Question : 51.The term paid-in capital means: A. All assets other than retained earnings. B. Legal : 1237470

 

 

51.The term paid-in capital means:   

A. All assets other than retained earnings.

 

B. Legal capital plus retained earnings.

 

C. Total stockholders’ equity minus retained earnings.

 

D. Legal capital minus retained earnings.

 

 

 

 

52.Which of the following best describes retained earnings?   

A. Cash available for dividends.

 

B. The amount initially invested in the business by stockholders.

 

C. Cash available for expansion and growth.

 

D. Income that has been reinvested in the business rather than distributed as dividends to stockholders.

 

 

 

 

53.Which of the following would usually be the greatest amount?   

A. The number of shares authorized.

 

B. The number of shares issued.

 

C. The number of shares outstanding.

 

D. The number of shares of Treasury Stock.

 

 

 

 

54.Which of the following best describes the relationship between revenue and retained earnings?   

A. Revenue increases net income, which in turn increases retained earnings.

 

B. Revenue represents a cash receipt; retained earnings is an element of stockholders’ equity.

 

C. Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends.

 

D. Retained earnings is equal to assets minus expenses.

 

 

 

 

55.If a corporation has only common stock outstanding, which of the following constitutes legal capital at a particular date?   

A. The amount in the Common Stock account.

 

B. The sum of the Common Stock account and any additional paid-in capital.

 

C. The total amount of stockholders’ equity.

 

D. The sum of the Common Stock account and retained earnings.

 

 

 

 

56.The entry to record the issuance of common stock at a price above its par value includes:   

A. A credit to Cash.

 

B. A credit to a liability account for the difference between the price paid by the stockholders and the par value of the stock.

 

C. A credit to Additional Paid-in Capital: Common Stock.

 

D. A debit to Common Stock.

 

 

 

 

57.When a corporation issues capital stock at a price higher than the par value:   

A. The amount received over par value increases retained earnings.

 

B. The entire issue price is credited to the Capital Stock account.

 

C. The amount received in excess of par value constitutes profit to the issuing corporation.

 

D. The amount received in excess of par value becomes part of paid-in capital.

 

 

 

 

58.When no-par stock is issued:   

A. The entire amount received is credited to the Additional Paid-in Capital account.

 

B. The issue price is credited to the Capital Stock account.

 

C. There is no legal capital created because there is no par or stated value.

 

D. The transaction usually involves only an exchange for non-cash assets or services, since the stock has no value on the stock exchanges.

 

 

 

 

59.Zigma Corporation is authorized to issue 2,000,000 shares of $4 par value capital stock. The corporation issued half the stock for cash at $8 per share, earned $336,000 during the first three months of operation, and declared a cash dividend of $60,000. The total paid-in capital of Zigma Corporation after three months of operation is:   

A. $7,940,000.

 

B. $8,000,000.

 

C. $8,276,000.

 

D. $8,336,000.

$1,000,000 × $8 = $8,000,000

 

 

 

60.Thurman Corporation issued 450,000 shares of $.50 par value capital stock at its date of incorporation for cash at a price of $4 per share. During the first year of operations, the company earned $100,000 and declared a dividend of $40,000. At the end of this first year of operations, the balance of the Common Stock account is:   

A. $1,800,000.

 

B. $1,860,000.

 

C. $225,000.

 

D. $1,820,000.

$450,000 × $0.50 = $225,000