is Antonio’s return on assets?

a. 5.0%

b. 4.5%

c. 6.2%

d. 4.0%

Transcribed Image Text:

Dividends Payable, Preferred 4,200 a. Dividends Payable, Common 11,600 Cash 15,800 b. Dividends Expense 15,800 15,800 Cash c. Retained Earnings 15,800 4,200 Dividends Payable, Preferred Dividends Payable, Common 11,600 d. Retained Earnings 15,800 7,900 Dividends Payable, Preferred 7,900 Dividends Payable, Common