Question 1

A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80. Its price-earnings ratio equals 13.

Accepted Answer

A) True 
 B)False

Question 2

Torino Company has 10,000 shares of $5 par value, 4% cumulative and nonparticipating preferred stock and 100,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $1,000 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

Accepted Answer

A)  $2,000. 
B)  $1,000. 
C)  $0. 
D)  $3,000. 
E)  $4,000. 
A)  $2,000. 
B)  $1,000. 
C)  $0. 
D)  $3,000. 
E)  $4,000.

Question 3

Stockholders' equity consists of which of the following?

Accepted Answer

A)  Long-term assets. 
B)  Paid-in capital and retained earnings. 
C)  Premiums and discounts. 
D)  Paid-in capital and par value. 
E)  Retained earnings and cash. 
A)  Long-term assets. 
B)  Paid-in capital and retained earnings. 
C)  Premiums and discounts. 
D)  Paid-in capital and par value. 
E)  Retained earnings and cash.

Question 4

A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

Paid and declared preferred dividends are called dividends in arrears.

Accepted Answer

A) True 
 B)False

Question 6

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 7

The price-earnings ratio is calculated by dividing:

Accepted Answer

A)  Dividends per share by market value per share. 
B)  Market value per share by earnings per share. 
C)  Dividends per share by earnings per share. 
D)  Earnings per share by market value per share. 
E)  Market value per share by dividends per share. 
A)  Dividends per share by market value per share. 
B)  Market value per share by earnings per share. 
C)  Dividends per share by earnings per share. 
D)  Earnings per share by market value per share. 
E)  Market value per share by dividends per share.

Question 8

Dividend yield is the percent of cash dividends paid to common shareholders relative to the:

Accepted Answer

A)  Investors' purchase price of the stock. 
B)  Earnings per share. 
C)  Amount of cash. 
D)  Common stock's market value. 
E)  Amount of retained earnings. 
A)  Investors' purchase price of the stock. 
B)  Earnings per share. 
C)  Amount of cash. 
D)  Common stock's market value. 
E)  Amount of retained earnings.

Question 9

Par value of a stock refers to the:

Accepted Answer

A)  Market value of the stock on the date of the financial statements. 
B)  Issue price of the stock. 
C)  Dividend value of the stock. 
D)  Maximum selling price of the stock. 
E)  Value assigned per share by the corporate charter. 
A)  Market value of the stock on the date of the financial statements. 
B)  Issue price of the stock. 
C)  Dividend value of the stock. 
D)  Maximum selling price of the stock. 
E)  Value assigned per share by the corporate charter.

Question 10

All stock dividends are recorded at par value so there would never be a credit to the paid-in capital in excess of par value account.

Accepted Answer

A) True 
 B)False

Question 11

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

Accepted Answer

A)  Always equal to its stated value. 
B)  Referred to as retained earnings. 
C)  Always equal to its par value. 
D)  Referred to as paid-in capital. 
E)  Always below its stated value. 
A)  Always equal to its stated value. 
B)  Referred to as retained earnings. 
C)  Always equal to its par value. 
D)  Referred to as paid-in capital. 
E)  Always below its stated value.

Question 12

What are the rights generally granted to common stockholders?

Accepted Answer

Common stockholders generally have the r

Question 13

The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

Accepted Answer

A) True 
 B)False

Question 14

Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record the dividend declaration is:

Accepted Answer

A)  No entry is made until the stock is issued. 
B)  Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000. 
C)  Debit Retained Earnings $135,000; credit Cash $135,000. 
D)  Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000. 
E)  Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000. 
A)  No entry is made until the stock is issued. 
B)  Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000. 
C)  Debit Retained Earnings $135,000; credit Cash $135,000. 
D)  Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000. 
E)  Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.

Question 15

On June 30, a company declared a cash dividend of $0.35 per common share to the shareholders of record on July 15. The cash dividend will be paid on July 31. This company has 500,000 shares authorized and 100,000 shares outstanding. Prepare the journal entries required on June 30, July 15 and July 31.

Accepted Answer

None

Question 16

A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

Accepted Answer

A) True 
 B)False

Question 17

Explain how to calculate the price-earnings ratio and describe how it is used in analysis of a company's financial condition and performance.

Accepted Answer

The price-earnings ratio of a common sto

Question 18

Given the following information about a corporation's current year activities, compute the retained earnings for the current year.
 $$\begin{array} { l | l } 
\text { Retained earnings, January 1 } & \$ 342,000 \
\hline \text { Cash dividends } & \$ 51,700 \
\hline \text { Stock dividends } & \$ 40,000 \
\hline \text { Net income } & \$ 141,000
\end{array}$$

Accepted Answer

Retained Earnings = $391,300 
Supporting

Question 19

Which of the following is true of a stock dividend?

Accepted Answer

A)  Transfers a portion of equity from retained earnings to a cash reserve account. 
B)  The decision to declare a stock dividend resides with the shareholders. 
C)  Reduces a corporation's assets and stockholders' equity. 
D)  It is a liability on the balance sheet. 
E)  Does not affect total equity, but transfer amounts between the components of equity. 
A)  Transfers a portion of equity from retained earnings to a cash reserve account. 
B)  The decision to declare a stock dividend resides with the shareholders. 
C)  Reduces a corporation's assets and stockholders' equity. 
D)  It is a liability on the balance sheet. 
E)  Does not affect total equity, but transfer amounts between the components of equity.

Question 20

A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

Accepted Answer

A)  A credit to Paid-in Capital in Excess of Par Value, Common Stock for $72,000. 
B)  A credit to Common Stock for $84,000. 
C)  A debit to Common Stock for $12,000. 
D)  A debit to Land for $12,000. 
E)  A credit to Land for $12,000. 
A)  A credit to Paid-in Capital in Excess of Par Value, Common Stock for $72,000. 
B)  A credit to Common Stock for $84,000. 
C)  A debit to Common Stock for $12,000. 
D)  A debit to Land for $12,000. 
E)  A credit to Land for $12,000.

Exam 13: Accounting for Corporations

A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80. Its price-earnings ratio equals 13.

Stockholders' equity consists of which of the following?

A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.

Paid and declared preferred dividends are called dividends in arrears.

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

The price-earnings ratio is calculated by dividing:

Dividend yield is the percent of cash dividends paid to common shareholders relative to the:

Par value of a stock refers to the:

All stock dividends are recorded at par value so there would never be a credit to the paid-in capital in excess of par value account.

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

What are the rights generally granted to common stockholders?

The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record the dividend declaration is:

A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

Explain how to calculate the price-earnings ratio and describe how it is used in analysis of a company's financial condition and performance.

Given the following information about a corporation's current year activities, compute the retained earnings for the current year. Retained earnings, January 1 \ 342,000 Cash dividends \ 51,700 Stock dividends \ 40,000 Net income \ 141,000

Which of the following is true of a stock dividend?

A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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