Question 1

The net effects on a corporation of the declaration and payment of a cash dividend are to

Accepted Answer

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

Question 2

Use the following information to answer the question below. When Langston Corporation was formed on January 1,20x5,the corporate charter provided for 100,000 shares of $10 par value common stock.The following transactions were among those engaged in by the corporation during its first month of operation:
1)The corporation issued 400 shares of stock to its lawyer in full payment of the $10,000 bill for assisting the company in drawing up its articles of incorporation and filing the proper papers with the state agency.
2)The company issued 16,000 shares of stock at a price of $50 per share.
3)The company issued 14,000 shares of stock in exchange for equipment that had a fair market value of $320,000.
-The entry to record transaction 2 is

Accepted Answer

A)  
B)  
C)  
D)   B

Question 3

The contributed capital of a corporation does not include

Accepted Answer

A)  additional paid-in capital.
B)  preferred stock.
C)  the stated value of common stock issued.
D)  retained earnings. D

Question 4

a.Yorkshire Corporation has 9,000 shares of $10 par value common stock and 5,000 shares of $50 par value,10 percent cumulative preferred stock outstanding.All shares were issued at par value.In addition,retained earnings total $90,000.If the preferred stock is callable at $54 per share,and one year's dividends are in arrears,compute book value per share of preferred stock.
b.Assume the same facts as in a above.Calculate book value per share of common stock.
c.Assume the same facts as in a above and that Yorkshire Corporation declares a 5-for-1 stock split on its common stock.After the split,total par value of common stock equals what amount?
d.Assume the same facts as in a above and that Yorkshire Corporation declares a 12 percent stock dividend on its preferred stock.If the market value on the declaration date was $70 per share,for what amount will Preferred Stock Distributable be credited?

Accepted Answer

The answer of a.Yorkshire Corporation has 9,000 shares of $10...

Question 5

On May 1,20x5,Ironwood Corporation had 200,000 shares of $10 par value common stock outstanding with a market value of $16 per share.On May 2,20x5,Ironwood announced a 4-for-1 stock split.After the split,the par value of the stock

Accepted Answer

A)  remained the same as before the split.
B)  was reduced to $2.50 per share.
C)  was reduced by $4 per share.
D)  was reduced by $2.50 per share.

Question 6

Receiving dividends is the only way in which stockholders can earn a return on their investment in a corporation.

Accepted Answer

A) True 
 B)False

Question 7

a.Indicate on the blanks below the effect (I = increase,D = decrease,NE = no effect)of the entry to record the declaration of a common stock dividend on each of the items listed.
b.Indicate on the blanks below the effect (I = increase,D = decrease,NE = no effect)of the entry to record the distribution of a (previously declared and recorded)common stock dividend on each of the items listed.

Accepted Answer

The answer of a.Indicate on the blanks below the effect...

Question 8

Which of the following statements is not true about a 2-for-1 stock split?

Accepted Answer

A)  Total contributed capital increases.
B)  Par value per share is reduced to half of what it was before the split.
C)  A stockholder with ten shares before the split owns twenty shares after the split.
D)  The market price probably will decrease.

Question 9

A disadvantage of the corporate form of business is

Accepted Answer

A)  lack of mutual agency.
B)  professional management.
C)  ease of transfer of ownership.
D)  tax treatment.

Question 10

Legal capital is a descriptive phrase for

Accepted Answer

A)  stockholders' equity.
B)  residual equity.
C)  market value.
D)  par value.

Question 11

Corporate earnings are subject to double taxation.

Accepted Answer

A) True 
 B)False

Question 12

Use the following information to obtain the ratios requested below.Where necessary,carry answers to one decimal place.
Dividends per share: $1.14
Market price per share: $54
Net income: $118,000
Stockholders' equity,beginning of year: $500,000
Stockholders' equity,end of year: $530,000
Earnings per share: $1.75
a.Dividends yield = _____________%
b.Return on equity = _____________%
c.Price/earnings (P/E)ratio = __________ times

Accepted Answer

The answer of Use the following information to obtain the...

Question 13

Financing a business with common stock is more risky than financing it with bonds.

Accepted Answer

A) True 
 B)False

Question 14

To evaluate the amount of dividends they receive,investors use the ratio called

Accepted Answer

A)  Price/Earnings ratio
B)  Return on Equity
C)  Dividend yield ratio
D)  Current ratio

Question 15

The price/earnings (P/E)ratio is measured in terms of

Accepted Answer

A)  dollars.
B)  a percentage.
C)  times.
D)  days.

Question 16

If Grant Corporation has 120,000 shares of common stock authorized,75,000 shares of common stock issued,and holds 3,000 shares of common stock as treasury stock,the total number of outstanding shares of Grant Corporation amounts to

Accepted Answer

A)  48,000 shares.
B)  117,000 shares.
C)  72,000 shares.
D)  54,000 shares.

Question 17

The entry to record the retirement of treasury stock will include a debit to Common Stock for the par value of the retired shares.

Accepted Answer

A) True 
 B)False

Question 18

Stockholders who own preferred stock usually do not have voting rights,whereas stockholders who own common stock usually have voting rights.

Accepted Answer

A) True 
 B)False

Question 19

On the balance sheet,treasury stock owned by the company is classified properly as

Accepted Answer

A)  contra-stockholders' equity.
B)  current assets.
C)  investments.
D)  a note to the financial statements.

Question 20

According to generally accepted accounting principles,treasury stock usually should be recorded at

Accepted Answer

A)  original issue cost.
B)  par or stated value.
C)  cost.
D)  net realizable value.

Exam 12: Stockholders Equity

The net effects on a corporation of the declaration and payment of a cash dividend are to

The contributed capital of a corporation does not include

On May 1,20x5,Ironwood Corporation had 200,000 shares of $10 par value common stock outstanding with a market value of $16 per share.On May 2,20x5,Ironwood announced a 4-for-1 stock split.After the split,the par value of the stock

Receiving dividends is the only way in which stockholders can earn a return on their investment in a corporation.

Which of the following statements is not true about a 2-for-1 stock split?

A disadvantage of the corporate form of business is

Legal capital is a descriptive phrase for

Corporate earnings are subject to double taxation.

Financing a business with common stock is more risky than financing it with bonds.

To evaluate the amount of dividends they receive,investors use the ratio called

The price/earnings (P/E) ratio is measured in terms of

If Grant Corporation has 120,000 shares of common stock authorized,75,000 shares of common stock issued,and holds 3,000 shares of common stock as treasury stock,the total number of outstanding shares of Grant Corporation amounts to

The entry to record the retirement of treasury stock will include a debit to Common Stock for the par value of the retired shares.

Stockholders who own preferred stock usually do not have voting rights,whereas stockholders who own common stock usually have voting rights.

On the balance sheet,treasury stock owned by the company is classified properly as

According to generally accepted accounting principles,treasury stock usually should be recorded at