Wk 4 Wiley Plus True and False Questions

Topics: Stock market, Stock, Generally Accepted Accounting Principles Pages: 6 (1039 words) Published: August 13, 2013
Week 4 Wiley True/False & Multiple Choice
Copyright © 2010 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 7/e Type True/False in the box provided

1. The cost method derives its name from the fact that the Treasury Stock account is maintained at the cost of shares purchased.

TRUE|

2. When treasury stock is sold for an amount greater than cost, the difference should be credited to Gain on Sale of Treasury Stock and reported as other income on the Income Statement.

FALSE|

3. Stockholders’ liability is generally unlimited; therefore, creditors have recourse to stockholders’ personal assets as well as corporate assets.

FALSE|

4. Retained earnings is net income retained in a corporation and is often referred to as earned capital.

TRUE|

5. A corporation is bound to a contract entered into by one of its stockholders.

FALSE|

6. Issued shares of stock less outstanding shares equals treasury stock.

TRUE|

7. The cumulative feature of stock only applies to preferred stock.

TRUE|

8. Dividends in arrears are not considered a liability because no obligation exists until the dividend is declared by the board of directors.

TRUE|

9. A prior period adjustment always includes a credit to Retained Earnings.

FALSE|

10. Three important dates relating to cash dividends are: date of declaration, date of record, and date of payment.

TRUE|

11. To be considered a short-term investment, the investment must be readily marketable and management should intend to convert the investment into cash within the next year or operating cycle, whichever is longer.

TRUE|

12. Accounting for short-term investments involves entries for the acquisition, interest and dividend revenue, and the sale.

TRUE|

13. The accounting guidelines for long-term investments in stock are based on the extent of the investor’s influence over the operating affairs of the issuing corporation.

TRUE|

14. Under the equity method of accounting, the investment account is credited for the investor’s share of investee earnings and is debited for dividends received from the investee.

FALSE|

15. A parent/subsidiary relationship exists only when the parent company has a controlling interest in the subsidiary company.

TRUE|

16. Consolidated financial statements are useful to parent company stockholders and managers because they indicate the magnitude and scope of operations of the companies under common control.

TRUE|

17. The Market Adjustment balance could be added to the cost of the investments to arrive at their fair value.

TRUE|

18. Under the fair value method, companies report the unrealized gain in the income statement for available-for-sale securities.

FALSE|

19. Companies report both realized and unrealized gains and losses on trading securities in the income statement.

TRUE|

20. The consolidated income statement shows only revenue and expense transactions between the consolidated entity and companies and individuals who are outside the affiliated group.

TRUE|

Multiple Choice – Place the correct answer in the box provided

1. Par value
a. represents what a share of stock is worth.
b. represents the original selling price for a share of stock. c. is the legal capital established for a share of stock.
d. is established for a share of stock after it is issued.

C|

2. If a company has 900,000 shares of common stock authorized, and has 750,000 shares issued, and holds 30,000 shares of common stock as treasury stock, the general ledger account for common stock, $1 par value would have a balance of a. $870,000.

b. $750,000.
c. $720,000.
d. $150,000.

B|

3. A company purchases 1,500 shares of its $25 par value stock at $35 per share. It then reissues 500 shares at $40 per share. The entry upon reissue of the stock would include a credit to
a. Cash for $2,500.
b. Treasury Stock for $2,500....
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • ACC 421 Final Exam Wiley Plus Essay
  • wiley plus Essay
  • True or False Essay
  • Essay on Management: True-False Questions
  • ACC 561 Assignment Wiley Plus Week 4 Research Paper
  • Acc 291 Wiley Plus E 11-1, 11-15 Ect.. Essay
  • Strategic Management: True or False Questions Essay
  • Decision Making and True/false Question Essay

Become a StudyMode Member

Sign Up - It's Free