Question 1

Stock options often are granted by a corporation to management personnel as a means of additional compensation and motivation of these employees.

Accepted Answer

A) True 
 B)False

Question 2

All of the following would appear on the statement of stockholders' equity except

Accepted Answer

A) declaration of cash dividends. 
B) an issuance of common stock. 
C) net income. 
D) declaration of a stock split. 
A) declaration of cash dividends. 
B) an issuance of common stock. 
C) net income. 
D) declaration of a stock split.

Question 3

A dividend that represents a return to the stockholders of a part of their paid-in capital rather than a distribution out of retained earnings is called a liquidating dividend.

Accepted Answer

A) True 
 B)False

Question 4

The board of directors of Lark Corporation declared a cash dividend of $3.50 per share on 57,000 shares of common stock on June 14,20x5.The dividend is to be paid on July 15,20x5,to shareholders of record on July 1,20x5.
-The effects of the entry to record the payment of the dividend on July 15,20x5,are to

Accepted Answer

A) increase assets and decrease stockholders' equity. 
B) decrease stockholders' equity and decrease liabilities. 
C) decrease liabilities and decrease assets. 
D) increase stockholders' equity and decrease liabilities. 
A) increase assets and decrease stockholders' equity. 
B) decrease stockholders' equity and decrease liabilities. 
C) decrease liabilities and decrease assets. 
D) increase stockholders' equity and decrease liabilities.

Question 5

Which of the following is a correct statement relating to the concept of mutual agency and the corporate form of business?

Accepted Answer

A) There is no mutual agency with the corporate form of business. 
B) Mutual agency may or may not exist in a corporation,depending on the individual state law. 
C) Mutual agency always exists in the corporate form of business. 
D) Mutual agency may or may not exist in a corporation,depending on a vote by the shareholders. 
A) There is no mutual agency with the corporate form of business. 
B) Mutual agency may or may not exist in a corporation,depending on the individual state law. 
C) Mutual agency always exists in the corporate form of business. 
D) Mutual agency may or may not exist in a corporation,depending on a vote by the shareholders.

Question 6

At the beginning of 20x5,Spur Corporation had 68,000 shares of $10 par value common stock issued and outstanding.During January 20x5,Spur declared and distributed a 10 percent stock dividend.The market value of Spur's stock was $25 throughout the month of January.The entry to be recorded for the declaration of stock dividend is

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 7

If there is no change in the number of shares authorized and issued from one year to the next,but there is a change in the number of shares outstanding on those same dates,how would you explain that change?

Accepted Answer

The change can be explained either by th

Question 8

Use the following information to answer the question below. The following transactions involving Cactus Wren Corporation occurred during the year:
Apr. 1  Purchased 2,000 shares of its own preferred stock for $20, the current market price. This is the first transaction involving its own stock engaged in by the company.
May 3  Sold 400 of the shares purchased on April 1 for $25 per share.
June 5  Retired 600 of the shares purchased on April 1. The original issue price was $10. The par value of the stock is $5.
-The entry to record the April 1 transaction is :

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 9

For accounting purposes,stated value is treated the same way as par value.

Accepted Answer

A) True 
 B)False

Question 10

The word preferred in the phrase preferred stock means that an owner of preferred stock has some advantages over a bondholder.

Accepted Answer

A) True 
 B)False

Question 11

Par value is the minimum cushion of capital established for the protection of

Accepted Answer

A) investors (stockholders). 
B) management. 
C) creditors. 
D) customers. 
A) investors (stockholders). 
B) management. 
C) creditors. 
D) customers.

Question 12

How is it possible for a corporation to have more shares issued than it has outstanding?

Accepted Answer

When a corporation buys back s

Question 13

Underwriters typically charge 1 percent of the selling price to guarantee the sale of initial public offerings of stock.

Accepted Answer

A) True 
 B)False

Question 14

Firehawk Corporation had net income of $560,000 in 20x5 and paid dividends of $440,000 on 200,000 shares of outstanding common stock.Total stockholders' equity at the end of 20x5 was $2,060,000 and the market price for each share of Firehawk's stock was $58 throughout 20x5.
-Additionally,the company paid preferred dividends of $2.40 per share during 20x5.Based on this information,what is the dividend yield on Firehawk's stock?

Accepted Answer

A) 21.36% 
B) 78.57% 
C) 3.79% 
D) 7.93% 
A) 21.36% 
B) 78.57% 
C) 3.79% 
D) 7.93%

Question 15

How should dividends in arrears be shown on a corporation's balance sheet?

Accepted Answer

A) As an increase in liabilities. 
B) In a note or in the body of the financial statements. 
C) As a decrease in assets. 
D) As an increase in stockholders' equity. 
A) As an increase in liabilities. 
B) In a note or in the body of the financial statements. 
C) As a decrease in assets. 
D) As an increase in stockholders' equity.

Question 16

Start-up and organization costs

Accepted Answer

A) are capitalized,but never amortized. 
B) are capitalized and amortized,usually over five years. 
C) are expensed in the year incurred. 
D) appear on the balance sheet as a current asset. 
A) are capitalized,but never amortized. 
B) are capitalized and amortized,usually over five years. 
C) are expensed in the year incurred. 
D) appear on the balance sheet as a current asset.

Question 17

Use the following information to obtain the ratios requested below.Where necessary,carry answers to one decimal place.
Dividends per share: $2.16
Market price per share: $48
Net income: $88,000
Average stockholders' equity: $625,000
Earnings per share: $1.56
a.Dividends yield = _____________%
b.Return on equity = _____________%
c.Price/earnings (P/E)ratio = __________times

Accepted Answer

a.4.5%
b.1

Question 18

Use this information to answer the following question. Pinnacle Corporation has 90,000 shares of $10 par value common stock outstanding.The following transactions occurred during the year:
Mar. 17 Declared a 10 percent stock dividend to stockholders of record on March 20. Market value of the stock was $22 on March 17.
Mar. 30 Distributed the stock dividend.
-The entry to record the transaction of March 30 is:

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 19

Which of the following is involved in assisting a corporation with its initial public offering (IPO)?

Accepted Answer

A) Registrar. 
B) Underwriter. 
C) Transfer agent. 
D) Incorporator. 
A) Registrar. 
B) Underwriter. 
C) Transfer agent. 
D) Incorporator.

Question 20

Treasury shares plus outstanding shares equal

Accepted Answer

A) unissued shares. 
B) subscribed shares. 
C) authorized shares. 
D) issued shares. 
A) unissued shares. 
B) subscribed shares. 
C) authorized shares. 
D) issued shares.

Exam 12: Stockholders Equity

Stock options often are granted by a corporation to management personnel as a means of additional compensation and motivation of these employees.

All of the following would appear on the statement of stockholders' equity except

A dividend that represents a return to the stockholders of a part of their paid-in capital rather than a distribution out of retained earnings is called a liquidating dividend.

Which of the following is a correct statement relating to the concept of mutual agency and the corporate form of business?

If there is no change in the number of shares authorized and issued from one year to the next,but there is a change in the number of shares outstanding on those same dates,how would you explain that change?

For accounting purposes,stated value is treated the same way as par value.

The word preferred in the phrase preferred stock means that an owner of preferred stock has some advantages over a bondholder.

Par value is the minimum cushion of capital established for the protection of

How is it possible for a corporation to have more shares issued than it has outstanding?

Underwriters typically charge 1 percent of the selling price to guarantee the sale of initial public offerings of stock.

How should dividends in arrears be shown on a corporation's balance sheet?

Start-up and organization costs

Which of the following is involved in assisting a corporation with its initial public offering (IPO)?

Treasury shares plus outstanding shares equal

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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