Question 1

Creston Enterprises has common stock with a par value of $5.During the current year,it declared and paid dividends of $20,000.It sold at $20 per share an additional 2,000 shares of stock that had not been previously issued.In addition,it had net income of $100,000 for the year.What is the amount of change to its stockholders' equity for the year?

Accepted Answer

A)  $140,000
B)  $90,000
C)  $110,000
D)  $120,000E) A) and B)
F) C) and D)

Question 2

Laurelhurst Co.has 240,000 shares of preferred stock,8% cumulative,$100 par value.It also has 2,800,000 shares of common stock,$0.01 par value.(The share information represents the numbers of shares issued and outstanding for both types of stock. ) Dividends in arrears at the beginning of the year totaled $960,000.If Laurelhurst's board of directors declares a total dividend of $3,300,000 to be distributed to preferred and common stockholders,how much will be paid to the common stockholders?

Accepted Answer

A)  $2,880,000
B)  $420,000
C)  $2,340,000
D)  $1,380,000E) B) and D)
F) All of the above

Question 3

Match each term with the appropriate definition.Not all definitions will be used.
-Sole Proprietorship

Accepted Answer

A)  A company that is like a partnership in nature except that it has limited liability.
B)  A company that has a separate legal identity from its owners.
C)  A company that issues stock on one of the major stock exchanges.
D)  When companies are obligated to pay preferred stockholders past dividends not yet distributed before paying dividends to owners of common stock.
E)  The nominal value per share of stock set by the company's charter.F) The current stock price.G) A stock that is currently selling for its original issue price.H) Stock of companies that tend to pay relatively high dividends compared to the stock price.I) Stock of companies that tend to reinvest earnings to provide for greater future sales and profits.J) When stockholders prefer to receive dividends at the end of the year rather than each quarter.K) An unincorporated business that is owned by a single individual.L) When preferred stockholders are paid dividends before other stockholders.M) An unincorporated business owned by two or more individuals.N) A) and F)
O) G) and M)

Question 4

Corbett Co.has the following information available from its accounting records:  The company has no preferred stock.What is the earnings per share?

Accepted Answer

A)  $0.80
B)  $8.00
C)  $9.33
D)  $11.20E) A) and B)
F) B) and C)

Question 5

Which of the following statements about Accumulated Other Comprehensive Income (Loss) is not correct?

Accepted Answer

A)  Accumulated Other Comprehensive Income (Loss) reports unrealized gains and losses,which are temporary changes in the value of certain assets and liabilities the company holds.
B)  Accumulated Other Comprehensive Income (Loss) can relate to pensions,foreign currencies,and financial investments.
C)  Accumulated Other Comprehensive Income (Loss) is a component of stockholders' equity.
D)  Accumulated Other Comprehensive Income (Loss) is reported on the income statement.E) None of the above
F) All of the above

Question 6

If a company's P/E ratio suddenly decreases:

Accepted Answer

A)  you should sell the stock as soon as possible.
B)  you should buy more of the stock to increase your average gain.
C)  the company probably announced higher earnings forecasts.
D)  the market must have reacted to some bad news that is expected to affect the company in the future.E) None of the above
F) All of the above

Question 7

The return on equity ratio measures the:

Accepted Answer

A)  return stockholders receive in dividends for each dollar of their investment.
B)  return stockholders receive in dividends and stock price growth for each dollar of their investment.
C)  amount of income earned for each dollar of common stockholders' equity.
D)  amount earned by the company on each dollar obtained from equity and debt financing.E) None of the above
F) All of the above

Question 8

Contributed capital is found in the ________ section of the ________.

Accepted Answer

A)  operating income;income statement
B)  stockholders' equity;balance sheet
C)  retained earnings;balance sheet
D)  retained earnings;income statementE) B) and D)
F) All of the above

Question 9

The term "capitalizing retained earnings" refers to:

Accepted Answer

A)  transferring from Retained Earnings to Common Stock the amount of a stock dividend.
B)  the recording of all costs to get an asset in place and ready for its intended use.
C)  the issuance of common stock at a price in excess of par value.
D)  stockholders contributing additional capital to a corporation.E) B) and D)
F) B) and C)

Question 10

On the declaration date,the company:

Accepted Answer

A)  debits Dividends and credits Dividends Payable for the amount of the dividend.
B)  debits Dividend Expense and credits Cash for the dividend amount.
C)  debits Dividends Payable and credits Cash for the dividend amount.
D)  establishes who will receive the dividend payment.E) None of the above
F) B) and D)

Question 11

Seville Co.issued 1,680 shares of $50 par value stock for $126,000.What is the total amount of contributed capital?

Accepted Answer

A)  $84,000
B)  $42,000
C)  $126,000
D)  $50E) All of the above
F) A) and C)

Question 12

The information below was extracted from the most recent financial statements of Milton Technologies (in millions,except for stock price) :  What is the company's return on equity (ROE) for the current year?

Accepted Answer

A)  39.3%
B)  21.7%
C)  37.1%
D)  36.3%E) None of the above
F) B) and C)

Question 13

King Corp.has one million shares outstanding with a par value of $5.On August 24 of this year,it issued a 10% stock dividend when its stock price was $25.As a result of this stock dividend,retained earnings:

Accepted Answer

A)  increased by $500,000.
B)  increased by $2,500,000.
C)  decreased by $500,000.
D)  decreased by $2,500,000.E) A) and B)
F) A) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)  Stock splits and stock dividends both reduce the market price of a share,but only stock splits reduce the par value of a share.
B)  Stock splits and stock dividends both reduce the market price of a share and the par value of a share.
C)  Stock splits and stock dividends both reduce the market price of a share,but only stock dividends reduce the par value of a share.
D)  Stock splits and stock dividends both reduce the market price of a share and reduce Retained Earnings.E) B) and C)
F) A) and B)

Question 15

Generally,a relatively high P/E ratio indicates:

Accepted Answer

A)  improvements in future profitability.
B)  diminished future profitability.
C)  a high level of debt financing.
D)  a high current return for shareholders of a company.E) A) and D)
F) C) and D)

Question 16

The return on equity ratio is calculated as:

Accepted Answer

A)  dividends paid divided by the average book value of stockholders' equity.
B)  net income divided by the average number of outstanding common shares.
C)  dividends divided by the average number of total shares.
D)  (net income less preferred dividends) divided by average common stockholders' equity.E) A) and B)
F) A) and C)

Question 17

The creation and oversight of all corporations are regulated by:

Accepted Answer

A)  city councils.
B)  state laws.
C)  stockholders.
D)  corporate officers.E) A) and B)
F) None of the above

Question 18

The market price of a share of common stock at the time of issuance was $19.50,while the market price of a preferred share of stock at the time of issuance was $32.The company paid $12.50 per share for its treasury stock.
Required:
Determine the missing amount in the stockholders' equity section of the balance sheet set forth below.

Accepted Answer

Supporting calculations:
(a) $2.00 Par ...

Question 19

Which of the following statements about equity and debt financing is correct?

Accepted Answer

A)  Equity financing is always better than debt financing.
B)  Equity financing requires dividends to be paid.
C)  Dividends are tax deductible.
D)  Equity financing can change stockholder control.E) A) and C)
F) C) and D)

Question 20

Which of the following statements about the declaration and payment of cash dividends is correct?

Accepted Answer

A)  Declaration and payment of cash dividends will reduce the amount of net income.
B)  Declaration and payment of cash dividends will not reduce the Retained Earnings balance.
C)  Declaration and payment of cash dividends will reduce the amount of cash available to invest in assets.
D)  Declaration and payment of cash dividends is calculated on the amount of shares of stock issued,not the amount of shares outstanding.E) A) and B)
F) A) and C)

Exam 11: Stockholders Equity

On the declaration date,the company:

Correct Answer
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King Corp.has one million shares outstanding with a par value of $5.On August 24 of this year,it issued a 10% stock dividend when its stock price was $25.As a result of this stock dividend,retained earnings:

Correct Answer
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Contributed capital is found in the section of the .

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Sole Proprietorship

Correct Answer
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The creation and oversight of all corporations are regulated by:

Correct Answer
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Corbett Co.has the following information available from its accounting records: The company has no preferred stock.What is the earnings per share?

Correct Answer
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The term "capitalizing retained earnings" refers to:

Correct Answer
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Supporting calculations:
(a) $2.00 Par ...
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Which of the following statements is correct?

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Which of the following statements about the declaration and payment of cash dividends is correct?

Correct Answer
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If a company's P/E ratio suddenly decreases:

Correct Answer
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The return on equity ratio measures the:

Correct Answer
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Correct Answer
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Generally,a relatively high P/E ratio indicates:

Correct Answer
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Which of the following statements about Accumulated Other Comprehensive Income (Loss) is not correct?

Correct Answer
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Which of the following statements about equity and debt financing is correct?

Correct Answer
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Seville Co.issued 1,680 shares of $50 par value stock for $126,000.What is the total amount of contributed capital?

Correct Answer
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The return on equity ratio is calculated as:

Correct Answer
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The information below was extracted from the most recent financial statements of Milton Technologies (in millions,except for stock price) : What is the company's return on equity (ROE) for the current year?

Correct Answer
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Exam 11: Stockholders Equity

On the declaration date,the company:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

King Corp.has one million shares outstanding with a par value of $5.On August 24 of this year,it issued a 10% stock dividend when its stock price was $25.As a result of this stock dividend,retained earnings:

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Contributed capital is found in the ________ section of the ________.

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Match each term with the appropriate definition.Not all definitions will be used. -Sole Proprietorship

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The creation and oversight of all corporations are regulated by:

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Corbett Co.has the following information available from its accounting records: The company has no preferred stock.What is the earnings per share?

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The term "capitalizing retained earnings" refers to:

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Correct AnswerverifiedSupporting calculations:(a) $2.00 Par ...View AnswerShow Answer

Which of the following statements is correct?

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Which of the following statements about the declaration and payment of cash dividends is correct?

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If a company's P/E ratio suddenly decreases:

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The return on equity ratio measures the:

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Correct AnswerverifiedShow Answer

Generally,a relatively high P/E ratio indicates:

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Which of the following statements about Accumulated Other Comprehensive Income (Loss) is not correct?

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Which of the following statements about equity and debt financing is correct?

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Seville Co.issued 1,680 shares of $50 par value stock for $126,000.What is the total amount of contributed capital?

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The return on equity ratio is calculated as:

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The information below was extracted from the most recent financial statements of Milton Technologies (in millions,except for stock price) : What is the company's return on equity (ROE) for the current year?

Correct AnswerverifiedShow Answer

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Contributed capital is found in the section of the .

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Supporting calculations:
(a) $2.00 Par ...
View Answer

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