Question 1

In a corporation's organization chart, which is the highest position?

Accepted Answer

A)  Stockholders. 
B)  Board of directors. 
C)  CEO. 
D)  President. 
A)  Stockholders. 
B)  Board of directors. 
C)  CEO. 
D)  President.

Question 2

Which of the following best describes retained earnings?

Accepted Answer

A)  Cash available for dividends. 
B)  The amount initially invested in the business by stockholders. 
C)  Cash available for expansion and growth. 
D)  Income that has been reinvested in the business rather than distributed as dividends to stockholders. 
A)  Cash available for dividends. 
B)  The amount initially invested in the business by stockholders. 
C)  Cash available for expansion and growth. 
D)  Income that has been reinvested in the business rather than distributed as dividends to stockholders.

Question 3

Which of the following does not appear in a corporate income statement?

Accepted Answer

A)  Gains and losses from treasury stock transactions. 
B)  Income tax expense. 
C)  The income or loss from a segment of the business that has been discontinued during the current year. 
D)  Gains and losses not expected to recur in the foreseeable future. 
A)  Gains and losses from treasury stock transactions. 
B)  Income tax expense. 
C)  The income or loss from a segment of the business that has been discontinued during the current year. 
D)  Gains and losses not expected to recur in the foreseeable future.

Question 4

Which of the following best describes the book value of a share of stock?

Accepted Answer

A)  Net assets divided by the number of shares outstanding. 
B)  The amount at which the stock would sell on the market if sold by a willing and informed seller to a willing and informed buyer. 
C)  Total assets of the company, as reported in the accounting records, divided by the number of shares of stock outstanding. 
D)  Total stockholders' equity divided by the number of shares authorized. 
A)  Net assets divided by the number of shares outstanding. 
B)  The amount at which the stock would sell on the market if sold by a willing and informed seller to a willing and informed buyer. 
C)  Total assets of the company, as reported in the accounting records, divided by the number of shares of stock outstanding. 
D)  Total stockholders' equity divided by the number of shares authorized.

Question 5

When a corporation fails to pay a dividend one year on its common stock, it is said to be "in arrears."

Accepted Answer

A) True 
 B)False

Question 6

Shares that have been sold and are in the hands of stockholders are called:

Accepted Answer

A)  Outstanding. 
B)  Issued. 
C)  Treasury. 
D)  Underwritten. 
A)  Outstanding. 
B)  Issued. 
C)  Treasury. 
D)  Underwritten.

Question 7

By going public a corporation can raise equity capital from many investors.

Accepted Answer

A) True 
 B)False

Question 8

Refer to the information above. If Vision did not pay a dividend for the last two years, but declared a dividend this year, how much will they have to declare in order for the common stockholders to receive $.45 per share?

Accepted Answer

A)  $189,000. 
B)  $306,000. 
C)  $108,000. 
D)  $162,000. 
A)  $189,000. 
B)  $306,000. 
C)  $108,000. 
D)  $162,000.

Question 9

A stock split will normally increase the market price of the stock and decrease the number of shares on the market.

Accepted Answer

A) True 
 B)False

Question 10

Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7%, $100 par preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per share dividend this year, what will be the total amount they must pay their shareholders?

Accepted Answer

A)  $117,000. 
B)  $341,000. 
C)  $327,000. 
D)  $177,000. 
A)  $117,000. 
B)  $341,000. 
C)  $327,000. 
D)  $177,000.

Question 11

The average issue price per share of Revere's preferred stock was:

Accepted Answer

A)  $117. 
B)  $100. 
C)  $110. 
D)  $34.50. 
A)  $117. 
B)  $100. 
C)  $110. 
D)  $34.50.

Question 12

A 2-for-1 stock split will:

Accepted Answer

A)  Increase the total par value of the stock and increase the number of shares outstanding. 
B)  Decrease the total par value of the stock and increase the number of shares outstanding. 
C)  Not change the total par value of the stock and increase the number of shares outstanding. 
D)  Increase total stockholders' equity. 
A)  Increase the total par value of the stock and increase the number of shares outstanding. 
B)  Decrease the total par value of the stock and increase the number of shares outstanding. 
C)  Not change the total par value of the stock and increase the number of shares outstanding. 
D)  Increase total stockholders' equity.

Question 13

The number of shares a corporation may issue is specified in the articles of incorporation and approved by the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the information above. How many shares of preferred stock are outstanding?

Accepted Answer

A)  32,400 shares. 
B)  5,400 shares. 
C)  10,000 shares. 
D)  The number of shares cannot be determined without more information. 
A)  32,400 shares. 
B)  5,400 shares. 
C)  10,000 shares. 
D)  The number of shares cannot be determined without more information.

Question 15

Which of the following most likely explains why a corporation's stock trades at a very high price-earnings ratio?

Accepted Answer

A)  Investors expect the corporation to have higher earnings in the future. 
B)  The corporation pays a very low dividend on its stock. 
C)  The corporation has several classes of stock outstanding. 
D)  The corporation is large with very low risk. 
A)  Investors expect the corporation to have higher earnings in the future. 
B)  The corporation pays a very low dividend on its stock. 
C)  The corporation has several classes of stock outstanding. 
D)  The corporation is large with very low risk.

Question 16

Refer to the information above. The reacquisition of the 2,000 shares on April 1, 2011, causes:

Accepted Answer

A)  No change in total assets of Jetter Corporation. 
B)  No change in the number of shares of Jetter Corporation stock outstanding. 
C)  A reduction in total assets and in total stockholders' equity of Jetter Corporation. 
D)  Jetter Corporation to show a new asset, "Treasury Stock", for $120,000. 
A)  No change in total assets of Jetter Corporation. 
B)  No change in the number of shares of Jetter Corporation stock outstanding. 
C)  A reduction in total assets and in total stockholders' equity of Jetter Corporation. 
D)  Jetter Corporation to show a new asset, "Treasury Stock", for $120,000.

Question 17

If the preferred stock of a corporation is cumulative:

Accepted Answer

A)  Dividends on preferred stock are guaranteed. 
B)  Dividends cannot be declared in an amount less than that stated on the stock certificate. 
C)  Preferred stockholders participate in dividends paid in excess of a stated amount on the common shares. 
D)  Dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock. 
A)  Dividends on preferred stock are guaranteed. 
B)  Dividends cannot be declared in an amount less than that stated on the stock certificate. 
C)  Preferred stockholders participate in dividends paid in excess of a stated amount on the common shares. 
D)  Dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock.

Question 18

Stock splits
Bainbridge Corporation recently patented an extraordinary invention that will allow average homeowners to cheaply generate a large fraction of the electricity consumed in their houses. As a result, the market price of Bainbridge's common stock has soared to $160 per share. Bainbridge is about to announce a 4 for 1 stock split. Explain why the company would take this action?

Accepted Answer

The purpose of a stock split is to bring

Question 19

Public corporations are required by law or regulation to perform all of the following except:

Accepted Answer

A)  Submit much of their financial information to the SEC for review. 
B)  Make regularly scheduled dividend payments to all stockholders. 
C)  Have their annual financial statements audited by an independent CPA. 
D)  Disclose their financial information to the public. 
A)  Submit much of their financial information to the SEC for review. 
B)  Make regularly scheduled dividend payments to all stockholders. 
C)  Have their annual financial statements audited by an independent CPA. 
D)  Disclose their financial information to the public.

Question 20

If a corporation has issued a single class of stock, it must be:

Accepted Answer

A)  Common Stock. 
B)  Preferred Stock. 
C)  Stock issued at Par-value. 
D)  Cumulative preferred Stock. 
A)  Common Stock. 
B)  Preferred Stock. 
C)  Stock issued at Par-value. 
D)  Cumulative preferred Stock.

Exam 11: Stockholders Equity: Paid-In Capital

In a corporation's organization chart, which is the highest position?

Which of the following best describes retained earnings?

Which of the following does not appear in a corporate income statement?

Which of the following best describes the book value of a share of stock?

When a corporation fails to pay a dividend one year on its common stock, it is said to be "in arrears."

Shares that have been sold and are in the hands of stockholders are called:

By going public a corporation can raise equity capital from many investors.

Refer to the information above. If Vision did not pay a dividend for the last two years, but declared a dividend this year, how much will they have to declare in order for the common stockholders to receive $.45 per share?

A stock split will normally increase the market price of the stock and decrease the number of shares on the market.

The average issue price per share of Revere's preferred stock was:

A 2-for-1 stock split will:

The number of shares a corporation may issue is specified in the articles of incorporation and approved by the Securities and Exchange Commission.

Refer to the information above. How many shares of preferred stock are outstanding?

Which of the following most likely explains why a corporation's stock trades at a very high price-earnings ratio?

Refer to the information above. The reacquisition of the 2,000 shares on April 1, 2011, causes:

If the preferred stock of a corporation is cumulative:

Public corporations are required by law or regulation to perform all of the following except:

If a corporation has issued a single class of stock, it must be:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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