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Sample Questions
Introduction to Financial Accounting II
Common Stock
 
Scenario I
Planet Plastics Inc. makes toys. It has 5,000,000 authorized shares and 1,000,000 issued and outstanding shares with no par value. Pradeep Ramanancharya is buying 100,000 shares and Gladwynn Dennis is buying 200,000 shares from the firm for $4.00 per share.


1) What is the number of issued shares upon completion of the transactions?

 a)  5,000,000.

 b)  100,000.

 c)  1,200,000.

 d)  1,300,000.

 e)  None of the above.



2) What is the Common Stock account balance before completion of the transactions?

 a)  $5,000,000.

 b)  $4,000,000.

 c)  Insufficient information.

 d)  $1,200,000.

 e)  None of the above.



3) Write the journal entry for the stock sale to Ramanancharya.

 a)  Cash   ....................................  800,000.00
          Common Stock   .........................             800,000.00
             To record common stock sale.


 b)  Cash   ....................................  400,000.00
          Common Stock   .........................             400,000.00
             To record common stock sale.


 c)  Common Stock   ............................  400,000.00
          Cash   .................................             400,000.00
             To record common stock sale.


 d)  Cash   ....................................  100,000.00
          Common Stock   .........................             100,000.00
             To record common stock sale.


 e)  None of the above.



4) Write the journal entry for the stock sale to Dennis.

 a)  Cash   ....................................  400,000.00
          Common Stock   .........................             400,000.00
             To record common stock sale.


 b)  Cash   ....................................  800,000.00
          Common Stock   .........................             800,000.00
             To record common stock sale.


 c)  Cash   ....................................  800,000.00
          Common Stock   .........................             800,000.00
             To record common stock purchase.


 d)  Common Stock   ............................  800,000.00
          Cash   .................................             800,000.00
             To record common stock sale.


 e)  None of the above.




Scenario II
Planet Plastics Inc. makes toys. It has 5,000,000 authorized shares and 1,000,000 issued and oustanding shares with a $3.00 par value. Pradeep Ramanancharya is buying 100,000 shares and Gladwynn Dennis is buying 200,000 shares from the firm for $4.00 per share.


5) What is the amount to be credited to the Common Stock account?

 a)  $300,000.

 b)  $600,000.

 c)  $900,000.

 d)  $1,200,000.

 e)  None of the above.



6) What is the amount to be credited to the Paid-In Capital account?

 a)  $300,000.

 b)  $600,000.

 c)  $900,000.

 d)  $1,200,000.

 e)  None of the above.



7) Write the journal entry for the stock sale to Ramanancharya.

 a)  Cash   ....................................  400,000.00
          Common Stock   .........................             200,000.00
          Paid-In Capital   ......................             200,000.00
             To record common stock sale.


 b)  Cash   ....................................  400,000.00
          Common Stock   .........................             300,000.00
          Paid-In Capital   ......................             100,000.00
             To record common stock sale.


 c)  Cash   ....................................  400,000.00
          Common Stock   .........................             100,000.00
          Paid-In Capital   ......................             300,000.00
             To record common stock sale.


 d)  Cash   ....................................  400,000.00
          Common Stock   .........................             400,000.00
             To record common stock sale.


 e)  None of the above.



8) Write the journal entry for the stock sale to Dennis.

 a)  Cash   ....................................  800,000.00
          Common Stock   .........................             800,000.00
             To record common stock sale.


 b)  Cash   ....................................  400,000.00
          Common Stock   .........................             300,000.00
          Paid-In Capital   ......................             100,000.00
             To record common stock sale.


 c)  Cash   ....................................  800,000.00
          Common Stock   .........................             200,000.00
          Paid-In Capital   ......................             600,000.00
             To record common stock sale.


 d)  Cash   ....................................  800,000.00
          Common Stock   .........................             600,000.00
          Paid-In Capital   ......................             200,000.00
             To record common stock sale.


 e)  None of the above.




Scenario III
Planet Plastics Inc. makes toys. It has 5,000,000 authorized shares and 1,000,000 issued and outstanding shares with no par value. Pradeep Ramanancharya is buying 100,000 shares from the firm using equipment as consideration and Gladwynn Dennis is buying 200,000 shares from the firm using a patent as consideration. The fair market value of the equipment is $600,000. The fair market value of the patent is $1,200,000.


9) What is the amount to be credited to the Common Stock account?

 a)  $300,000.

 b)  $600,000.

 c)  $1,800,000.

 d)  $1,200,000.

 e)  None of the above.



10) What is the amount to be credited to the Paid-In Capital account?

 a)  $400,000.

 b)  $800,000.

 c)  $1,500,000.

 d)  $1,800,000.

 e)  None of the above.




11) Write the journal entry for the stock sale to Ramanancharya.

 a)  Equipment   ...............................  600,000.00
          Common Stock   .........................             600,000.00
             To record preferred stock sale.


 b)  Equipment   ...............................  600,000.00
          Common Stock   .........................             400,000.00
          Paid-In Capital   ......................             200,000.00
             To record common stock sale.


 c)  Equipment   ...............................  600,000.00
          Common Stock   .........................             600,000.00
             To record common stock sale.


 d)  Cash   ....................................  600,000.00
          Common Stock   .........................             600,000.00
             To record common stock sale.


 e)  None of the above.



12) Write the journal entry for the stock sale to Dennis.

 a)  Cash   ....................................   1,200,000
          Common Stock   .........................              1,200,000
             To record common stock sale.


 b)  Patents  ..................................   1,200,000
          Common Stock   .........................              1,200,000
             To record common stock sale.


 c)  Patents  ..................................   1,200,000
          Paid-In Capital   ......................              1,200,000
             To record common stock sale.


 d)  Equipment   ...............................   1,200,000
          Common Stock   .........................              1,200,000
             To record common stock sale.


 e)  None of the above.




Scenario IV
Planet Plastics Inc. makes toys. It has 5,000,000 authorized shares and 2,500,000 issued and outstanding shares with no par value. The firm redeems 200,000 shares from Pradeep Ramanancharya for $5.00 a share and 300,000 shares from Gladwynn Dennis also for $5.00 a share. The firm cancels the redeemed shares.


13) What is the number of outstanding shares upon completion of the transactions?

 a)  5,000,000.

 b)  2,500,000.

 c)  2,000,000.

 d)  3,000,000.

 e)  None of the above.



14) What is the amount of Treasury Stock upon completion of the transactions?

 a)  $2,500,000.

 b)  $1,500,000.

 c)  $1,000,000.

 d)  $500,000.

 e)  None of the above.



15) Write the journal entry for the stock purchase from Ramanancharya.

 a)  Cash   ....................................   1,000,000
          Common Stock   .........................              1,000,000
             To record common stock purchase.


 b)  Common Stock   ............................   1,000,000
          Cash   .................................              1,000,000
             To record common stock sale.


 c)  Treasury Stock   ..........................   1,000,000
          Cash   .................................              1,000,000
             To record common stock purchase.


 d)  Common Stock   ............................   1,000,000
          Cash   .................................              1,000,000
             To record common stock purchase.


 e)  None of the above.



16) Write the journal entry for the stock purchase from Dennis.

 a)  Common Stock   ............................   1,500,000
          Cash   .................................              1,500,000
             To record common stock purchase.


 b)  Preferred Stock   .........................   1,500,000
          Cash   .................................              1,500,000
             To record common stock purchase.


 c)  Common Stock   ............................   1,500,000
          Cash   .................................              1,500,000
             To record common stock sale.


 d)  Cash   ....................................   1,500,000
          Common Stock   .........................              1,500,000
             To record common stock purchase.


 e)  None of the above.




Scenario V
Planet Plastics Inc. makes toys. It has 5,000,000 authorized shares and 2,500,000 issued and outstanding shares with no par value. The firm redeems 200,000 shares from Pradeep Ramanancharya for $5.00 a share and 300,000 shares from Gladwynn Dennis also for $5.00 a share. The firm does not cancel the redeemed shares.


17) What is the number of issued shares upon completion of the transactions?

 a)  5,000,000.

 b)  2,500,000.

 c)  2,000,000.

 d)  3,000,000.

 e)  None of the above.



18) What is the amount of Treasury Stock upon completion of the transactions?

 a)  $2,500,000.

 b)  $1,500,000.

 c)  $1,000,000.

 d)  $500,000.

 e)  None of the above.



19) Write the journal entry for the stock purchase from Ramanancharya.

 a)  Cash   ....................................   1,000,000
          Treasury Stock   .......................              1,000,000
             To record common stock purchase.


 b)  Common Stock   ............................   1,000,000
          Cash   .................................              1,000,000
             To record common stock purchase.


 c)  Treasury Stock   ..........................   1,000,000
          Cash   .................................              1,000,000
             To record common stock purchase.


 d)  Treasury Stock   ..........................   1,500,000
          Cash   .................................              1,500,000
             To record common stock purchase.


 e)  None of the above.



20) Write the journal entry for the stock purchase from Dennis.

 a)  Treasury Stock   ..........................   2,500,000
          Cash   .................................              2,500,000
             To record common stock purchase.


 b)  Treasury Stock   ..........................   1,500,000
          Cash   .................................              1,500,000
             To record common stock purchase.


 c)  Treasury Stock   ..........................   1,500,000
          Cash   .................................              1,500,000
             To record common stock sale.


 d)  Cash   ....................................   1,500,000
          Treasury Stock   .......................              1,500,000
             To record common stock purchase.


 e)  None of the above.






 

 

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