21. Hayes Corporation issues 100 shares of its $1 par value common stock for $15 per share. The entry to record the issuance will not include a:
A. Debit to Cash $1,500.
B. Credit to Additional Paid-In Capital $1,400.
C. Credit to Common Stock of $100.
D. All of the other options would be included.
22. Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to:
A. Dividends and voting rights.
B. Par value and dividends.
C. The preemptive right and voting rights.
D. Dividends and distribution of assets if the corporation is dissolved.
23. Preferred stock:
A. is always recorded as a liability.
B. is always recorded as part of stockholders’ equity.
C. can have features of both liabilities and stockholders’ equity.
D. is not included in either liabilities or stockholders’ equity.
24. Which of the following financing alternatives has the highest preference of payment in a case where the company liquidates its assets?
A. Common Stock.
B. Preferred Stock.
C. Bonds.
D. They have equal preference.
25. Which of the following is not a potential feature of preferred stock?
A. Convertible.
B. Redeemable.
C. Cumulative.
D. They all are potential features of preferred stock.
26. Which of the following has the highest expected return to the investor?
A. Common Stock.
B. Preferred Stock.
C. Bonds.
D. They all have similar expected returns.
27. A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?
A. Debit Preferred Stock $5,000.
B. Credit Cash $5,000.
C. Credit Preferred Stock $5,000.
D. Credit Additional Paid-In Capital $4,000.
28. The Surf’s Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2011. All remaining shares are common stock. The company was not able to pay dividends in 2011, but plans to pay dividends of $18,000 in 2012. Assuming the preferred stock is cumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?
A. $6,000 to preferred stockholders and $12,000 to common stockholders.
B. $18,000 to preferred stockholders and $0 to common stockholders.
C. $12,000 to preferred stockholders and $6,000 to common stockholders.
D. $9,000 to preferred stockholders and $9,000 to common stockholders.
29. The Surf’s Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2011. All remaining shares are common stock. The company was not able to pay dividends in 2011, but plans to pay dividends of $18,000 in 2012. Assuming the preferred stock is noncumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?
A. $6,000 to preferred stockholders and $12,000 to common stockholders.
B. $18,000 to preferred stockholders and $0 to common stockholders.
C. $12,000 to preferred stockholders and $6,000 to common stockholders.
D. $9,000 to preferred stockholders and $9,000 to common stockholders.
30. California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2011. All remaining shares are common stock. The company was not able to pay dividends in 2011, but plans to pay dividends of $100,000 in 2012. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?
A. $40,000 to preferred stockholders and $60,000 to common stockholders.
B. $80,000 to preferred stockholders and $20,000 to common stockholders.
C. $20,000 to preferred stockholders and $80,000 to common stockholders.
D. $100,000 to preferred stockholders and $0 to common stockholders.
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