Question 1

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 divided by average stockholders' equity.E) A) and B)
F) A) and D) D

Question 2

Which of the following statements is true concerning the declaration and payment of cash dividends?

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 resources 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) B) and C)
F) C) and D)

Question 3

If a corporation declares and distributes a 10% stock dividend on its common shares,the account debited is:

Accepted Answer

A)  Dividends Payable.
B)  Common Stock.
C)  Additional Paid-in Capital.
D)  Retained Earnings.E) A) and B)
F) None of the above

Question 4

Typically,a profitable company that pays relatively high dividends:

Accepted Answer

A)  is an attractive investment for those seeking a steady income,like retired people.
B)  will reinvest more profit which can lead to smaller growth potential.
C)  will experience more growth in stock price over time.
D)  is a bad investment.E) B) and D)
F) All of the above

Question 5

In its most basic form,the earnings per share ratio is calculated as:

Accepted Answer

A)  dividends paid on common stock divided by the average number of outstanding common shares.
B)  net income divided by the average number of outstanding common shares.
C)  total dividends paid divided by the average number of total stock shares.
D)  net income divided by average stockholders' equity.E) None of the above
F) B) and C)

Question 6

A company reported net income of $5.6 million.At the beginning of the year,3.4 million shares of common stock were outstanding and at the end of the year,3.6 million shares were outstanding.No dividends were declared.The EPS is approximately:

Accepted Answer

A)  $1.60.
B)  $1.56.
C)  $1.65.
D)  $1.40.E) A) and D)
F) B) and D)

Question 7

Typically,a profitable company that pays little or no dividends:

Accepted Answer

A)  is a bad investment.
B)  will reinvest profits which can lead to greater growth potential.
C)  will experience relatively stable stock prices over time.
D)  will appeal to investors who desire distributions of profit.E) B) and C)
F) All of the above

Question 8

A company declared a $0.80 per share cash dividend.The company has 100,000 shares authorized,45,000 shares issued,and 42,000 shares of common stock outstanding.What is the journal entry to record the dividend declaration?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) None of the above
F) A) and B)

Question 9

Use the information above to answer the following question.Assume the company paid a dividend of $5 per share on August 3.What is the total amount of the dividends that would be paid to the common stockholders?

Accepted Answer

A)  $95,000
B)  $100,000
C)  $90,000
D)  $76,000E) A) and C)
F) B) and C)

Question 10

Use the information above to answer the following question.What is the journal entry to record the purchase of the stock on January 20?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) None of the above
F) All of the above

Question 11

A stock split increases total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 12

Corporations are governed by federal law.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements accurately explains why the board of directors of a company whose financial future contains some uncertainties might issue a 2-for-1 stock split rather than declare a 100% stock dividend?

Accepted Answer

A)  A stock split would not reduce the market price per share,whereas a stock dividend would.
B)  A stock split would reduce the market price per share,whereas a stock dividend would not.
C)  A stock split would increase total stockholders' equity,whereas a stock dividend would not.
D)  A stock split would not reduce retained earnings,whereas a stock dividend would.E) A) and C)
F) All of the above

Question 14

The retained earnings balance was $22,900 on January 1.Net income for the year was $18,100.If retained earnings had a credit balance of $23,800 after closing entries were made for the year,and if additional stock of $5,200 was issued during the year,what was the amount of dividends declared during the year?

Accepted Answer

A)  $17,200
B)  $23,700
C)  $23,300
D)  $13,000E) A) and C)
F) B) and C) A

Question 15

A company originally issues 180,000 shares of stock at a price of $22;one year later the stock price is $40 per share,the number of outstanding shares is unchanged,and the company's net income for the year is $230,400.The P/E ratio at the end of the recent year is:

Accepted Answer

A)  0.0002.
B)  24.22.
C)  31.25.
D)  0.0001.E) A) and B)
F) A) and C)

Question 16

A company has outstanding 10 million shares of $2 par common stock and 1 million shares of $4 par preferred stock.The preferred stock has an 8% dividend rate.The company declares $300,000 in total dividends for the year.Which of the following is true if the preferred stockholders have a cumulative dividend preference?

Accepted Answer

A)  Preferred stockholders will receive the entire $300,000,and they must also be paid $20,000 before the end of the current accounting period.Common stockholders will receive nothing.
B)  Preferred stockholders will receive $24,000 (8% of the total dividends) .Common stockholders will receive the remaining $276,000.
C)  Preferred stockholders will receive the entire $300,000,and they must also be paid $20,000 sometime in the future before common stockholders will receive anything.
D)  Preferred stockholders will receive the entire $300,000,but will receive nothing more relating to this dividend declaration.Common stockholders will receive nothing.E) B) and D)
F) A) and D)

Question 17

All other things being equal,when companies make stock repurchases:

Accepted Answer

A)  EPS falls and ROE rises.
B)  EPS rises and ROE stays the same.
C)  EPS rises and ROE falls.
D)  EPS and ROE both rise.E) C) and D)
F) All of the above

Question 18

State laws often restrict dividends to the amount of retained earnings.

Accepted Answer

A) True 
 B)False  True

Question 19

A company that pays no dividends is always a poor investment.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about stock options is false?

Accepted Answer

A)  Stock options are intended to give upper management the same goals as stockholders.
B)  When stock options are exercised by upper management,existing stockholders lose voting power.
C)  Stock options may create an incentive for upper management to overstate net income.
D)  An expense is reported by the company when stock options are exercised.E) A) and D)
F) All of the above

Exam 11: Stockholders Equity

The Return on Equity ratio is calculated as:

Correct Answer
verified
D

Which of the following statements is true concerning the declaration and payment of cash dividends?

Correct Answer
verified

If a corporation declares and distributes a 10% stock dividend on its common shares,the account debited is:

Correct Answer
verified

Typically,a profitable company that pays relatively high dividends:

Correct Answer
verified

In its most basic form,the earnings per share ratio is calculated as:

Correct Answer
verified

A company reported net income of $5.6 million.At the beginning of the year,3.4 million shares of common stock were outstanding and at the end of the year,3.6 million shares were outstanding.No dividends were declared.The EPS is approximately:

Correct Answer
verified

Typically,a profitable company that pays little or no dividends:

Correct Answer
verified

A company declared a $0.80 per share cash dividend.The company has 100,000 shares authorized,45,000 shares issued,and 42,000 shares of common stock outstanding.What is the journal entry to record the dividend declaration?

Correct Answer
verified

Use the information above to answer the following question.Assume the company paid a dividend of $5 per share on August 3.What is the total amount of the dividends that would be paid to the common stockholders?

Correct Answer
verified

Use the information above to answer the following question.What is the journal entry to record the purchase of the stock on January 20?

Correct Answer
verified

A stock split increases total stockholders' equity.

Correct Answer
verified

Corporations are governed by federal law.

Correct Answer
verified

Which of the following statements accurately explains why the board of directors of a company whose financial future contains some uncertainties might issue a 2-for-1 stock split rather than declare a 100% stock dividend?

Correct Answer
verified

Correct Answer
verified
A

A company originally issues 180,000 shares of stock at a price of $22;one year later the stock price is $40 per share,the number of outstanding shares is unchanged,and the company's net income for the year is $230,400.The P/E ratio at the end of the recent year is:

Correct Answer
verified

Correct Answer
verified

All other things being equal,when companies make stock repurchases:

Correct Answer
verified

State laws often restrict dividends to the amount of retained earnings.

Correct Answer
verified
True

A company that pays no dividends is always a poor investment.

Correct Answer
verified

Which of the following statements about stock options is false?

Correct Answer
verified

Exam 11: Stockholders Equity

The Return on Equity ratio is calculated as:

Correct AnswerverifiedD

Which of the following statements is true concerning the declaration and payment of cash dividends?

Correct AnswerverifiedShow Answer

If a corporation declares and distributes a 10% stock dividend on its common shares,the account debited is:

Correct AnswerverifiedShow Answer

Typically,a profitable company that pays relatively high dividends:

Correct AnswerverifiedShow Answer

In its most basic form,the earnings per share ratio is calculated as:

Correct AnswerverifiedShow Answer

A company reported net income of $5.6 million.At the beginning of the year,3.4 million shares of common stock were outstanding and at the end of the year,3.6 million shares were outstanding.No dividends were declared.The EPS is approximately:

Correct AnswerverifiedShow Answer

Typically,a profitable company that pays little or no dividends:

Correct AnswerverifiedShow Answer

A company declared a $0.80 per share cash dividend.The company has 100,000 shares authorized,45,000 shares issued,and 42,000 shares of common stock outstanding.What is the journal entry to record the dividend declaration?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.Assume the company paid a dividend of $5 per share on August 3.What is the total amount of the dividends that would be paid to the common stockholders?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the journal entry to record the purchase of the stock on January 20?

Correct AnswerverifiedShow Answer

A stock split increases total stockholders' equity.

Correct AnswerverifiedShow Answer

Corporations are governed by federal law.

Correct AnswerverifiedShow Answer

Which of the following statements accurately explains why the board of directors of a company whose financial future contains some uncertainties might issue a 2-for-1 stock split rather than declare a 100% stock dividend?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

A company originally issues 180,000 shares of stock at a price of $22;one year later the stock price is $40 per share,the number of outstanding shares is unchanged,and the company's net income for the year is $230,400.The P/E ratio at the end of the recent year is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All other things being equal,when companies make stock repurchases:

Correct AnswerverifiedShow Answer

State laws often restrict dividends to the amount of retained earnings.

Correct AnswerverifiedTrue

A company that pays no dividends is always a poor investment.

Correct AnswerverifiedShow Answer

Which of the following statements about stock options is false?

Correct AnswerverifiedShow Answer

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified