Question

1) The number of shares of stock a corporation sells to investors are

a. Authorizes shares

b. Issued shares

c. Treasury shares

d. Outstanding shares

2) A corporation issued 20 shares of common stock with $1 par value for $5 per share. The amount of cash the company generated

By issuing the common stock was

a. $5

b. $20

c. $80

d. $100

3) The declaration of a cash dividend

a. Increases cash

b. Decreases cash

c. Increase retained earnings

d. Decreases retained earnings

4) The payment of a cash dividend

a. Decreases dividends payable

b. Increases dividends payable

c. Increases retained earnings

d. Decreases retained earnings

5) A firm that purchases its own stock (treasury stock)

a. Does not change the amount of shareholders’ equity

b. Increases shareholders’ equity

c. Decreases shareholders’ equity

d. Is bankrupt

Answer 1

Hey !

Answer to question 1)

b.Issued Shares.Reason: Issued Shares are those shares which are issued by the company to its investors, insiders and financial institutions. Issued Shares is a bigger term than outstanding shares.

Answer to question 2)

d. $100. Reason. 20 shares are issued at rate of $5 per share. Hence corporation raised $100.

Answer to question 3)

d. Decrease retained Earnings. Reason. At the time of declaration of cash dividend retained earning is debited which results in decrease of retained earning. Dividend Payable is credit.

Answer to question 4)

a. Decrease Dividend Payable. Reason. At the time of payment of cash dividend, Dividend Payable is debited which reduces its balance and bank/cash is credited.

Answer to question 5)

c. Decreases shareholders’ equity. Reason. Shareholders' equity is reduced by the amount of own shares purchased by the company and then shown in its balance sheet.