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.