21. Under what condition can a contingent liability be recorded in a journal entry?

A. When the likelihood of an actual loss is remote.

B. When the likelihood of a loss is reasonably possible.

C. When the likelihood of a loss is probable.

D. Never.

22. What is paid-in capital?

A. Investments by the owners of a corporation

B. Investments by the creditors of a corporation

C. Undistributed profits

D. All of the above

23. Which of the following is true regarding retained earnings?

A. It is classified as a liability on the Balance Sheet.

B. It does not appear on either the Balance Sheet or Income Statement.

C. It represents undistributed profits.

D. It represents investments by the owners of a corporation.

24. Which of the following would be recorded when a company issues 55,000 shares of no-par common stock for $13.50 per share?

A. cr. APIC (additional paid-in capital) for $742,500

B. cr. Common Stock for $742,500

C. cr. Cash for $742,500

D. dr. APIC (additional paid-in capital) for $742,500

25. Which of the following is true about dividends?

A. Dividends are a distribution of cash to the shareholders.

B. When cash dividends are paid, both assets and equity decrease.

C. Dividends decrease retained earnings.

D. All of the above.