Question: 1. Freebee Corporation's common stock is actively traded on a national exchange. It issues 2,000 shares of its $3 par value stock for equipment that was advertised for $43,000. The current fair value of Freebee's shares is $20 per share. How much should be the debit to equipment?
a- $40,000
b- $6,000
c- $43,000
d- $34,000
2. Which of the following is not a preference for preferred stock?
a- The right to have first vote for the board of directors
b- The right to receive dividends, if declared, before common stock
c- The right to receive amounts in liquidation first.
d- If cumulative, the right to receive dividends in arrears, if declared
3. How is treasury stock shown on a balance sheet?
a- An asset
b- A subtraction from Paid-in Capital
c- A subtraction from the stock accounts
d- A subtraction from total Stockholders' Equity
4. Which date creates a legal liability of the corporation to pay dividends to the stockholders?
a- Payment date
b- Record date
c- Declaration date
d- Purchase date
5. Which of the following journal entries is made on the record date for a cash dividend?
a- Debit: Retained Earnings Credit: Dividends Payable
b- Debit: Dividends Payable Credit: Cash
c- Debit: Paid-in Capital-Dividends Credit: Dividends Payable
d- There is no entry on the record date.
6. Abstract Corporation has just declared a $1.60 dividend per share on 10,000 shares of common stock. What journal entry is required?
a- Debit: Retained Earnings, 16,000 Credit: Dividends Payable. 16,000
b- Debit: Retained Earnings, 16,000 Credit: Cash, 16,000
c- Debit: Dividends Payable, 16,000 Credit: Retained Earnings, 16,000
d- No journal entry is required on a declaration date.