Question 1

A corporate charter specifies that the company may sell up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The number of authorized shares after these transactions are accounted for is:

Accepted Answer

A)  12 million shares.
B)  20 million shares.
C)  9 million shares.
D)  17 million shares.E) A) and C)
F) B) and C)

Question 2

An increase in EPS is an indicator of:

Accepted Answer

A)  higher profitability.
B)  lower profitability.
C)  lower financial leverage.
D)  lower return on equity.E) None of the above
F) C) and D)

Question 3

Features of common stock usually include all of the following except:

Accepted Answer

A)  voting rights.
B)  dividends.
C)  primary claim to the company's assets in case of liquidation.
D)  preemptive rights.E) B) and C)
F) B) and D)

Question 4

Mountain View Co.buys back 3,000 shares of its $10 par value common stock from investors at $126 per share.This stock repurchase would be recorded with a debit to:

Accepted Answer

A)  Cash and a credit to Treasury Stock for $378,000.
B)  Treasury Stock and a credit to Cash for $30,000.
C)  Treasury Stock and a credit to Cash for $378,000.
D)  Treasury Stock for $30,000,a debit to Additional Paid-in Capital for $348,000,and a credit to Cash for $378,000.E) A) and B)
F) A) and C)

Question 5

A company issued 8% preferred stock with a $100 par value.This means:

Accepted Answer

A)  Preferred stockholders are entitled to 8% of the annual net income.
B)  Only 8% of total contributed capital can be preferred stock.
C)  Preferred stockholders are guaranteed a dividend.
D)  The potential dividend to preferred stockholders is $8 per share per year.E) None of the above
F) A) and D)

Question 6

On April 30,2018,Marie Claire sold 1,000 shares of her Spectrum Company's common stock to Fountain of the Sun for $16,000.The stock cost Marie Claire $10,000.Spectrum Company's accounting equation:

Accepted Answer

A)  is not affected because the corporation is separate from its owners.
B)  is not affected because of the cost principle.
C)  will show an increase in total assets and total stockholders' equity.
D)  will show a decrease in total assets and total stockholders' equity.E) B) and D)
F) A) and B)

Question 7

Brandies,Inc.reported net income of $5.6 million.At the beginning of the year,6.8 million shares of common stock were outstanding and at the end of the year,7.2 million shares were outstanding.No dividends were declared.The EPS is approximately:

Accepted Answer

A)  $0.80.
B)  $0.78.
C)  $0.83.
D)  $0.70.E) A) and D)
F) B) and C)

Question 8

Core Corporation had 400,000 shares of $2 par value common stock authorized.On December 31,2018,there were 200,000 shares issued and outstanding.The market value of its common stock on that date was $100 per share.On January 5,2019,the board of directors declared a five-to-four stock split (i.e. ,a 25% increase in the number of shares).
Required:
Part a.Briefly explain the how a stock spilt affects the stockholders' equity accounts and the total resources of the company.
Part b.Assume that you have 100 shares of Core Corporation common stock.Determine how many shares will you have after the stock split.
Part c.Determine how the stock split will impact the number of authorized shares,the number of issued and outstanding shares,and the par value per share.
Part d.Determine the total par value of the company's issued and outstanding shares (that is,the balance of the Common Stock account)before the stock split and after the stock split.

Accepted Answer

Part a
Stock splits are not dividends.Wh...

Question 9

Which of the following below correctly states the sequence of dates related to dividends on common stock?

Accepted Answer

A)  Board of directors date,Date of declaration,Date of payment
B)  Declaration date,Date of record,Date of payment
C)  Date of record-Declaration date,Date of payment
D)  Declaration date,Date of Payment,Date of distributionE) A) and B)
F) A) and C)

Question 10

Treasury stock is reported in the:

Accepted Answer

A)  financing section of the income statement.
B)  stockholders' equity section of the balance sheet.
C)  liability section of the balance sheet.
D)  operating section of the income statement.E) None of the above
F) B) and C)

Question 11

Match each term with the appropriate definition.Not all definitions will be used.
-Current Dividend Preference

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) E) and G)
O) B) and F)

Question 12

A major advantage of the corporate form of ownership is:

Accepted Answer

A)  limited legal liability.
B)  unlimited legal liability.
C)  ease of formation.
D)  that corporate earnings aren't taxed until they are distributed to owners as dividends.E) B) and D)
F) B) and C)

Question 13

Sugar Snap Manufacturing has the following information available from its accounting records:  The company has no preferred stock.What is the approximate return on equity?

Accepted Answer

A)  20%
B)  22%
C)  25%
D)  234%E) All of the above
F) B) and D)

Question 14

On September 1,Primrose Industries with 100,000 shares of $5 par value common stock and $2,000,000 of Retained Earnings issues a 2-for-1 stock split.The market price of the stock on that date is $24 per share.Which of the following statements is correct concerning this stock split?

Accepted Answer

A)  Contributed capital will increase by $500,000.
B)  Retained Earnings will decrease by $2,400,000.
C)  Dividends payable will increase by $500,000.
D)  No entry will be made for this transaction.E) B) and D)
F) All of the above

Question 15

A stock dividend increases the market price of the company's stock.

Accepted Answer

A) True 
 B)False

Question 16

Mr.Big received a $5,000 payment from his sole proprietorship,Buy & Large,for work performed by Mr.Big.The payment should be recorded with a $5,000:

Accepted Answer

A)  debit to M.Big,Drawings.
B)  debit to Salary Expense.
C)  debit to M.Big,Capital.
D)  credit to Salary Expense.E) A) and C)
F) B) and C)

Question 17

Walter Co.declared a cash dividend.On the payment date of the dividend,its:

Accepted Answer

A)  assets decreased and its stockholders' equity decreased.
B)  assets decreased and its liabilities decreased.
C)  assets decreased and its stockholders' equity increased.
D)  liabilities decreased and its common stock decreased.E) C) and D)
F) B) and D)

Question 18

The statement of stockholder's equity differs from the statement of retained earnings in that the statement of stockholders' equity:

Accepted Answer

A)  shows the effect of dividends declared.
B)  contains net income.
C)  contains the changes in contributed capital.
D)  contains a liability section.E) None of the above
F) B) and D)

Question 19

All else being equal,if net income decreases:

Accepted Answer

A)  EPS decreases and ROE increases.
B)  EPS and ROE both decrease.
C)  EPS increases and ROE decreases.
D)  EPS and ROE both increase.E) A) and D)
F) B) and C)

Question 20

An increase to Rich's Farm's account called Barry Rich,capital would occur when:

Accepted Answer

A)  Barry Rich receives cash from Rich's Farm.
B)  Barry Rich invests cash in Rich's Farm.
C)  Rich's Farm pays Barry Rich a dividend.
D)  Rich's Farm issues common stock to Barry Rich.E) All of the above
F) A) and B)

Exam 11: Stockholders Equity

An increase in EPS is an indicator of:

Correct Answer
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Correct Answer
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Part a
Stock splits are not dividends.Wh...
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Features of common stock usually include all of the following except:

Correct Answer
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A stock dividend increases the market price of the company's stock.

Correct Answer
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An increase to Rich's Farm's account called Barry Rich,capital would occur when:

Correct Answer
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Mountain View Co.buys back 3,000 shares of its $10 par value common stock from investors at $126 per share.This stock repurchase would be recorded with a debit to:

Correct Answer
verified

On April 30,2018,Marie Claire sold 1,000 shares of her Spectrum Company's common stock to Fountain of the Sun for $16,000.The stock cost Marie Claire $10,000.Spectrum Company's accounting equation:

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Current Dividend Preference

Correct Answer
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Mr.Big received a $5,000 payment from his sole proprietorship,Buy & Large,for work performed by Mr.Big.The payment should be recorded with a $5,000:

Correct Answer
verified

Walter Co.declared a cash dividend.On the payment date of the dividend,its:

Correct Answer
verified

A company issued 8% preferred stock with a $100 par value.This means:

Correct Answer
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Sugar Snap Manufacturing has the following information available from its accounting records: The company has no preferred stock.What is the approximate return on equity?

Correct Answer
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Treasury stock is reported in the:

Correct Answer
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A corporate charter specifies that the company may sell up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The number of authorized shares after these transactions are accounted for is:

Correct Answer
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A major advantage of the corporate form of ownership is:

Correct Answer
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On September 1,Primrose Industries with 100,000 shares of $5 par value common stock and $2,000,000 of Retained Earnings issues a 2-for-1 stock split.The market price of the stock on that date is $24 per share.Which of the following statements is correct concerning this stock split?

Correct Answer
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The statement of stockholder's equity differs from the statement of retained earnings in that the statement of stockholders' equity:

Correct Answer
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Brandies,Inc.reported net income of $5.6 million.At the beginning of the year,6.8 million shares of common stock were outstanding and at the end of the year,7.2 million shares were outstanding.No dividends were declared.The EPS is approximately:

Correct Answer
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All else being equal,if net income decreases:

Correct Answer
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Which of the following below correctly states the sequence of dates related to dividends on common stock?

Correct Answer
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Exam 11: Stockholders Equity

An increase in EPS is an indicator of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart aStock splits are not dividends.Wh...View AnswerShow Answer

Features of common stock usually include all of the following except:

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A stock dividend increases the market price of the company's stock.

Correct AnswerverifiedShow Answer

An increase to Rich's Farm's account called Barry Rich,capital would occur when:

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Mountain View Co.buys back 3,000 shares of its $10 par value common stock from investors at $126 per share.This stock repurchase would be recorded with a debit to:

Correct AnswerverifiedShow Answer

On April 30,2018,Marie Claire sold 1,000 shares of her Spectrum Company's common stock to Fountain of the Sun for $16,000.The stock cost Marie Claire $10,000.Spectrum Company's accounting equation:

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Current Dividend Preference

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Mr.Big received a $5,000 payment from his sole proprietorship,Buy & Large,for work performed by Mr.Big.The payment should be recorded with a $5,000:

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Walter Co.declared a cash dividend.On the payment date of the dividend,its:

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A company issued 8% preferred stock with a $100 par value.This means:

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Sugar Snap Manufacturing has the following information available from its accounting records: The company has no preferred stock.What is the approximate return on equity?

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Treasury stock is reported in the:

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A corporate charter specifies that the company may sell up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The number of authorized shares after these transactions are accounted for is:

Correct AnswerverifiedShow Answer

A major advantage of the corporate form of ownership is:

Correct AnswerverifiedShow Answer

On September 1,Primrose Industries with 100,000 shares of $5 par value common stock and $2,000,000 of Retained Earnings issues a 2-for-1 stock split.The market price of the stock on that date is $24 per share.Which of the following statements is correct concerning this stock split?

Correct AnswerverifiedShow Answer

The statement of stockholder's equity differs from the statement of retained earnings in that the statement of stockholders' equity:

Correct AnswerverifiedShow Answer

Brandies,Inc.reported net income of $5.6 million.At the beginning of the year,6.8 million shares of common stock were outstanding and at the end of the year,7.2 million shares were outstanding.No dividends were declared.The EPS is approximately:

Correct AnswerverifiedShow Answer

All else being equal,if net income decreases:

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Which of the following below correctly states the sequence of dates related to dividends on common stock?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Part a
Stock splits are not dividends.Wh...
View Answer

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