1.

Analysis reveals that a company had a net increase in cash of $20,000 for the current
year. Net cash provided by operating activities was $18,000; net cash used in investing
activities was $10,000 and net cash provided by financing activities was $12,000. If the
year-end cash balance is $24,000, the beginning cash balance was:

A.
B.
C.
D.
E.
2.

$4,000.
$16,000.
$44,000.
$40,000.
$39,000.
Addams Corporation paid cash dividends totaling $75,000 during its most recent fiscal
year. How should this information be reported on Addam's statement of cash flows?

A.
B.
C.
D.
E.

4.

In operating activities as a source of funds.

In investing activities as a source of funds.
In investing activities as a use of funds.
In financing activities as a source of funds.
In financing activities as a use of funds.

Investing activities do not include the:

A.
B.
C.
D.
E.

Purchase of plant assets.

Lending and collecting on notes receivable.
Issuance of common stock.
Sale of plant assets.
Sale of short-term investments other than cash equivalents.

5.

The appropriate section in the statement of cash flows for reporting the issuance of
common stock for cash is:

A.
B.
C.
D.
E.

Operating activities.
Financing activities.
Investing activities.
Schedule of noncash investing or financing activity.
This is not reported on the statement of cash flows.

6. A company's board of directors votes to declare a cash dividend of $1.00 per share on its
12,000 common shares outstanding. The journal entry to record the declaration of the cash
dividend is:

A.
Debit Dividend Expense $12,000; credit Cash $12,000.
B. Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C. Debit Common Dividend Payable $12,000; credit Cash $12,000.
D. Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E. Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.
7. Global Corporation had 50,000 shares of $20 par value common stock outstanding on July
1. Later that day the board of directors declared a 10% stock dividend when the market
value of each share was $27. The entry to record this dividend is:

A. Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable

$135,000.
B.
Debit Retained Earnings $135,000; credit Cash $135,000.
C. Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable
$100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.
D. Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable
$100,000.
E.
No entry is made until the stock is issued.

8.

9.

A liability for dividends exists:

A.
When cumulative preferred stock is sold.
B.
On the date of declaration.
C.
On the date of record.
D.
On the date of payment.
E.
For dividends in arrears on cumulative preferred stock.
A corporation issued 6,000 shares of its $2 par value common stock in exchange for
land that has a market value of $84,000. The entry to record this transaction would
include:

A.
A debit to Common Stock for $12,000.
B.
A debit to Land for $12,000.
C.
A credit to Land for $12,000.
D. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $72,000.
E.
A credit to Common Stock for $84,000.
10. Retained earnings:

A. Generally consists of a company's cumulative net income less any net losses and
dividends declared since its inception.
B. Can only be appropriated by setting aside a cash fund.
C. Represent an amount of cash available to pay shareholders.
D. Are never adjusted for anything other than net income or dividends.
E. Represents the amount shareholders are guaranteed to receive upon company
liquidation.
11.

The costs of bringing a corporation into existence, including legal fees, promoter fees,
and amounts paid to obtain a charter are called:

A.
B.
C.
D.
E.

Minimum legal capital.

Stock subscriptions.
Organization expenses.
Selling expenses.
Prepaid fees.

12.

Par value of a stock refers to the:

A.
B.
C.
D.
E.
13.

Issue price of the stock.

Value assigned per share by the corporate charter.
Market value of the stock on the date of the financial statements.
Maximum selling price of the stock.
Dividend value of the stock.

A corporation issued 100 shares of its $5 par value common stock in payment of a
$1,800 charge from its accountant for assistance in filing its charter with the state.
The entry to record this transaction will include:

A.
A $1,800 credit to Common Stock.
B.
A $300 debit to Organization Expenses.
C. A $1,300 credit to Paid-in Capital in Excess of Par Value, Common Stock.
D.
A $1,800 debit to Legal Expenses.
E.
A $1,800 credit to Cash.
14.

15.

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000
shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The
journal entry to record the payment of the dividend is:

A. Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.

B. Debit Common Dividends Payable $104,500; credit Cash $104,500.
C. Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
D. Debit Common Dividends Payable $100,100; credit Cash $100,100.
E. Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
A company's board of directors votes to declare a cash dividend of $1.00 per share on
its 12,000 common shares outstanding. The journal entry to record the payment of
the cash dividend is:

A.
Debit Dividend Expense $12,000; credit Cash $12,000.
B. Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C. Debit Common Dividend Payable $12,000; credit Cash $12,000.
D. Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E. Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

16.

On September 1, Ziegler Corporation had 50,000 shares of $5 par value common

stock, and $1,500,000 of retained earnings. On that date, when the market price of
the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general
journal entry to record this transaction is:

A. Debit Retained Earnings $750,000; credit Common Stock Split Distributable

$750,000.
B. Debit Retained Earnings $750,000; credit Common Stock $750,000.
C. Debit Retained Earnings $250,000; credit Common Stock $250,000.
D. Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.
E.
No entry is made for this transaction.