Question

1. XYZ Corp has 90,000 shares of $2 par value common stock outstanding . XYZ declared and distributed a 10% stock dividend when the market price of its stock was $12.00 per share. In recording this stock dividend transaction,

		A) Retained Earnings is credited for $108,000
		B) Paid in capital in excess of par value is credited for $7,200
		C) Retained Earnings is debited for $$108,000
		D) Retained Earnings is debited for $18,000

2)  A corporation repurchased 1,000 shares of its $1.00 par value common stock for $6.00 per hare. The corporation

sold 300 shares back into the market at $3.00 per share. The journal entry to record the sale transaction could include:

		A) Debit to Treasury stock
		B) Debit to Retained earnings
		C) Credit to Paid -in Capital - treasury stock
		D) None of the above

3. XYZ Corp issued  $600,000 of 9% , 10-year  bonds on June 30,2020, for $562,500. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. If XYZ uses the effective- interest method , the entry to record interest expense at the end of the accounting period on October 31, 2020 will include:

		A) Credit to  Interest Expense
		B) Debit to Bond payable
		C) Credit to Interest payable
		D) Credit to Cash

4. If bonds with a face value of $209,000 are issued at 93, the entry to record the bond issue will include :

		A)  Debit to Cash, $209,000; Credit to Discount on Bond payable, $14,630
		B)   Debit to Cash, $ 194,370 ; Credit  to Bond payable , $209,000
		C) Debit to Bonds payable , $209,000; Credit to Cash $194,370
		D)  Debit  to Discount on Bonds payable, $14,630; Credit to Bonds payable, $194,370

Answer 1

1. XYZ Corp has 90,000 shares of $2 par value common stock outstanding . XYZ declared and distributed a 10% stock dividend when the market price of its stock was $12.00 per share. In recording this stock dividend transaction,

	A) Retained Earnings is credited for $108,000
	B) Paid in capital in excess of par value is credited for $7,200
CORRECT ANSWER: Because Retained earnings is debited by amount of Stock dividend which is 90000 shares x 10% x $ 12 = $ 108,000	C) Retained Earnings is debited for $108,000
	D) Retained Earnings is debited for $18,000

2)  A corporation repurchased 1,000 shares of its $1.00 par value common stock for $6.00 per hare. The corporation

sold 300 shares back into the market at $3.00 per share. The journal entry to record the sale transaction could include:

	A) Debit to Treasury stock
	B) Debit to Retained earnings
CORRECT ANSWER: Because cost is $ 1 and Resale price is $ 3. The difference is credited to Paid in Capital from Treasury STock	C) Credit to Paid -in Capital - treasury stock
	D) None of the above

3. XYZ Corp issued  $600,000 of 9% , 10-year  bonds on June 30,2020, for $562,500. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. If XYZ uses the effective- interest method , the entry to record interest expense at the end of the accounting period on October 31, 2020 will include:

	A) Credit to  Interest Expense
	B) Debit to Bond payable
CORRECT ANSWER: Because interest is not yet paid on Oct 31 and will be paid on 31 Dec [next accounting period]. Hence, Interest expenses is debited and Interest Payable is credited.	C) Credit to Interest payable
	D) Credit to Cash

4. If bonds with a face value of $209,000 are issued at 93, the entry to record the bond issue will include :

	A)  Debit to Cash, $209,000; Credit to Discount on Bond payable, $14,630
CORRECT ANSWER: Debit to Cash = $ 209000 x 93/100 = $ 194370 Debit to Discount = $ 209000 – 194370 = $ 14630 Credit to Bonds Payable $ 209000	B)   Debit to Cash, $ 194,370 ; Credit  to Bond payable , $209,000
	C) Debit to Bonds payable , $209,000; Credit to Cash $194,370
	D)  Debit  to Discount on Bonds payable, $14,630; Credit to Bonds payable, $194,370