Question 1

Explain the composition of retained earnings and identify the special items that are reported in it.

Accepted Answer

Retained earnings generally consists of

Question 2

What are the rights generally granted to common stockholders?

Accepted Answer

Common stockholders generally have the r

Question 3

A company reported net income of $478,000 and paid $5,500 in preferred cash dividends during the current year. The company had 100,000 common shares issued, and 10,000 common shares in treasury during the year. The year-end market price per common share was $43.05. Calculate the company's price-earnings ratio.

Accepted Answer

The answer of A company reported net income of $478,000...

Question 4

What is the effect of dividend preferences on preferred stock? Explain how a dividend is distributed in the case of cumulative preferred stock with dividends in arrears.

Accepted Answer

Preferred shareholders usually have the

Question 5

The date of record is the date that directors vote to pay a cash dividend to shareholders.

Accepted Answer

A) True 
 B)False

Question 6

If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.

Accepted Answer

A) True 
 B)False

Question 7

Book value per share:

Accepted Answer

A)  Reflects the value per share if a company is liquidated at balance sheet amounts. 
B)  Is assets divided by equity. 
C)  Is assets divided by the number of common shares outstanding. 
D)  Measures the worth of assets. 
E)  Is equal to par value per share. 
A)  Reflects the value per share if a company is liquidated at balance sheet amounts. 
B)  Is assets divided by equity. 
C)  Is assets divided by the number of common shares outstanding. 
D)  Measures the worth of assets. 
E)  Is equal to par value per share.

Question 8

Book value per common share is calculated by dividing stockholders' equity applicable to common shares by the number of common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 9

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:

Accepted Answer

A)  Participating preferred stock. 
B)  Callable preferred stock. 
C)  Cumulative preferred stock. 
D)  Convertible preferred stock. 
E)  Noncumulative preferred stock. 
A)  Participating preferred stock. 
B)  Callable preferred stock. 
C)  Cumulative preferred stock. 
D)  Convertible preferred stock. 
E)  Noncumulative preferred stock.

Question 10

Participating preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock.

Accepted Answer

A) True 
 B)False

Question 11

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average) common stock.

Accepted Answer

A) True 
 B)False

Question 12

Prior period adjustments to financial statements can result from:

Accepted Answer

A)  Changes in accounting estimates. 
B)  Unacceptable accounting practices. 
C)  Discontinued operations. 
D)  Changes in tax law. 
E)  Extraordinary items. 
A)  Changes in accounting estimates. 
B)  Unacceptable accounting practices. 
C)  Discontinued operations. 
D)  Changes in tax law. 
E)  Extraordinary items.

Question 13

The annual amount of cash dividends distributed to common shareholders relative to the common stock's market value is the:

Accepted Answer

A)  Dividend payout ratio. 
B)  Dividend yield. 
C)  Price-earnings ratio. 
D)  Current yield. 
E)  Earnings per share. 
A)  Dividend payout ratio. 
B)  Dividend yield. 
C)  Price-earnings ratio. 
D)  Current yield. 
E)  Earnings per share.

Question 14

Sparrow Company had net income of $63,000. The company had 9,000 weighted average common shares outstanding. The basic earnings per share equal $7.00 per share.

Accepted Answer

A) True 
 B)False

Question 15

Changes in accounting estimates are:

Accepted Answer

A)  Considered accounting errors. 
B)  Reported as prior period adjustments. 
C)  Accounted for with a cumulative "catch-up" adjustment. 
D)  Extraordinary items. 
E)  Accounted for in current and future periods. 
A)  Considered accounting errors. 
B)  Reported as prior period adjustments. 
C)  Accounted for with a cumulative "catch-up" adjustment. 
D)  Extraordinary items. 
E)  Accounted for in current and future periods.

Question 16

The cumulative net income and loss retained by a corporation is called ___________________.

Accepted Answer

The answer of The cumulative net income and loss retained...

Question 17

A debit balance in retained earnings is referred to as a retained earnings deficit.

Accepted Answer

A) True 
 B)False

Question 18

A company has net income of $850,000. It has 125,000 weighted-average common shares outstanding, a market value per share of $115, and a book value of $100 per share. The company's price-earnings ratio equals:

Accepted Answer

A)  16.9. 
B)  14.7. 
C)  92.0. 
D)  13.5. 
E)  8.0. 
A)  16.9. 
B)  14.7. 
C)  92.0. 
D)  13.5. 
E)  8.0.

Question 19

Corporations often buy back their own stock:

Accepted Answer

A)  To avoid a hostile take-over. 
B)  To have shares available for a merger or acquisition. 
C)  To have shares available for employee compensation. 
D)  To maintain market value for the company stock. 
E)  All of these. 
A)  To avoid a hostile take-over. 
B)  To have shares available for a merger or acquisition. 
C)  To have shares available for employee compensation. 
D)  To maintain market value for the company stock. 
E)  All of these.

Question 20

All of the following statements regarding stock dividends are true except:

Accepted Answer

A)  Directors can use stock dividends to keep the market price of the stock affordable. 
B)  Stock dividends provide evidence of management's confidence that the company is doing well. 
C)  Stock dividends do not reduce assets or equity. 
D)  Stock dividends decrease the number of shares outstanding. 
E)  Stock dividends transfer a portion of equity from retained earnings to contributed capital. 
A)  Directors can use stock dividends to keep the market price of the stock affordable. 
B)  Stock dividends provide evidence of management's confidence that the company is doing well. 
C)  Stock dividends do not reduce assets or equity. 
D)  Stock dividends decrease the number of shares outstanding. 
E)  Stock dividends transfer a portion of equity from retained earnings to contributed capital.

Exam 13: Accounting for Corporations

Explain the composition of retained earnings and identify the special items that are reported in it.

What are the rights generally granted to common stockholders?

What is the effect of dividend preferences on preferred stock? Explain how a dividend is distributed in the case of cumulative preferred stock with dividends in arrears.

The date of record is the date that directors vote to pay a cash dividend to shareholders.

If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.

Book value per share:

Book value per common share is calculated by dividing stockholders' equity applicable to common shares by the number of common shares outstanding.

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:

Participating preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock.

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average) common stock.

Prior period adjustments to financial statements can result from:

The annual amount of cash dividends distributed to common shareholders relative to the common stock's market value is the:

Sparrow Company had net income of $63,000. The company had 9,000 weighted average common shares outstanding. The basic earnings per share equal $7.00 per share.

Changes in accounting estimates are:

The cumulative net income and loss retained by a corporation is called ___________________.

A debit balance in retained earnings is referred to as a retained earnings deficit.

A company has net income of $850,000. It has 125,000 weighted-average common shares outstanding, a market value per share of $115, and a book value of $100 per share. The company's price-earnings ratio equals:

Corporations often buy back their own stock:

All of the following statements regarding stock dividends are true except:

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 Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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