Question 1

If Capital,Inc.'s P/E ratio is 12.5 and the company's stock price is $35.00 per share then the company's EPS is:

Accepted Answer

A) $1.42. 
B) $2.80. 
C) $10.00. 
D) $0.80.

Question 2

McEwan Company has outstanding 10 million shares of $2 par value common stock and 1 million shares of $4 par value preferred stock.The preferred stock is noncumulative and has a 7% current dividend preference.The company declares total dividends amounting to $50,000,$250,000,and $600,000 during 2017,2018,and 2019,respectively.
Required:
Part a.Compute the amount of dividends to be distributed to preferred and common shareholders during 2017.
Part b.Compute the amount of dividends to be distributed to preferred and common shareholders during 2018.
Part c.Compute the amount of dividends to be distributed to preferred and common shareholders during 2019.

Accepted Answer

The answer of McEwan Company has outstanding 10 million shares...

Question 3

The stockholders' equity section of the balance sheet includes all of the following except:

Accepted Answer

A) Retained Earnings. 
B) Contributed Capital. 
C) Treasury Stock. 
D) Dividends.

Question 4

When a company uses excess cash to buy back some of its outstanding common stock,which of the following ratios will be affected directly in the manner described below?

Accepted Answer

A) Return on equity (RO
E) will decrease. 
B) Earnings per share (EPS)will increase. 
C) The Price Earnings (P
E) ratio will increase. 
D) There will not be any effect on the three ratios.

Question 5

An Additional Paid-in Capital account could be used with all of the following transactions except:

Accepted Answer

A) The issuance of par value stock at a price greater than the par value. 
B) The reissuance of treasury stock at a price less than the price paid when the stock was reacquired. 
C) The reissuance of treasury stock at a price greater than the price paid when the stock was reacquired. 
D) The issuance of no-par stock.

Question 6

Corporations can raise large amounts of money because:

Accepted Answer

A) shares of stock in public companies can easily be bought and sold by investors. 
B) the unlimited liability feature makes corporate ownership attractive to investors. 
C) corporate earnings are not taxed. 
D) all investments in corporate stock earn money for investors.

Question 7

Which of the following line items are not found on a sole proprietorship's statement of owner's equity?

Accepted Answer

A) Withdrawals 
B) Retained Earnings 
C) Capital 
D) Net income

Question 8

Galleria Company has 280,000 shares authorized,196,000 shares issued and 14,000 shares of treasury stock.How many shares does Galleria Company have outstanding?

Accepted Answer

A) 14,000 
B) 182,000 
C) 210,000 
D) 266,000

Question 9

Sylvan Heights Company issues 200,000 shares of preferred stock for $40 per share.The stock has a fixed dividend rate of 5% and a par value of $3 per share.The company records the issuance with a debit to Cash for:

Accepted Answer

A) $8 million and a credit to Preferred Stock for $8 million. 
B) $600,000 and a credit to Preferred Stock for $600,000. 
C) $8 million,a credit to Preferred Stock for $600,000,and a credit to Additional Paid-in Capital for $7.4 million. 
D) $600,000,a debit for $7.4 million to Long-term Investments,a credit to Preferred Stock for $600,000,and a credit to Additional Paid-in Capital for $7.4 million.

Question 10

A partnership:

Accepted Answer

A) has two or more co-owners. 
B) is a not-for-profit business. 
C) is incorporated. 
D) is a separate legal entity.

Question 11

Seasoned new issues are:

Accepted Answer

A) the selling of additional new shares. 
B) the repurchase of previously issued shares. 
C) the shares issued in an IPO. 
D) required before a corporation goes public.

Question 12

Complete the table below by filling in the Formula blank with the letter that corresponds to the correct formula for each ratio and filling in the Interpretation blank with the letter that corresponds to the interpretation provided.Not all ratio formulas and interpretations will be used.
 $$\begin{array} { | c | c | c | } 
\hline \text { Ratio } & \text { Formula } & \text { Interpretation } \
\hline \text { 1.PriceEarnings Ratio } & & \
\hline \text { 2. Earnings per Share } & & \
\hline \text { 3. Return on Equity } & & \
\hline
\end{array}$$ 
Ratio Formulas
A.	365 ÷ Inventory Turnover
B.	(Sales – Cost of Goods Sold) ÷ Sales
C.	Net Income ÷ Sales
D.	Net Operating Income ÷ Interest Expense
E.	(Net income – Preferred dividends) ÷ Average number of common shares outstanding
F.	Total Liabilities ÷ Total Assets
G.	Current stock price (per share) ÷ Earnings per Share
H.	(Net income – Preferred dividends) ÷ Average common stockholders' equity

Ratio Interpretations
A.	The portion of sales that is attributable to merchandise profit.
B.	Ability of a company to pay its short-term debts as they come due.
C.	The percent of each sales dollar that is left over after covering costs and expenses.
D.	How many times more than the current year's earnings investors are willing to pay for a company's common stock.
E.	Ability of a company to quickly pay its short-term debts as they come due.
F.	The portion of a company's total financing that comes from debt.
G.	The amount of income generated for each share of common stock owned by stockholders.
H.	How effectively a company is using its assets to generate revenue.
I.	The amount of income earned for each dollar of common stockholders' equity.

Accepted Answer

The answer of Complete the table below by filling in...

Question 13

Match each term with the appropriate definition.Not all definitions will be used.
-Stock Options

Accepted Answer

A) The total number of shares currently owned by stockholders. 
B) The amount above the par value of the stock that owners paid the issuer for the stock. 
C) When employees of a company have the opportunity to buy a company's stock in the future at a fixed price. 
D) The date on which a company determines who receives a dividend. 
E) The date on which a liability is recorded for a dividend.
F)When a company sells issues of stock after its IPO.
G)When owners of the company contribute additional capital beyond what they paid for their stock.
H)When cash or stock dividends are issued according to the proportion of stock owned.
I)The date on which a company authorizes a dividend payment.
J)The date on which a company debits dividends payable and credits cash.
K)Dividends that have not had income tax withheld from them.
L)The total number of shares the company has sold,whether held by stockholders or by the company.
M)The accumulation of all the past dividends the company has not paid.
N)When cash or stock dividends are issued in an equal dollar or share amount per stockholder.

Question 14

Match each term with the appropriate definition.Not all definitions will be used.
-Pro Rata Basis

Accepted Answer

A) The total number of shares currently owned by stockholders. 
B) The amount above the par value of the stock that owners paid the issuer for the stock. 
C) When employees of a company have the opportunity to buy a company's stock in the future at a fixed price. 
D) The date on which a company determines who receives a dividend. 
E) The date on which a liability is recorded for a dividend.
F)When a company sells issues of stock after its IPO.
G)When owners of the company contribute additional capital beyond what they paid for their stock.
H)When cash or stock dividends are issued according to the proportion of stock owned.
I)The date on which a company authorizes a dividend payment.
J)The date on which a company debits dividends payable and credits cash.
K)Dividends that have not had income tax withheld from them.
L)The total number of shares the company has sold,whether held by stockholders or by the company.
M)The accumulation of all the past dividends the company has not paid.
N)When cash or stock dividends are issued in an equal dollar or share amount per stockholder.

Question 15

Stock dividends and stock splits are similar in all of the following ways except:

Accepted Answer

A) they both involve a pro rata distribution of shares to existing stockholders. 
B) they both reduce the stock price. 
C) they both decrease Retained Earnings. 
D) they both have no effect on cash.

Question 16

Mapleleaf Industries declared a $0.80 per share cash dividend.The company has 200,000 shares authorized,90,000 shares issued,and 84,000 shares of common stock outstanding.What is the journal entry to record the dividend declaration?

Accepted Answer

A) Debit Dividends and credit Dividends Payable for $72,000. 
B) Debit Dividends and credit Dividends Payable for $67,200. 
C) Debit Dividends Payable and credit Cash for $72,000. 
D) Debit Dividends Payable and credit Cash for $160,000.

Question 17

On the payment date for a cash dividend,the company:

Accepted Answer

A) debits Dividends and credits Dividends Payable for the amount of the dividend. 
B) debits Dividend Expense and credits Cash for the dividend amount. 
C) debits Dividends Payable and credits Cash for the dividend amount. 
D) establishes who will receive the dividend payment.

Question 18

Edgewater Co.has the following December 31,2018 equity balances: Common stock of $56,000;Additional paid-in capital of $84,000;and Retained earnings of $140,000.If Edgewater repurchases shares of its stock for $28,000,the total stockholders' equity balance would equal:

Accepted Answer

A) $168,000. 
B) $252,000. 
C) $308,000. 
D) $112,000.

Question 19

Tacoma Company had the following balances in its stockholders' equity accounts at December 31,2018:

The following transactions occurred during 2019:

Required:
Based on the above information,prepare a statement of stockholders' equity for 2019.

Accepted Answer

The answer of Tacoma Company had the following balances in...

Question 20

Sullivan Gulch Corporation declared a stock dividend on November 1 and issued 18,000 shares of stock to its stockholders.Prior to the dividend,the balance in Retained Earnings was $1,700,000,the number of shares of $5 par value stock issued and outstanding was 120,000,and the market value of the stock was $12.This stock dividend will cause total stockholders' equity to:

Accepted Answer

A) remain unchanged. 
B) increase by $90,000. 
C) decrease by $216,000. 
D) decrease by $126,000.

Exam 11: Stockholders Equity