Question 1

A corporation does not have a legal obligation to pay dividends.

Accepted Answer

A) True 
 B)False  True

Question 2

Par value of a stock refers to the

Accepted Answer

A)  issue price of the stock 
B)  value assigned to a share of stock in the corporate charter. 
C)  market value of the stock. 
D)  maximum selling price of the stock. 
A)  issue price of the stock 
B)  value assigned to a share of stock in the corporate charter. 
C)  market value of the stock. 
D)  maximum selling price of the stock. B

Question 3

As of November 29, it appears that Notel will report earnings per share (EPS) of $1.15 for the quarter ended November 30. Which of the following events would cause this EPS number to decrease, assuming t he event occurs the morning of November 30?

Accepted Answer

A)  The company pays a supplier for inventory bought on account. 
B)  The company declares, but does not pay, a cash dividend. 
C)  The company purchases 10 shares of common stock in another company. 
D)  The company reissues the treasury stock it holds. 
A)  The company pays a supplier for inventory bought on account. 
B)  The company declares, but does not pay, a cash dividend. 
C)  The company purchases 10 shares of common stock in another company. 
D)  The company reissues the treasury stock it holds. D

Question 4

The right of current stockholders to purchase additional shares of newly issued stock in order to maintain the same percentage ownership is called:

Accepted Answer

A)  liquidation. 
B)  preemptive rights. 
C)  cumulative preference. 
D)  voting rights. 
A)  liquidation. 
B)  preemptive rights. 
C)  cumulative preference. 
D)  voting rights.

Question 5

McBean 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 has a 7% dividend rate. The company declares $600,000 in
total dividends for the year. Dividends in arrears are $30,000. Compute the amount of dividends to be distributed to:
a. preferred shareholders b. common shareholders

Accepted Answer

a. Current preferred dividend = 1,000,00

Question 6

The patent on a major drug produced by a pharmaceutical company will soon expire. Sales of the drug contribute 10% to the company's net income. Which of the following statements is most likely to be true in these circumstances?

Accepted Answer

A)  The P/E ratio will probably fall when the patent ends. 
B)  The P/E ratio will probably rise because the stock price will rise and the earnings will fall. 
C)  The P/E ratio will probably fall as investors factor in the future drop in net income. 
D)  The P/E ratio will probably rise because the stock price will fall and the earnings fall. 
A)  The P/E ratio will probably fall when the patent ends. 
B)  The P/E ratio will probably rise because the stock price will rise and the earnings will fall. 
C)  The P/E ratio will probably fall as investors factor in the future drop in net income. 
D)  The P/E ratio will probably rise because the stock price will fall and the earnings fall.

Question 7

All else equal, when the current stock price for a company's stock falls and net income falls:

Accepted Answer

A)  EPS decreases and ROE increases. 
B)  EPS and ROE both decrease. 
C)  EPS increases and ROE decreases. 
D)  EPS and ROE both increase. 
A)  EPS decreases and ROE increases. 
B)  EPS and ROE both decrease. 
C)  EPS increases and ROE decreases. 
D)  EPS and ROE both increase.

Question 8

The authorized number of shares of stock is the total number of shares of stock issued and outstanding.

Accepted Answer

A) True 
 B)False

Question 9

Mulberry Street Inc. began business on January 1, 2011 by issuing all of its 1000 authorized shares of its
$3 par value common stock for $10 per share. On June 30, they declared a cash dividend of $1 per share to
stockholders of record on July 31. They paid the cash dividend on August 30. On November 1, Mulberry Street reacquired 100 of its own shares of stock for $12 per share.
a. Prepare all of the necessary journal entries to record the events described above.
b. Prepare the Stockholders' Equity section of the Balance sheet as of 12/31/2011 assuming that the Net Income
for the year was $30,000.

Accepted Answer

@#IMG-DLM& b. @#IMG-DLM& Ending Bal. RE

Question 10

A company reported net income of $5.6 million. At the beginning of the year, 3.4 million shares of common stock were outstanding while during the year the average number of common shares outstanding was 3.5 million. There were 400,000 shares of preferred stock outstanding on average and no dividends were declared. The EPS is approximately:

Accepted Answer

A)  $1.60. 
B)  $1.51. 
C)  $1.65. 
D)  $1.75. 
A)  $1.60. 
B)  $1.51. 
C)  $1.65. 
D)  $1.75.

Question 11

Limited Liability Companies (LLCs) are like general partnerships in that:

Accepted Answer

A)  income tax is not paid by the company itself. 
B)  the business has a separate legal identity. 
C)  liability is limited. 
D)  amounts paid to the owners are recorded as salaries expense. 
A)  income tax is not paid by the company itself. 
B)  the business has a separate legal identity. 
C)  liability is limited. 
D)  amounts paid to the owners are recorded as salaries expense.

Question 12

Dividends in arrears are reported as liabilities on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

If the company pays the fixed dividend on the preferred stock, the transaction will:

Accepted Answer

A)  decrease Preferred stock by $20,000. 
B)  decrease Retained earnings by $600,000. 
C)  decrease Cash by $20,000. 
D)  increase Liabilities by $20,000. 
A)  decrease Preferred stock by $20,000. 
B)  decrease Retained earnings by $600,000. 
C)  decrease Cash by $20,000. 
D)  increase Liabilities by $20,000.

Question 14

AMD buys back 300,000 shares of its stock from investors at $6.50 a share. Two years later, it reissues this stock for $6.00 a share. The stock reissue would be recorded as:

Accepted Answer

A)  a debit to Cash of $1.8 million, a debit to Additional Paid-in Capital of $150,000, and a credit to Treasury Stock of $1.95 million. 
B)  a debit to Cash of $1.95 million, a credit to Treasury Stock of $1.8 million, and a credit to Additional Paid-in Capital of $150,000. 
C)  a debit to Cash of $1.95 million and a credit to Treasury Stock of $1.95 million. 
D)  a debit to Cash of $1.8 million and a credit to Treasury Stock of $1.8 million. 
A)  a debit to Cash of $1.8 million, a debit to Additional Paid-in Capital of $150,000, and a credit to Treasury Stock of $1.95 million. 
B)  a debit to Cash of $1.95 million, a credit to Treasury Stock of $1.8 million, and a credit to Additional Paid-in Capital of $150,000. 
C)  a debit to Cash of $1.95 million and a credit to Treasury Stock of $1.95 million. 
D)  a debit to Cash of $1.8 million and a credit to Treasury Stock of $1.8 million.

Question 15

Which of the following statements regarding dividends is true?

Accepted Answer

A)  Some companies do not pay dividends even when the company is profitable. 
B)  Stock dividends immediately increase the total value of the stockholders' investment. 
C)  Cash dividends and stock dividends both decrease total stockholders' equity. 
D)  A corporation has a legal obligation to pay dividends each year. 
A)  Some companies do not pay dividends even when the company is profitable. 
B)  Stock dividends immediately increase the total value of the stockholders' investment. 
C)  Cash dividends and stock dividends both decrease total stockholders' equity. 
D)  A corporation has a legal obligation to pay dividends each year.

Question 16

The declaration date for a dividend is the date on which the company:

Accepted Answer

A)  debits Dividends Declared 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. 
A)  debits Dividends Declared 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 17

When a company reissues shares of its treasury stock, it must report a gain or a loss on the sale.

Accepted Answer

A) True 
 B)False

Question 18

A company issues 100,000 shares of preferred stock for $40 a 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:

Accepted Answer

A)  debit of $4 million to Cash and a credit of $4 million to Preferred Stock. 
B)  debit of $300,000 to Cash and a credit of $300,000 to Preferred Stock. 
C)  debit of $4 million to Cash, a credit of $300,000 to Preferred Stock, and a credit of $3.7 million to Additional Paid-in Capital. 
D)  debit of $300,000 to Cash, a debit of $3.7 million to Long-term Investments, a credit of $300,000 to 
A)  debit of $4 million to Cash and a credit of $4 million to Preferred Stock. 
B)  debit of $300,000 to Cash and a credit of $300,000 to Preferred Stock. 
C)  debit of $4 million to Cash, a credit of $300,000 to Preferred Stock, and a credit of $3.7 million to Additional Paid-in Capital. 
D)  debit of $300,000 to Cash, a debit of $3.7 million to Long-term Investments, a credit of $300,000 to

Question 19

A corporation's legal capital (legal value) is often defined as:

Accepted Answer

A)  The par value of the issued shares. 
B)  The par value of the outstanding shares. 
C)  The par value of the authorized shares. 
D)  The par value of the shares in the treasury. 
A)  The par value of the issued shares. 
B)  The par value of the outstanding shares. 
C)  The par value of the authorized shares. 
D)  The par value of the shares in the treasury.

Question 20

A current dividend preference means that:

Accepted Answer

A)  preferred stockholders are paid current dividends before common stockholders are paid dividends. 
B)  unpaid dividends to preferred stockholders accumulate and must be paid before common stockholders receive dividends. 
C)  preferred stockholders are paid their full fixed dividend rate each period as long as the company is in operation. 
D)  unpaid cash dividends to preferred stockholders must be replaced with stock dividends during the current period. 
A)  preferred stockholders are paid current dividends before common stockholders are paid dividends. 
B)  unpaid dividends to preferred stockholders accumulate and must be paid before common stockholders receive dividends. 
C)  preferred stockholders are paid their full fixed dividend rate each period as long as the company is in operation. 
D)  unpaid cash dividends to preferred stockholders must be replaced with stock dividends during the current period.

A corporation does not have a legal obligation to pay dividends.

Par value of a stock refers to the

As of November 29, it appears that Notel will report earnings per share (EPS) of $1.15 for the quarter ended November 30. Which of the following events would cause this EPS number to decrease, assuming t he event occurs the morning of November 30?

The right of current stockholders to purchase additional shares of newly issued stock in order to maintain the same percentage ownership is called:

The patent on a major drug produced by a pharmaceutical company will soon expire. Sales of the drug contribute 10% to the company's net income. Which of the following statements is most likely to be true in these circumstances?

All else equal, when the current stock price for a company's stock falls and net income falls:

The authorized number of shares of stock is the total number of shares of stock issued and outstanding.

Limited Liability Companies (LLCs) are like general partnerships in that:

Dividends in arrears are reported as liabilities on the balance sheet.

If the company pays the fixed dividend on the preferred stock, the transaction will:

AMD buys back 300,000 shares of its stock from investors at $6.50 a share. Two years later, it reissues this stock for $6.00 a share. The stock reissue would be recorded as:

Which of the following statements regarding dividends is true?

The declaration date for a dividend is the date on which the company:

When a company reissues shares of its treasury stock, it must report a gain or a loss on the sale.

A company issues 100,000 shares of preferred stock for $40 a 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:

A corporation's legal capital (legal value) is often defined as:

A current dividend preference means that:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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Exam 11: Reporting and Interpreting Stockholders Equity

A corporation does not have a legal obligation to pay dividends.

Par value of a stock refers to the

As of November 29, it appears that Notel will report earnings per share (EPS) of $1.15 for the quarter ended November 30. Which of the following events would cause this EPS number to decrease, assuming t he event occurs the morning of November 30?

The right of current stockholders to purchase additional shares of newly issued stock in order to maintain the same percentage ownership is called:

The patent on a major drug produced by a pharmaceutical company will soon expire. Sales of the drug contribute 10% to the company's net income. Which of the following statements is most likely to be true in these circumstances?

All else equal, when the current stock price for a company's stock falls and net income falls:

The authorized number of shares of stock is the total number of shares of stock issued and outstanding.

Limited Liability Companies (LLCs) are like general partnerships in that:

Dividends in arrears are reported as liabilities on the balance sheet.

If the company pays the fixed dividend on the preferred stock, the transaction will:

AMD buys back 300,000 shares of its stock from investors at $6.50 a share. Two years later, it reissues this stock for $6.00 a share. The stock reissue would be recorded as:

Which of the following statements regarding dividends is true?

The declaration date for a dividend is the date on which the company:

When a company reissues shares of its treasury stock, it must report a gain or a loss on the sale.

A company issues 100,000 shares of preferred stock for $40 a 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:

A corporation's legal capital (legal value) is often defined as:

A current dividend preference means that:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters