Question 1

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?

Accepted Answer

The answer of a.Explain what the dividend payout ratio is...

Question 2

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

Accepted Answer

A) Stockholders' equity is increased. 
B) Liabilities are increased. 
C) Assets are increased. 
D) Assets are decreased.

Question 3

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

Accepted Answer

A) increase increase 
B) increase decrease 
C) decrease increase 
D) decrease decrease

Question 4

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

Accepted Answer

A) The payment of dividends is at the discretion of the board of directors. 
B) The payment of interest on bonds payable is required by law. 
C) Interest accrues,whereas dividends do not accrue. 
D) The declaration of dividends reduces the amount of income taxes the corporation must pay.

Question 5

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?

Accepted Answer

A) In terms of the par value of the stock issued. 
B) At the fair market value of the machine. 
C) At the cost recorded by the previous owner of the machine. 
D) Recording the transaction would be postponed until a market price for the stock could be determined.

Question 6

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

Accepted Answer

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

Question 7

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?

Accepted Answer

A) Cash increases $10,000. 
B) Common Stock increases $15,000. 
C) Additional Paid-in Capital increases $5,000. 
D) Retained Earnings increases $5,000.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Contrast stock dividends and stock splits.

Accepted Answer

The answer of Contrast stock dividends and stock splits....

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

[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.

Accepted Answer

The answer of [APPENDIX] Fowler Company opened business as a...

Question 13

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

Accepted Answer

The answer of The annual dividend amount divided by the...

Question 14

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

Accepted Answer

A) It is a separate legal entity. 
B) It may have more than one class of stock outstanding. 
C) It is owned by one or more persons. 
D) The separate entity concept applies.

Question 15

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?

Accepted Answer

A) Common Stock increases $150,000. 
B) Common Stock increases $5,000;Additional Paid-in Capital - Common increases $145,000. 
C) Common Stock increases $5,000;Retained Earnings increases $145,000. 
D) Common Stock increases $5,000;Gain on Sale of Common Stock increases $145,000.

Question 16

Comprehensive income is

Accepted Answer

A) considered an appropriation of retained earnings when reported in the stockholders' equity section of the balance sheet. 
B) the result of all events and transactions that affect income during the accounting period that are reported on the income statement. 
C) reporting all items that are not under management's control on the statement of retained earnings. 
D) an all-inclusive approach to income that includes transactions that affect stockholders' equity with the exception of those transactions that affect owners.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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?

Accepted Answer

A) The Treasury Stock account should have a balance of $24,800. 
B) The company has a gain of $800 that should appear on the income statement. 
C) The Treasury Stock account should have a balance of $25,600. 
D) The company has a gain of $1,600 that should appear on the income statement.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) In the Stockholders' Equity section of the balance sheet 
B) In the Treasury Stock section of the balance sheet 
C) On the statement of retained earnings 
D) On both the balance sheet and statement of retained earnings

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?

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.

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?