Question 1

Advantages of the corporate form of business include which of the following? I.Double taxation
II.Ability to raise capital
III.Lack of mutual agency
IV.More paperwork
V.Limited liability

Accepted Answer

A)  II.
B)  II.,III.,V.
C)  I.,II.,III.
D)  II.,IV.,V.E) A) and D)
F) A) and C)

Question 2

Financial information for Retro Designs includes the following selected data: 
  Net income (in millions)  $145 Preferred stock dividends (in millions)  $25 Shares outstanding (in millions)  240 Stock price $10.00\begin{array}{lr}	ext { Net income (in millions)  } & \$ 145 \	ext { Preferred stock dividends (in millions)  } & \$ 25 \	ext { Shares outstanding (in millions)  } & 240 \	ext { Stock price } & \$ 10.00\end{array} Net income (in millions)   Preferred stock dividends (in millions)   Shares outstanding (in millions)   Stock price ​$145$25240$10.00​ 
What is the company's price-earnings ratio?

Accepted Answer

A)  20.0.
B)  15.0.
C)  6.9.
D)  0.05. E) C) and D)
F) None of the above

Question 3

The PE ratio:

Accepted Answer

A)  tends to be higher for growth stocks.
B)  tends to be higher for value stocks.
C)  indicates how a stock is trading in relation to cumulative earnings over the life of the company.
D)  typically is less than 1.E) B) and D)
F) B) and C)

Question 4

The disadvantages of the corporate form of business include:

Accepted Answer

A)  Lack of mutual agency.
B)  Additional taxes.
C)  Limited liability.
D)  Ability to raise capital.E) B) and C)
F) All of the above

Question 5

Retained Earnings represent a company's:

Accepted Answer

A)  Net income less dividends since the company first started.
B)  Undistributed net assets.
C)  Extra paid-in capital.
D)  Undistributed cash.E) A) and C)
F) A) and D)

Question 6

The stockholders' equity section of the balance sheet shows how each equity account changed during the year.

Accepted Answer

A) True 
 B)False

Question 7

Common stockholders usually have all of the following rights except:

Accepted Answer

A)  To receive dividends when declared.
B)  To share in the distribution of assets.
C)  To elect board of directors.
D)  To participate in the day-to-day operations.E) B) and C)
F) A) and D)

Question 8

We compute the return on equity ratio by dividing net income by ending stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

The return on equity measures the ability of company management to generate earnings from the resources that owners provide.

Accepted Answer

A) True 
 B)False

Question 10

When treasury stock is resold at a price above cost:

Accepted Answer

A)  A gain account is credited.
B)  A loss is reported.
C)  A revenue account is credited.
D)  Additional Paid-in Capital is increased.E) A) and D)
F) None of the above

Question 11

Large stock dividends and stock splits are issued primarily to:

Accepted Answer

A)  Lower the trading price of the stock per share.
B)  Increase the number of authorized shares.
C)  Increase legal capital.
D)  Increase the number of outstanding shares.E) All of the above
F) B) and C)

Question 12

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share.What is true about the journal entry to record the issuance?

Accepted Answer

A)  Credit Common Stock $300,000.
B)  Credit Cash $300,000.
C)  Credit Common Stock $15,000.
D)  Debit Additional Paid-In Capital $285,000.E) A) and B)
F) A) and C)

Question 13

The Surf's Up issues 1,000 shares of 6%,$100 par value preferred stock at the beginning of 2011.All remaining shares are common stock.The company was not able to pay dividends in 2011,but plans to pay dividends of $18,000 in 2012.Assuming the preferred stock is noncumulative,how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?

Accepted Answer

A)  $6,000 to preferred stockholders and $12,000 to common stockholders.
B)  $18,000 to preferred stockholders and $0 to common stockholders.
C)  $12,000 to preferred stockholders and $6,000 to common stockholders.
D)  $9,000 to preferred stockholders and $9,000 to common stockholders.E) A) and B)
F) A) and C)

Question 14

A company credits Additional Paid-in Capital for the portion of the cash proceeds above par value received for the issuance of stock.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements regarding the corporate form of business is correct?

Accepted Answer

A)  The disadvantages are that generating capital is difficult and that owners have limited liability.
B)  Disadvantages are that the business is subject to government regulations and double taxation on its income.
C)  One disadvantage is that ownership is easy to transfer.
D)  All of the other options are correct.E) None of the above
F) All of the above

Question 16

Northwest Clothing Supply has the following transactions during the year related to stockholders' equity:
Record each of these transactions.

Accepted Answer

The answer of Northwest Clothing Supply has the following transactions...

Question 17

Desert Apparel has 5,000 shares of common stock outstanding.On April 1,the company declares a $2 per share dividend to stockholders of record on April 15.The dividend is paid on April 30.Record all necessary entries on the appropriate dates for cash dividends.

Accepted Answer

The answer of Desert Apparel has 5,000 shares of common...

Question 18

The balance of Retained Earning at the end of the year represents:

Accepted Answer

A)  current year's profits less payments to owners.
B)  total earnings less payments to owners over the life of the company.
C)  total contributions from owners less withdrawals over the life of the company.
D)  total earnings over the life of the company.E) C) and D)
F) A) and B)

Question 19

Court Casuals has the following beginning balances in its stockholders' equity accounts on January 1,2012: Common Stock,$100,000; Additional Paid-in Capital,$4,100,000; and Retained Earnings,$3,000,000.Net income for the year ended December 31,2012,is $800,000.Court Casuals has the following transactions affecting stockholders' equity in 2012:

Accepted Answer

The answer of Court Casuals has the following beginning balances...

Question 20

Indicate whether each of the following transactions increases (+),decreases (-),or has no effect (NE)on total assets,total liabilities,and total stockholders' equity.
 $$\begin{array} { l c c c } 
 & \begin{array} { c } 
\text { Total } \
\text { Assets }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Liabilities }
\end{array} & \begin{array} { c } 
\text { Sotal } \
\text { Squolders' } \
\text { Equity }
\end{array} \
\text { Transaction }\
\text { Issue common stock } & & & \
\text { Issue preferred stock } & & & \
\text { Repurchase treasury stock } & & & \
\text { Sale of treasury stock } & & \
\text { Declare cash dividend } & & \
\text { Pay cash dividend } & & \
\text { 100\% stock dividend } & & \
\text { 2-for-1 stock split }
\end{array}$$

Accepted Answer

The answer of Indicate whether each of the following transactions...

Exam 10: Stockholders Equity

Retained Earnings represent a company's:

Correct Answer
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Northwest Clothing Supply has the following transactions during the year related to stockholders' equity: Record each of these transactions.

Correct Answer
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The balance of Retained Earning at the end of the year represents:

Correct Answer
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We compute the return on equity ratio by dividing net income by ending stockholders' equity.

Correct Answer
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A company credits Additional Paid-in Capital for the portion of the cash proceeds above par value received for the issuance of stock.

Correct Answer
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Correct Answer
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When treasury stock is resold at a price above cost:

Correct Answer
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Advantages of the corporate form of business include which of the following? I.Double taxation II.Ability to raise capital III.Lack of mutual agency IV.More paperwork V.Limited liability

Correct Answer
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Correct Answer
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Large stock dividends and stock splits are issued primarily to:

Correct Answer
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Which of the following statements regarding the corporate form of business is correct?

Correct Answer
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The PE ratio:

Correct Answer
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Common stockholders usually have all of the following rights except:

Correct Answer
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Correct Answer
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Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share.What is true about the journal entry to record the issuance?

Correct Answer
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Desert Apparel has 5,000 shares of common stock outstanding.On April 1,the company declares a $2 per share dividend to stockholders of record on April 15.The dividend is paid on April 30.Record all necessary entries on the appropriate dates for cash dividends.

Correct Answer
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The stockholders' equity section of the balance sheet shows how each equity account changed during the year.

Correct Answer
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The disadvantages of the corporate form of business include:

Correct Answer
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Correct Answer
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The return on equity measures the ability of company management to generate earnings from the resources that owners provide.

Correct Answer
verified

Exam 10: Stockholders Equity

Retained Earnings represent a company's:

Correct AnswerverifiedShow Answer

Northwest Clothing Supply has the following transactions during the year related to stockholders' equity: Record each of these transactions.

Correct AnswerverifiedShow Answer

The balance of Retained Earning at the end of the year represents:

Correct AnswerverifiedShow Answer

We compute the return on equity ratio by dividing net income by ending stockholders' equity.

Correct AnswerverifiedShow Answer

A company credits Additional Paid-in Capital for the portion of the cash proceeds above par value received for the issuance of stock.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When treasury stock is resold at a price above cost:

Correct AnswerverifiedShow Answer

Advantages of the corporate form of business include which of the following? I.Double taxation II.Ability to raise capital III.Lack of mutual agency IV.More paperwork V.Limited liability

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Large stock dividends and stock splits are issued primarily to:

Correct AnswerverifiedShow Answer

Which of the following statements regarding the corporate form of business is correct?

Correct AnswerverifiedShow Answer

The PE ratio:

Correct AnswerverifiedShow Answer

Common stockholders usually have all of the following rights except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share.What is true about the journal entry to record the issuance?

Correct AnswerverifiedShow Answer

Desert Apparel has 5,000 shares of common stock outstanding.On April 1,the company declares a $2 per share dividend to stockholders of record on April 15.The dividend is paid on April 30.Record all necessary entries on the appropriate dates for cash dividends.

Correct AnswerverifiedShow Answer

The stockholders' equity section of the balance sheet shows how each equity account changed during the year.

Correct AnswerverifiedShow Answer

The disadvantages of the corporate form of business include:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The return on equity measures the ability of company management to generate earnings from the resources that owners provide.

Correct AnswerverifiedShow Answer

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