module 7.docx - Homework 1 Question 1 0.5 out of 0.5 points When a shareholder sells its shares to another person for more than its original cost the

module 7.docx - Homework 1 Question 1 0.5 out of 0.5 points...

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Homework 1 Question 1 0.5 out of 0.5 points When a shareholder sells its shares to another person for more than its original cost, the corporation ______. Selected Answer: does not make a journal entry Answers: records a gain on the sale of stock does not make a journal entry increases Retained Earnings records a credit to Common Stock records a debit to Treasury Stock Response Feedback: See Module 7, LO 1 Record and Summarize Stocks Issued. The trading of stock on the secondary stock exchange between shareholders is not recorded by the company. The company is not receiving or giving anything in exchange. Question 2 0.25 out of 0.5 points Retained Earnings is ______. (Select all that apply.) Selected Answers: decreased by dividends increased by net income Answers: decreased by dividends increased by net income equal to cash all of the company's earnings kept rather than distributed to shareholders decreased by purchases of land Response Feedback: See Module 7, LO 1 Forming a Corporation. Retained Earnings represents the earnings (net income) retained (kept) by the company and is reported on the balance sheet and
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the statement of retained earnings. Retained Earnings equals the beginning balance plus Net Income minus Dividends . Question 3 0.5 out of 0.5 points Daffy Duct, Inc., began operations in January by issuing 100,000 shares of $1 par value common stock for $5 per share. It also issued 10,000 shares of $50 par value, 5%, cumulative preferred stock for $50 each. Net income for the year was $500,000 and dividends were $44,000. Using the information above, show the effect of the issuance of the preferred stock on the accounting equation: Be sure to select an answer for each item below and if no effect, select "0 No Effect". Question Correct Match Selected Match Assets N. 500,000 Cash N. 500,000 Cash Liabilities A. 0 No Effect A. 0 No Effect Shareholders' Equity G. 500,000 Preferred Stock G. 500,000 Preferred Stock All Answer Choices A. 0 No Effect B. (500,000) Preferred Stock C. (475,000) Preferred Stock D. (25,000) Preferred Stock E. 25,000 Preferred Stock F. 475,000 Preferred Stock G. 500,000 Preferred Stock H. 25,000 Paid in Capital in Excess of Par I. (500,000) Cash J. (475,000) Cash K.
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(25,000) Cash L. 25,000 Cash M. 475,000 Cash N. 500,000 Cash Response Feedback: See Module 7, LO 1.3 Preferred Stock. Cash (+A) increased by $500,000 ( =price of $50 x 10,000 shares issued ) and Preferred Stock (+SE) increased by $500,000 ( =par value of $50 x 10,000 shares issued ). The dividend rate is not used to record the issuance of the stock. The dividend rate is used to determine the amount of dividends each share of preferred stock should receive before the common shares receive any dividends and equals $2.50 (=Par Value of $50 x 5% ). Question 4 0.5 out of 0.5 points The arbitrary amount assigned by a company to a share of its stock is the ______. Selected Answer: par value Answers: par value capital value no - par value total value none of these is correct Response Feedback: See Module 7, LO 1.2 Issuing Par Value Stock.
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