1.

The board of directors for the Blank Corporation declares a $1 per share cash dividend on
April 1, Year One, to be paid to owners of record on April 17, Year One, with the checks being
distributed on April 29, Year One. Prior to April 1, the company had issued 100,000 shares of
common stock but held 10,000 treasury shares. Another 10,000 shares were repurchased on
April 25, Year One. On what date should the company decrease its working capital as a result
of this dividend?
A April 1, Year One
B April 17, Year One
C April 25, Year One
D April 29, Year One
2. The board of directors for the Carson Corporation declares a $1 per share cash dividend on
April 1, Year One, to be paid to owners of record on April 17, Year One, with the checks being
distributed on April 29, Year One. Prior to April 1, the company had issued 100,000 shares of
common stock but held 10,000 treasury shares. Another 10,000 shares were repurchased on
April 4, Year One. What is the decrease in retained earnings created by this dividend?
A -0B $80,000
C $90,000
D $100,000
3. The board of directors for the Denton Corporation declares a $1 per share cash dividend on
April 1, Year One, to be paid to owners of record on April 17, Year One, with the checks being
distributed on April 29, Year One, and received by the owners on May 3, Year One. Ms. Jones
owns 1,000 shares of this stock. On what date will she record dividend revenue of $1,000?
A April 1, Year One
B April 17, Year One
C April 29, Year One
D May 3, Year One
4. The Braxton Company has 100,000 common shares issued and outstanding. This stock was
issued several years ago at a price above the $10 per share par value. During the current
year, the board of directors declared a 5 percent stock dividend so that 5,000 new shares
were issued to the stockholders when the price of the stock was $26 per share. As a result of
this dividend, what reduction was recorded in the reported amount of retained earnings?
A -0B $50,000
C $80,000
D $130,000
5. The Monroe Corporation has 100,000 common shares issued and outstanding. This stock
was issued several years ago at a price above the $10 per share par value. During the
current year, the board of directors declared a 30 percent stock dividend so that 30,000 new
shares were issued to the stockholders when the price of the stock was $30 per share. As a
result of this dividend, what reduction was recorded in the reported amount of retained
earnings?

A -0B $300,000
C $600,000
D $900,000
6. The Parson Company has 100,000 common shares issued and outstanding. This stock was
issued several years ago at a price above the $10 per share par value. During the current
year, the board of directors declared a 10 percent stock dividend so that 10,000 new shares
were issued to the stockholders when the price of the stock was $24 per share. As a result of
this dividend, what reduction was recorded reduction in total stockholders' equity?
A -0B $100,000
C $140,000
D $240,000
7. The Larson Company has 100,000 shares of $10 par value common stock outstanding that
was originally issued for $18 per share. In the current year, when the price of this stock
increased to $60 per share, the company's board of directors issued a two-for-one stock
split. The price of the stock immediately fell to $30 per share. By what amount should the
company reduce its Retained Earnings balance as a result of this split?
A -0B $1,000,000
C $3,000,000
D $6,000,000
8. The Anna Company has 100,000 shares of common stock outstanding with a $10 per share
par value. In addition, the company has 20,000 shares of preferred stock outstanding with a
$100 par value. On this preferred stock, there is a 4 percent annual dividend that is
cumulative. What does the term "cumulative" mean in this situation?
A The current and any missed dividends must be paid on the preferred stock shares before
any dividends can be paid to the owners of the common stock.
B The preferred stock dividend must be paid each year.
C If the preferred stock dividend is not paid in one year, it must be paid the following year.
D If the preferred stock dividend is not paid in one year, an additional (or penalty) dividend
must be paid in the subsequent period.
9. The Lara Company has 100,000 shares of common stock outstanding with a $10 per share
par value. In addition, the company has 30,000 shares of preferred stock outstanding with a
$100 par value. On this preferred stock, there is a 5 percent annual dividend that is
cumulative. No dividend is paid on the preferred stock during Year One. Which of the
following statements is true?
A The company has to report a current liability of $150,000.
B The company has to report a noncurrent liability of $150,000.
C The company has to report an amount within stockholders equity for this $150,000.
D The company must disclose information about the nature of this missed dividend.

10. The Mills Corporation was started several years ago and incorporated in the state of
Delaware. The company was granted the authorization to issue 250,000 shares of $10 per
share par value common stock. At that time, 30,000 shares were issued for cash of $12 per
share. Last year, another 10,000 shares were issued for cash of $19 per share. Early in the
current year, the company issued 12,000 shares of this common stock as a stock dividend
when the fair value was $30 per share. For the 52,000 shares that are now outstanding,
what amount should be reported in stockholders equity as additional paid-in capital?
A $150,000
B $220,000
C $310,000
D $390,000
11. A company declares a cash dividend on its common stock on December 24, Year One,
payable to owners of record on January 2, Year Two, with checks to be mailed on January 9,
Year Two. Which of the following statements is true?
A The owners will record the revenue from this transaction in Year Two but the company will
record the effect of the dividend in Year One.
B This dividend is recorded by the company as an operating expense on its income
statement.
C The company will have a liability on its December 31, Year One balance sheet and the
owners will record a receivable on their December 31, Year One balance sheet.
D Both the revenue and the dividend paid will be recorded by the two companies on January
9, Year Two when payment is made.
12. The Mulieri Company was authorized to issue 100,000 shares of common stock with a $10
par value. The company issued 30,000 shares for cash of $15 per share. Later, when the
shares were selling for $20 per share on a stock exchange, the company issued another
9,000 shares as a stock dividend. Which of the following statements is true about the
recording of the stock dividend?
A The total amount of stockholders equity is not affected but retained earnings is reduced
by $90,000.
B Stockholders equity is reduced by $180,000 and retained earnings is also reduced by
$180,000.
C Stockholders equity is reduced by $90,000 and retained earnings is reduced by
$135,000.
D The total amount of stockholders equity is not effected but retained earnings is reduced
by $180,000.
13. A company issues 100,000 shares of common stock and 10,000 shares of preferred stock
with a $2 cumulative dividend. In the first year, no dividends are paid or declared. Which of
the following statements are true?
A The company should report a $20,000 liability on its year-end balance sheet.
B All dividends in arrears on the preferred stock must be paid before any dividends can be
paid on common stock.
C The preferred stockholders are guaranteed to receive this $20,000 at some point in the
future.
D By not paying the cumulative dividend, the company will be forced into bankruptcy within
90 days of the beginning of the new year.