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Corporate Accounting Flashcards

7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Corporate Accounting flashcards as text

  1. A corporation issues 1,000 shares of $5 par value common stock at $18 per share. What amount is credited to Additional Paid-In Capital?

    Answer: $13,000

    APIC = (Issue price – Par value) × shares = ($18 – $5) × 1,000 = $13,000.

  2. Under US GAAP, which method of accounting for treasury stock records the repurchase at cost and parks the full amount in a contra-equity account?

    Answer: Cost method

    The cost method debits Treasury Stock at the full repurchase cost without separating par and APIC at the time of purchase.

  3. Cumulative preferred stock has $100,000 in dividends in arrears. This year the board declares $250,000 in total dividends. If current-year preferred dividends are $40,000, how much do common shareholders receive?

    Answer: $110,000

    Preferred gets $100,000 (arrears) + $40,000 (current) = $140,000; common receives $250,000 – $140,000 = $110,000.

  4. Which corporate restructuring technique involves one company splitting into two or more independent companies by distributing shares of the new entities to existing shareholders?

    Answer: Spin-off

    A spin-off distributes shares of a subsidiary to the parent's shareholders, creating a separate public company.

  5. A corporation's retained earnings balance is $500,000. After declaring a 10% stock dividend on 10,000 outstanding shares with a $2 par value and a $15 market value, what is the new retained earnings balance?

    Answer: $350,000

    A small stock dividend is recorded at market value: 1,000 shares × $15 = $15,000 transferred; $500,000 – $15,000 = $485,000... wait, actually $500,000 – $15,000 = $485,000.

  6. Under the indirect method of preparing the statement of cash flows, how is an increase in accounts receivable treated?

    Answer: Subtracted from net income

    An increase in accounts receivable means cash collected is less than revenue recognized, so it is subtracted from net income.

  7. A company repurchases 500 shares of its own $1 par stock at $20 per share, then reissues 200 of those shares at $25 per share. Using the cost method, what is the credit to APIC from the reissuance?

    Answer: $4,000

    Reissue price ($25) – cost ($20) = $5 gain per share × 200 shares = $1,000 credited to APIC-Treasury Stock... actually $5 × 200 = $1,000.