Exam 11: Stockholders Equity

a.Explain what the dividend payout ratio is and which firms typically have a high ratio and which firms may have the lowest. b.Many firms operate at a dividend payout ratio of less than 50%.Why do many firms not pay a larger percentage of income as dividends?

When a company declares a cash dividend,which of the following is true?

Simple Solutions Company reported net earnings of $60,000,declared and paid cash dividends on its common stock in the amount of $40,000 during the year,and sold 3,000 shares of $2 par value common stock for $15 per share during the year.What effects would these transactions have on the stockholders' equity accounts shown below? Retained Earnings Common Stock

Which of the following is false regarding the issue of stock versus the issue of bonds to raise capital?

A company purchased machinery by issuing 2,000 shares of $3 par value common stock.Since the company is new,there is no established market price for its stock.How would the company record the transaction?

All of the following statements are true about a 3-for-1 split,except:

Vegas Finance Company reported the following: Common stock,$10 par,100,000 shares authorized,80,000 shares issued and outstanding What is the effect of issuing 1,000 shares of common stock at $15 per share?

The cumulative feature of stock allows the firm to eliminate a class of stock by paying the stockholders a specified amount.

When the board of director's declares a cash or stock dividend,this action decreases Retained Earnings.

Contrast stock dividends and stock splits.

When stock is issued for a noncash asset,the par value of the stock is the best indicator of the value of the asset.

[APPENDIX] Fowler Company opened business as a sole proprietorship on January 1,2012.The owner contributed $525,000 cash on that date.During the year,the company had a net income of $20,000.The company purchased equipment of $120,000 during the year.The owner also withdrew $75,000 to pay for personal expenses during 2012. REQUIRED: Determine the company's owner's equity at December 31,2012.

The annual dividend amount divided by the annual net income is ________________________.

[APPENDIX] Which of the following is true concerning a sole proprietorship?

Valor Company issued 5,000 shares of $1 par common stock for $30 per share,providing the company with $150,000 in cash.What effect,in addition to the increase in cash,does this transaction have on the accounting equation for Valor?

Comprehensive income is

The statement of stockholders' equity is useful in evaluating a company's liquidity.

A company issued 4,000 shares of $5 par common stock for $30 per share.The company purchased 1,200 shares as treasury stock at $32 per share.Later,the company reissued 400 shares of the treasury stock at $34 per share.Which of the following is true?

Stockholders' equity is composed of three parts: contributed capital,earnings retained in the business,and dividends paid.

Venture Enterprises' accountant determined the following: Where would this item be reported on Venture's financial statements?