Question 1

Dividend yield is computed by dividing earnings per share by the market value per share.

Accepted Answer

A) True 
 B)False

Question 2

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared
Year 1 $ 2,000
Year 2 $ 6,000
Year 3 $ 32,00
0
The amount of dividends paid to preferred and common shareholders in year 3 is:

Accepted Answer

A) $32,000 preferred; $0 common. 
B) $15,000 preferred; $17,000 common. 
C) $5,000 preferred; $27,000 common. 
D) $7,000 preferred; $25,000 common. 
E) $0 preferred; $32,000 common. 
A) $32,000 preferred; $0 common. 
B) $15,000 preferred; $17,000 common. 
C) $5,000 preferred; $27,000 common. 
D) $7,000 preferred; $25,000 common. 
E) $0 preferred; $32,000 common.

Question 3

Prior to May 1, Fortune Company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on May 1 for $5,000. On July 1, it reissued 50 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?

Accepted Answer

A) $0. 
B) $100. 
C) $50. 
D) $5,050. 
E) $2,600. 
A) $0. 
B) $100. 
C) $50. 
D) $5,050. 
E) $2,600.

Question 4

A dividend preference for preferred stock means that:

Accepted Answer

A) Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders. 
B) Preferred stockholders prefer dividends more than common stockholders. 
C) Dividends are paid quarterly. 
D) Preferred shareholders are guaranteed dividends. 
E) Dividends must be declared on preferred stock. 
A) Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders. 
B) Preferred stockholders prefer dividends more than common stockholders. 
C) Dividends are paid quarterly. 
D) Preferred shareholders are guaranteed dividends. 
E) Dividends must be declared on preferred stock.

Question 5

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

Accepted Answer

Book value per common share is calculate

Question 6

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the dividend declaration is:

Accepted Answer

A) Debit Common Dividends Payable $90,000; credit Cash $90,000. 
B) Debit Common Dividends Payable $95,000; credit Cash $95,000. 
C) Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000. 
D) Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000. 
E) Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000. 
A) Debit Common Dividends Payable $90,000; credit Cash $90,000. 
B) Debit Common Dividends Payable $95,000; credit Cash $95,000. 
C) Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000. 
D) Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000. 
E) Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.

Question 7

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 5,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. $$\begin{array}{l}

\begin{array} { l r r } &\text { Dividend Declared }\
\text { year 1 } & \$ 2,000 \
\text { year 2 } & \$ 6,000 \
\text { year 3 } & \$ 32,000 \
\end{array}
\end{array}$$ The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Accepted Answer

A) $12,000 preferred; $28,000 common. 
B) $10,000 preferred; $30,000 common. 
C) $15,000 preferred; $25,000 common. 
D) $5,000 preferred; $35,000 common. 
E) $11,000 preferred; $29,000 common. 
A) $12,000 preferred; $28,000 common. 
B) $10,000 preferred; $30,000 common. 
C) $15,000 preferred; $25,000 common. 
D) $5,000 preferred; $35,000 common. 
E) $11,000 preferred; $29,000 common.

Question 8

A liability for a dividend does not exist until the directors declare a dividend.

Accepted Answer

A) True 
 B)False

Question 9

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IFRS is true except:

Accepted Answer

A) U. S. GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock. 
B) Gains are not recognized on retirements of treasury stock under U. S. GAAP. 
C) A company's assets and equity are always reduced by the amount paid for the retiring stock. 
D) Only gains are recognized on retirements of treasury stock under IFRS. 
E) IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock. 
A) U. S. GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock. 
B) Gains are not recognized on retirements of treasury stock under U. S. GAAP. 
C) A company's assets and equity are always reduced by the amount paid for the retiring stock. 
D) Only gains are recognized on retirements of treasury stock under IFRS. 
E) IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock.

Question 10

The amount of income earned per share of a company's outstanding common stock is known as:

Accepted Answer

A) Continuing operations per share. 
B) Earnings per share. 
C) Dividends per share. 
D) Restricted retained earnings per share. 
E) Book value per share. 
A) Continuing operations per share. 
B) Earnings per share. 
C) Dividends per share. 
D) Restricted retained earnings per share. 
E) Book value per share.

Question 11

A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

Accepted Answer

A) $490,000. 
B) $116,250. 
C) $433,750. 
D) $546,250. 
E) $426,250. 
A) $490,000. 
B) $116,250. 
C) $433,750. 
D) $546,250. 
E) $426,250.

Question 12

A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

Accepted Answer

A) 6.4%. 
B) 6.25%. 
C) 15.00%. 
D) 6.67%. 
E) 2.4%. 
A) 6.4%. 
B) 6.25%. 
C) 15.00%. 
D) 6.67%. 
E) 2.4%.

Question 13

The price-earnings ratio is calculated by dividing:

Accepted Answer

A) Dividends per share by market value per share. 
B) Market value per share by earnings per share. 
C) Dividends per share by earnings per share. 
D) Earnings per share by market value per share. 
E) Market value per share by dividends per share. 
A) Dividends per share by market value per share. 
B) Market value per share by earnings per share. 
C) Dividends per share by earnings per share. 
D) Earnings per share by market value per share. 
E) Market value per share by dividends per share.

Question 14

The board of directors of a corporation:

Accepted Answer

A) Do not have the power to bind the corporation to contracts, due to lack of mutual agency. 
B) Are elected by the corporate registrar. 
C) Are responsible for and have final authority for managing corporate activities. 
D) Are responsible for day-to-day operations of the business. 
E) May not also be executive officers of the corporation, due to the separate entity principle. 
A) Do not have the power to bind the corporation to contracts, due to lack of mutual agency. 
B) Are elected by the corporate registrar. 
C) Are responsible for and have final authority for managing corporate activities. 
D) Are responsible for day-to-day operations of the business. 
E) May not also be executive officers of the corporation, due to the separate entity principle.

Question 15

A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

Accepted Answer

A) True 
 B)False

Question 16

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Accepted Answer

A) Authorized. 
B) Subscribed. 
C) Outstanding. 
D) Issued. 
E) In treasury. 
A) Authorized. 
B) Subscribed. 
C) Outstanding. 
D) Issued. 
E) In treasury.

Question 17

Stated value of no-par stock is:

Accepted Answer

A) The difference between the par value of stock and the amount below or above par value paid-in by the stockholder. 
B) An amount assigned to no-par stock by the corporation's board of directors. 
C) The market value of the stock on the date of issuance. 
D) An amount assigned to par value stock by the state of incorporation. 
E) Another name for redemption value. 
A) The difference between the par value of stock and the amount below or above par value paid-in by the stockholder. 
B) An amount assigned to no-par stock by the corporation's board of directors. 
C) The market value of the stock on the date of issuance. 
D) An amount assigned to par value stock by the state of incorporation. 
E) Another name for redemption value.

Question 18

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Accepted Answer

A) True 
 B)False

Question 19

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Accepted Answer

A large stock dividend is a distribution

Question 20

Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

Accepted Answer

A) $100. 
B) $2,600. 
C) $1,200. 
D) $5,050. 
E) $0. 
A) $100. 
B) $2,600. 
C) $1,200. 
D) $5,050. 
E) $0.

Dividend yield is computed by dividing earnings per share by the market value per share.

A dividend preference for preferred stock means that:

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the dividend declaration is:

A liability for a dividend does not exist until the directors declare a dividend.

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IFRS is true except:

The amount of income earned per share of a company's outstanding common stock is known as:

A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

The price-earnings ratio is calculated by dividing:

The board of directors of a corporation:

A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Stated value of no-par stock is:

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters

Exam 13: Accounting for Corporations

Dividend yield is computed by dividing earnings per share by the market value per share.

A dividend preference for preferred stock means that:

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the dividend declaration is:

A liability for a dividend does not exist until the directors declare a dividend.

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IFRS is true except:

The amount of income earned per share of a company's outstanding common stock is known as:

A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

The price-earnings ratio is calculated by dividing:

The board of directors of a corporation:

A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Stated value of no-par stock is:

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters