Question 1

Which one of the following describes financial leverage?

Accepted Answer

A)  To pay off all long-term debt in order to reduce interest expense 
B)  To finance with equity capital 
C)  To offer discounts to customers for early payment of invoices 
D)  To earn more income on borrowed money than the related interest expense 
A)  To pay off all long-term debt in order to reduce interest expense 
B)  To finance with equity capital 
C)  To offer discounts to customers for early payment of invoices 
D)  To earn more income on borrowed money than the related interest expense

Question 2

Which of the following is a disadvantage of the corporate form of business?

Accepted Answer

A)  Separation of ownership and management 
B)  Continuous life 
C)  The potential to raise large amounts of capital 
D)  No mutual agency 
A)  Separation of ownership and management 
B)  Continuous life 
C)  The potential to raise large amounts of capital 
D)  No mutual agency

Question 3

The book value of common stock is equal to the total equity less the book value of preferred stock, divided by the number or common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 4

Retained earnings is equity that is generated internally by corporate business transactions.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following measures a company's success in using assets to earn income?

Accepted Answer

A)  The rate of return on stockholders' equity 
B)  Days sales in receivables 
C)  Inventory turnover 
D)  The rate of return on total assets 
A)  The rate of return on stockholders' equity 
B)  Days sales in receivables 
C)  Inventory turnover 
D)  The rate of return on total assets

Question 6

Every corporation issues preferred stock.

Accepted Answer

A) True 
 B)False

Question 7

On December 2, 2014, Ewell Company purchases a piece of land from the original owner. In payment for the land, Ewell Company issues 8,000 shares of common stock with $1.00 par value. The land has been appraised at a market value of $400,000. Please provide the journal entry for this transaction.
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Accepted Answer

This question is no

Question 8

Hot Tamale Company had $120,000 of Revenues and $125,000 of Expenses. No dividends were paid. Please provide the second of the year-end closing entries.
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Accepted Answer

This question is no

Question 9

Which of the following represents one of the basic rights of stockholders?

Accepted Answer

A)  Stockholders may sell their stock back to the company if they wish. 
B)  Stockholders may authorize a business contract on behalf of the corporation. 
C)  Stockholders may participate in management by voting on corporate matters. 
D)  Stockholders may determine at what price the company issues stock. 
A)  Stockholders may sell their stock back to the company if they wish. 
B)  Stockholders may authorize a business contract on behalf of the corporation. 
C)  Stockholders may participate in management by voting on corporate matters. 
D)  Stockholders may determine at what price the company issues stock.

Question 10

Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. These factors will result in which of the following?

Accepted Answer

A)  Retained earnings will go down. 
B)  Retained earnings will go up. 
C)  Paid-in capital will go down. 
D)  Paid-in capital will go up. 
A)  Retained earnings will go down. 
B)  Retained earnings will go up. 
C)  Paid-in capital will go down. 
D)  Paid-in capital will go up.

Question 11

A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the second of three year-end closing entries?

Accepted Answer

A)  Debit Income summary $75,000 and credit Expenses $75,000. 
B)  Debit Expenses $75,000 and credit Income summary $75,000. 
C)  Debit Income summary $5,000 and credit Retained earnings $5,000. 
D)  Debit Revenues $80,000 and credit Income summary $80,000. 
A)  Debit Income summary $75,000 and credit Expenses $75,000. 
B)  Debit Expenses $75,000 and credit Income summary $75,000. 
C)  Debit Income summary $5,000 and credit Retained earnings $5,000. 
D)  Debit Revenues $80,000 and credit Income summary $80,000.

Question 12

Which of the following would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share cash?

Accepted Answer

A)  Cash would be debited for $65,000. 
B)  Common stock would be debited for $50,000. 
C)  Common stock would be credited for $65,000. 
D)  Paid-in capital in excess of par-common would be debited for $5,000. 
A)  Cash would be debited for $65,000. 
B)  Common stock would be debited for $50,000. 
C)  Common stock would be credited for $65,000. 
D)  Paid-in capital in excess of par-common would be debited for $5,000.

Question 13

A corporation is a separate legal entity formed under the laws of a particular state.

Accepted Answer

A) True 
 B)False

Question 14

Lerner Company had the following transactions in 2013, its first year of operations.

• Issued 20,000 shares of common stock. Stock has par value of $1.00 per share and was issued at $14.00
Per share.
• Issued 1,000 shares of $100 par value preferred stock. Shares were issued at par.
• Earned net income of $35,000.
• Paid no dividends.

-
At the end of 2013, what is the total amount of Stockholders' equity?

Accepted Answer

A)  $415,000 
B)  $120,000 
C)  $260,000 
D)  $380,000 
A)  $415,000 
B)  $120,000 
C)  $260,000 
D)  $380,000

Question 15

Which of the following describes a retained earnings deficit?

Accepted Answer

A)  When the company records a net loss for the year 
B)  When the retained earnings is less than the total paid-in capital 
C)  When the retained earnings is a negative amount 
D)  When the company does not pay out any dividends 
A)  When the company records a net loss for the year 
B)  When the retained earnings is less than the total paid-in capital 
C)  When the retained earnings is a negative amount 
D)  When the company does not pay out any dividends

Question 16

From its inception through the year of 2014, Quicksales Company was profitable and made strong dividend payments each year. In the year 2015, Quicksales had major losses and paid no dividends. In 2016, the company started making large profits again, and they were able to pay dividends to all shareholders-both common and preferred. There are 1,500 shares of cumulative, 7% preferred stock outstanding. The preferred stock has a par value of $100. What is the total amount of dividends which should be paid to the preferred shareholders in December, 2016?

Accepted Answer

A)  $210 
B)  $22,000 
C)  $10,500 
D)  $21,000 
A)  $210 
B)  $22,000 
C)  $10,500 
D)  $21,000

Question 17

Sheffield Company had $42,000 of net income in 2013. Equity at the beginning of the year was $1,200,000 and at the end of the year was $1,600,000. Sheffield has no preferred stock. Please calculate the rate of return on common stockholders' equity. (Round to 3 decimal places.)

Accepted Answer

A)  0.035 
B)  0.026 
C)  0.030 
D)  0.032 
A)  0.035 
B)  0.026 
C)  0.030 
D)  0.032

Question 18

Which of the following is the correct description of dividends in arrears, as it applies to cumulative preferred stock?

Accepted Answer

A)  The cumulative amount of dividends which were not paid in previous years 
B)  The cumulative amount of dividends that were paid in previous years 
C)  The amount of dividends that were paid late 
D)  The amount of dividends that will be paid in the coming year 
A)  The cumulative amount of dividends which were not paid in previous years 
B)  The cumulative amount of dividends that were paid in previous years 
C)  The amount of dividends that were paid late 
D)  The amount of dividends that will be paid in the coming year

Question 19

Most preferred stock is sold at a price higher than its par value.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following types of stock are considered to be LEAST risky for investors?

Accepted Answer

A)  Common stock 
B)  Par value stock 
C)  No-par stock 
D)  Preferred stock 
A)  Common stock 
B)  Par value stock 
C)  No-par stock 
D)  Preferred stock

Which one of the following describes financial leverage?

Which of the following is a disadvantage of the corporate form of business?

The book value of common stock is equal to the total equity less the book value of preferred stock, divided by the number or common shares outstanding.

Retained earnings is equity that is generated internally by corporate business transactions.

Which of the following measures a company's success in using assets to earn income?

Every corporation issues preferred stock.

On December 2, 2014, Ewell Company purchases a piece of land from the original owner. In payment for the land, Ewell Company issues 8,000 shares of common stock with $1.00 par value. The land has been appraised at a market value of $400,000. Please provide the journal entry for this transaction.

Hot Tamale Company had $120,000 of Revenues and $125,000 of Expenses. No dividends were paid. Please provide the second of the year-end closing entries.

Which of the following represents one of the basic rights of stockholders?

Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. These factors will result in which of the following?

A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the second of three year-end closing entries?

Which of the following would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share cash?

A corporation is a separate legal entity formed under the laws of a particular state.

Which of the following describes a retained earnings deficit?

Sheffield Company had $42,000 of net income in 2013. Equity at the beginning of the year was $1,200,000 and at the end of the year was $1,600,000. Sheffield has no preferred stock. Please calculate the rate of return on common stockholders' equity. (Round to 3 decimal places.)

Which of the following is the correct description of dividends in arrears, as it applies to cumulative preferred stock?

Most preferred stock is sold at a price higher than its par value.

Which of the following types of stock are considered to be LEAST risky for investors?

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters

Exam 12: Corporations: Paid-In Capital and the Balance Sheet

Which one of the following describes financial leverage?

Which of the following is a disadvantage of the corporate form of business?

The book value of common stock is equal to the total equity less the book value of preferred stock, divided by the number or common shares outstanding.

Retained earnings is equity that is generated internally by corporate business transactions.

Which of the following measures a company's success in using assets to earn income?

Every corporation issues preferred stock.

On December 2, 2014, Ewell Company purchases a piece of land from the original owner. In payment for the land, Ewell Company issues 8,000 shares of common stock with $1.00 par value. The land has been appraised at a market value of $400,000. Please provide the journal entry for this transaction.

Hot Tamale Company had $120,000 of Revenues and $125,000 of Expenses. No dividends were paid. Please provide the second of the year-end closing entries.

Which of the following represents one of the basic rights of stockholders?

Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. These factors will result in which of the following?

A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the second of three year-end closing entries?

Which of the following would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share cash?

A corporation is a separate legal entity formed under the laws of a particular state.

Which of the following describes a retained earnings deficit?

Sheffield Company had $42,000 of net income in 2013. Equity at the beginning of the year was $1,200,000 and at the end of the year was $1,600,000. Sheffield has no preferred stock. Please calculate the rate of return on common stockholders' equity. (Round to 3 decimal places.)

Which of the following is the correct description of dividends in arrears, as it applies to cumulative preferred stock?

Most preferred stock is sold at a price higher than its par value.

Which of the following types of stock are considered to be LEAST risky for investors?

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters