B. retained earnings.
C. a liability account.
D. additional paid-in capital from stock warrants.
2) The conversion of preferred stock may be recorded by the
A. par value method.
B. book value method.
C. market value method.
D. incremental method.
3) Proceeds from an issue of debt securities having stock warrants sho
uld NOT be allocated between debt and equity features when
A. the warrants issued with the debt securities are nondetachable.
B. exercise of the warrants within the next few fiscal periods seems r
emote.
C. the allocation would result in a discount on the debt security.
D. the market value of the warrants is NOT readily available.
4) Total stockholders‟ equity represents
A. only the amount of earnings that have been retained in the busines
s.
B. the maximum amount that can be borrowed by the enterprise.
C. a claim against a portion of the total assets of an enterprise.
D. a claim to specific assets contributed by the owners.
5) When a corporation issues its capital stock in payment for services,
the least appropriate basis for recording the transaction is the
A. Any of these provides an appropriate basis for recording the trans
action.
B. par value of the shares issued.
C. market value of the shares issued.
D. market value of the services received.
6) A primary source of stockholders‟ equity is
A. both income retained by the corporation and contributions by stoc
kholders.
B. appropriated retained earnings.
C. contributions by stockholders.
D. income retained by the corporation.
7) Wilson Corp. purchased its own par value stock on January 1, 2007
for $20,000 and debited the treasury stock account for the purchase p
rice. The stock was subsequently sold for $12,000. The $8,000 differe