Question 1

Which of the following statements regarding a stock split is true?

Accepted Answer

A)  A stock split decreases retained earnings. 
B)  Stock splits do not require a journal entry. 
C)  Stock splits are the same as stock dividends. 
D)  Stock splits increase the par value per share. 
A)  A stock split decreases retained earnings. 
B)  Stock splits do not require a journal entry. 
C)  Stock splits are the same as stock dividends. 
D)  Stock splits increase the par value per share.

Question 2

Which of the following statements regarding business forms is true?

Accepted Answer

A)  A sole proprietorship is an unincorporated business owned by one person. 
B)  All partnerships are owned by two people. 
C)  A corporation is not a legal entity. 
D)  An LLC (limited liabilitycompany) has the same tax treatment as a corporation. 
A)  A sole proprietorship is an unincorporated business owned by one person. 
B)  All partnerships are owned by two people. 
C)  A corporation is not a legal entity. 
D)  An LLC (limited liabilitycompany) has the same tax treatment as a corporation.

Question 3

The retained earnings balance was $22,900 on January 1. Net income for the year was $18,100. If retained earnings had a credit balance of $23,800 after closing entries were made for the year, and if additional stock of $5,200 was issued during the year, what was the amount of dividends declared during the year?

Accepted Answer

A)  $17,200 
B)  $23,700 
C)  $23,300 
D)  $13,000 
A)  $17,200 
B)  $23,700 
C)  $23,300 
D)  $13,000

Question 4

If a company's preferred stock is 7%, $1 par value, then the dividend on the stock is $.07 per share.

Accepted Answer

A) True 
 B)False

Question 5

A stock split increases total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 6

Typically, all other things equal, a profitable company that pays relatively high dividends:

Accepted Answer

A)  is an attractive investment for those seeking a steady income, like retired people. 
B)  will reinvest more profit which can lead to smaller growth potential. 
C)  will experience more growth in stock price over time. 
D)  is a bad investment. 
A)  is an attractive investment for those seeking a steady income, like retired people. 
B)  will reinvest more profit which can lead to smaller growth potential. 
C)  will experience more growth in stock price over time. 
D)  is a bad investment.

Question 7

A stock dividend:

Accepted Answer

A)  is the same thing as a stock split. 
B)  will reduce stockholders' equity just like a cash dividend. 
C)  will not change any of the accounts within stockholders' equity. 
D)  will reduce retained earnings just like a cash dividend. 
A)  is the same thing as a stock split. 
B)  will reduce stockholders' equity just like a cash dividend. 
C)  will not change any of the accounts within stockholders' equity. 
D)  will reduce retained earnings just like a cash dividend.

Question 8

A corporation's charter establishes the market value of the company's stock.

Accepted Answer

A) True 
 B)False

Question 9

The owner's salary is frequently the largest expense of a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 10

A major advantage of debt financing is that interest expense is tax deductible.

Accepted Answer

A) True 
 B)False

Question 11

If a company's P/E ratio suddenly decreases:

Accepted Answer

A)  you should sell the stock as soon as possible. 
B)  you should buy more of the stock to increase your average gain. 
C)  the company probably announced higher earnings forecasts. 
D)  the market must have reacted to some bad news that is expected to affect the company in the future. 
A)  you should sell the stock as soon as possible. 
B)  you should buy more of the stock to increase your average gain. 
C)  the company probably announced higher earnings forecasts. 
D)  the market must have reacted to some bad news that is expected to affect the company in the future.

Question 12

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The number of authorized shares after these transactions are accounted for is:

Accepted Answer

A)  12 million shares. 
B)  20 million shares. 
C)  9 million shares. 
D)  17 million shares. 
A)  12 million shares. 
B)  20 million shares. 
C)  9 million shares. 
D)  17 million shares.

Question 13

Stockholders' equity is:

Accepted Answer

A)  the amount the company received for all stock when issued plus the amount of retained earnings minus treasury stock. 
B)  the amount the company received for all stock authorized plus the amount of retained earnings and treasury stock. 
C)  the par value the company received for all stock issued plus the amount of retained earnings minus treasury stock. 
D)  the amount the company received for all stock when issued minus the amount of retained earnings and 
A)  the amount the company received for all stock when issued plus the amount of retained earnings minus treasury stock. 
B)  the amount the company received for all stock authorized plus the amount of retained earnings and treasury stock. 
C)  the par value the company received for all stock issued plus the amount of retained earnings minus treasury stock. 
D)  the amount the company received for all stock when issued minus the amount of retained earnings and

Question 14

Which of the following statements is true?

Accepted Answer

A)  Stock splits and stock dividends both reduce the market price of a share, but only stock splits reduce the par value of a share. 
B)  Stock splits and stock dividends both reduce the market price of a share and the par value of a share. 
C)  Stock splits and stock dividends both reduce the market price of a share, but only stock dividends reduce the par value of a share. 
D)  Stock splits and stock dividends both reduce the market price of a share and reduce retained earnings. 
A)  Stock splits and stock dividends both reduce the market price of a share, but only stock splits reduce the par value of a share. 
B)  Stock splits and stock dividends both reduce the market price of a share and the par value of a share. 
C)  Stock splits and stock dividends both reduce the market price of a share, but only stock dividends reduce the par value of a share. 
D)  Stock splits and stock dividends both reduce the market price of a share and reduce retained earnings.

Question 15

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

Accepted Answer

A)  $36.00. 
B)  $25.50. 
C)  $16.00. 
D)  $6.25. 
A)  $36.00. 
B)  $25.50. 
C)  $16.00. 
D)  $6.25.

Question 16

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

Accepted Answer

A) True 
 B)False

Question 17

At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

Accepted Answer

A) True 
 B)False

Question 18

What is the journal entry to record the reissuance on July 3?

Accepted Answer

A)  Option: A 
B)  Option: B 
C)  Option: C 
D)  Option: D 
A)  Option: A 
B)  Option: B 
C)  Option: C 
D)  Option: D

Question 19

In its most basic form, the earnings per share ratio is calculated as:

Accepted Answer

A)  dividends paid on common stock divided by the average number of outstanding common shares. 
B)  net income divided by the average number of outstanding common shares. 
C)  total dividends paid divided by the average number of total stock shares. 
D)  net income divided by average stockholders' equity. 
A)  dividends paid on common stock divided by the average number of outstanding common shares. 
B)  net income divided by the average number of outstanding common shares. 
C)  total dividends paid divided by the average number of total stock shares. 
D)  net income divided by average stockholders' equity.

Question 20

A company originally issues 180,000 shares of stock at a price of $22; one year later the stock price is $40 per share, the number of outstanding shares is unchanged, and the company's net income for the year is $230,400. The P/E ratio at the end of the year is:

Accepted Answer

A)  0.0002. 
B)  24.22. 
C)  31.25. 
D)  0.0001. 
A)  0.0002. 
B)  24.22. 
C)  31.25. 
D)  0.0001.

Which of the following statements regarding a stock split is true?

Which of the following statements regarding business forms is true?

If a company's preferred stock is 7%, $1 par value, then the dividend on the stock is $.07 per share.

A stock split increases total stockholders' equity.

Typically, all other things equal, a profitable company that pays relatively high dividends:

A stock dividend:

A corporation's charter establishes the market value of the company's stock.

The owner's salary is frequently the largest expense of a sole proprietorship.

A major advantage of debt financing is that interest expense is tax deductible.

If a company's P/E ratio suddenly decreases:

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The number of authorized shares after these transactions are accounted for is:

Stockholders' equity is:

Which of the following statements is true?

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

What is the journal entry to record the reissuance on July 3?

In its most basic form, the earnings per share ratio is calculated as:

A company originally issues 180,000 shares of stock at a price of $22; one year later the stock price is $40 per share, the number of outstanding shares is unchanged, and the company's net income for the year is $230,400. The P/E ratio at the end of the year is:

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

Exam 11: Reporting and Interpreting Stockholders Equity

Which of the following statements regarding a stock split is true?

Which of the following statements regarding business forms is true?

If a company's preferred stock is 7%, $1 par value, then the dividend on the stock is $.07 per share.

A stock split increases total stockholders' equity.

Typically, all other things equal, a profitable company that pays relatively high dividends:

A stock dividend:

A corporation's charter establishes the market value of the company's stock.

The owner's salary is frequently the largest expense of a sole proprietorship.

A major advantage of debt financing is that interest expense is tax deductible.

If a company's P/E ratio suddenly decreases:

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The number of authorized shares after these transactions are accounted for is:

Stockholders' equity is:

Which of the following statements is true?

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

What is the journal entry to record the reissuance on July 3?

In its most basic form, the earnings per share ratio is calculated as:

A company originally issues 180,000 shares of stock at a price of $22; one year later the stock price is $40 per share, the number of outstanding shares is unchanged, and the company's net income for the year is $230,400. The P/E ratio at the end of the year is:

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