Question 1

Preferred stockholders:

Accepted Answer

A)  must receive dividends every year. 
B)  have the right to receive dividends only in the years the board of directors declares dividends. 
C)  have the right to receive dividends only if there are enough dividends to pay the common stockholders too. 
D)  must receive more dividends per share than the common stockholders. 
A)  must receive dividends every year. 
B)  have the right to receive dividends only in the years the board of directors declares dividends. 
C)  have the right to receive dividends only if there are enough dividends to pay the common stockholders too. 
D)  must receive more dividends per share than the common stockholders. B

Question 2

Nancy O'Rode,doing business as O'Rode Consulting,performs consulting services for companies that create online learning games for children.On January 1,2015,she started a sole proprietorship by placing $15,000 cash in a bank account opened for the business.Each month during the year,O'Rode withdrew $500 cash from the business for personal use.At December 31,2015,after the last withdrawal,the Drawings account reflected a debit balance of $6,000.During the year,the usual journal entries for the year,including adjusting and closing entries for the revenue and expense accounts,resulted in total revenue of $60,000,total expenses of $12,000,and net income of $48,000.(For purposes of the related journal entry,use the accounts "Consulting Revenue" and "Operating Expenses.")
Part a.Prepare the journal entry to record the initial capital contribution.
Part b.Prepare the journal entry to record one of the monthly withdrawals.
Part c.Prepare the journal entry to close the net income to the N.O'Rode,Capital account.
Part d.Prepare the journal entry to close the N.O'Rode,Drawings accounts at the end of the year.
Part e.Prepare a Statement of Owner's Equity for the year ending December 31,2015.

Accepted Answer

Part a
   
Part b
   
Part c
   
Part d
   
Part e

Question 3

Ms.Jessica Duffy purchased 1 share of $10 par value common stock from Ohio Corporation for $50 per share.Ms.Duffy sold that share to Mike Truesdale for $60 per share.As a result of the sale by Duffy to Truesdale sale,Ohio Corporation would:

Accepted Answer

A)  debit Cash and credit Additional Paid-in Capital for $10. 
B)  debit Cash and credit Common Stock for $10. 
C)  debit Common Stock and credit Additional Paid-in Capital for $10. 
D)  not debit or credit any of its accounts. 
A)  debit Cash and credit Additional Paid-in Capital for $10. 
B)  debit Cash and credit Common Stock for $10. 
C)  debit Common Stock and credit Additional Paid-in Capital for $10. 
D)  not debit or credit any of its accounts. D

Question 4

On September 1,a corporation with 50,000 shares of $5 par value common stock and $1,000,000 of Retained Earnings issues a 2-for-1 stock split.The market price of the stock on that date is $12 per share.Which of the following statements is correct concerning this stock split?

Accepted Answer

A)  Contributed capital will increase by $250,000. 
B)  Retained Earnings will decrease by $600,000. 
C)  Dividends payable will increase by 250,000. 
D)  No entry will be made for this transaction. 
A)  Contributed capital will increase by $250,000. 
B)  Retained Earnings will decrease by $600,000. 
C)  Dividends payable will increase by 250,000. 
D)  No entry will be made for this transaction.

Question 5

A company has net income of $5.6 million and earnings per share of $2.00.Average common stockholders' equity is $32 million.The company's current stock price is $10 per share.What is its Price/Earnings (P/E)ratio?

Accepted Answer

A)  0.2 
B)  5.0 
C)  0.175 
D)  5.7 
A)  0.2 
B)  5.0 
C)  0.175 
D)  5.7

Question 6

Choose the appropriate letter to match the term and the definition.Not all definitions will be used.
Term:
1._____ Date of Declaration
2._____ Issued Shares
3._____ Seasoned New Issues
4._____ Pro Rata Basis
5._____ Date of Record
6._____ Additional Paid-in Capital
7._____ Outstanding Shares
8._____ Stock Options
9._____ Payment Date
Definition:
A.The date on which a company authorizes a dividend payment.
B.The total number of shares currently owned by stockholders.
C.When cash or stock dividends are issued according to the proportion of stock owned.
D.Dividends that have not had income tax withheld from them.
E.The date on which a company determines who receives a dividend.
F.When employees of a company have the opportunity to buy a company's stock in the future at a fixed price.
G.The accumulation of all the past dividends the company has not paid.
H.When a company sells issues of stock after its IPO.
I.The date on which a company debits dividends payable and credits cash.
J.When cash or stock dividends are issued in an equal dollar or share amount per stockholder.
K.The date on which a liability is recorded for a dividend.
L.The total number of shares the company has sold,whether held by stockholders or by the company.
M.When owners of the company contribute additional capital beyond what they paid for their stock.
N.The amount above the par value of the stock that owners paid the issuer for the stock.

Accepted Answer

1.K
2.L
3.

Question 7

Just In Thyme,Inc.has the following December 31,2014 equity balances: Common stock of $20,000; Additional paid-in capital of $30,000; and Retained earnings of $50,000.If Just In Thyme repurchases shares of its stock for $10,000,the total stockholders' equity balance would equal:

Accepted Answer

A)  $60,000. 
B)  $90,000. 
C)  $110,000. 
D)  $40,000. 
A)  $60,000. 
B)  $90,000. 
C)  $110,000. 
D)  $40,000.

Question 8

When should a corporation record a liability for dividends in arrears on its cumulative preferred stock?

Accepted Answer

A)  When the dividends have been declared 
B)  When the corporation knows it will not be paying dividends 
C)  When recording yearend adjusting entries 
D)  Never 
A)  When the dividends have been declared 
B)  When the corporation knows it will not be paying dividends 
C)  When recording yearend adjusting entries 
D)  Never

Question 9

Which of the following organizations is required by law to apply for a charter?

Accepted Answer

A)  Sole proprietorship 
B)  Partnership 
C)  Any for-profit business 
D)  Corporation 
A)  Sole proprietorship 
B)  Partnership 
C)  Any for-profit business 
D)  Corporation

Question 10

Which of the following statements about the benefits enjoyed by the owners of common stock is not correct?

Accepted Answer

A)  Some classes of common stock can carry more votes than others. 
B)  Investors in a corporation are called stockholders. 
C)  Stockholders receive a share of the corporation's profits when distributed as dividends. 
D)  If the company ceases operations, stockholders share in any assets remaining before creditors have been paid. 
A)  Some classes of common stock can carry more votes than others. 
B)  Investors in a corporation are called stockholders. 
C)  Stockholders receive a share of the corporation's profits when distributed as dividends. 
D)  If the company ceases operations, stockholders share in any assets remaining before creditors have been paid.

Question 11

Choose the appropriate letter to match the description with the purpose and accounting effect of the type of stock transaction.Some letters will appear in more than one column and not all letters will necessarily be used.Some blanks will require more than one letter.
   
A.To obtain shares to reissue to employees as part of employee stock purchase plans.
B.To increase the number of shares outstanding and decrease the per-share market price while managing a company that you expect will struggle financially in the future.
C.To reduce the number of outstanding shares to increase per-share measures of earnings.
D.To increase the number of shares outstanding and decrease the per-share market price while signaling to financial statement users that the company expects significant future earnings.
E.To obtain shares that can be reissued as payment for purchases of other companies.
F.To send a signal to investors that the company itself believes its own stock is worth acquiring.
G.Reduces stockholders' equity.
H.Changes par value per share.
I.Changes Additional Paid-in Capital account balance.
J.Reduces Retained Earnings.
K.Does not affect any of the account balances that comprise stockholders equity.

Accepted Answer

The answer of Choose the appropriate letter to match the...

Question 12

Which of the following statements about when cash dividends can be paid is not correct?

Accepted Answer

A)  The Retained Earnings account must have an accumulated balance sufficient to cover the amount of the dividends to be paid. 
B)  The Cash account must have a balance sufficient to pay the dividends. 
C)  The board of directors must have declared the dividend before it can be paid. 
D)  Loan covenants cannot restrict the payment of dividends. 
A)  The Retained Earnings account must have an accumulated balance sufficient to cover the amount of the dividends to be paid. 
B)  The Cash account must have a balance sufficient to pay the dividends. 
C)  The board of directors must have declared the dividend before it can be paid. 
D)  Loan covenants cannot restrict the payment of dividends.

Question 13

The Dewie,Cheatum,and Howe partnership paid each of the partners $100,000 for the work they performed during the year.As a result of these payments,the closing process will include a:

Accepted Answer

A)  credit to Salary Expense. 
B)  credit to each partner's Capital account. 
C)  credit to each partner's Drawing account. 
D)  debit to Salary Expense. 
A)  credit to Salary Expense. 
B)  credit to each partner's Capital account. 
C)  credit to each partner's Drawing account. 
D)  debit to Salary Expense.

Question 14

Corporations are governed by federal law.

Accepted Answer

A) True 
 B)False

Question 15

Stock options:

Accepted Answer

A)  provide the holder with the option to purchase stock at a specified price during a specified period of time. 
B)  are stock dividends in which additional shares equal to more than 20 to 25%. 
C)  of the shares outstanding are issued. 
D)  are a corporation's option to issue both preferred and common stock. 
A)  provide the holder with the option to purchase stock at a specified price during a specified period of time. 
B)  are stock dividends in which additional shares equal to more than 20 to 25%. 
C)  of the shares outstanding are issued. 
D)  are a corporation's option to issue both preferred and common stock.

Question 16

A company issued 8% preferred stock with a $100 par value.This means:

Accepted Answer

A)  Preferred stockholders are entitled to 8% of the annual net income. 
B)  Only 8% of total contributed capital can be preferred stock. 
C)  Preferred stockholders are guaranteed a dividend. 
D)  The potential dividend to preferred stockholders is $8 per share per year. 
A)  Preferred stockholders are entitled to 8% of the annual net income. 
B)  Only 8% of total contributed capital can be preferred stock. 
C)  Preferred stockholders are guaranteed a dividend. 
D)  The potential dividend to preferred stockholders is $8 per share per year.

Question 17

Stockit Inc.has 1,000 shares of 5%,$100 par value,cumulative preferred stock outstanding.In its first two years of business,Stockit did not declare a dividend.As a result,Stockit's balance sheets at the end of its first two years of business should:

Accepted Answer

A)  report Dividends Payable. 
B)  report Dividends Arrears Payable. 
C)  not report any Dividends Payable. 
D)  report Dividends Expense. 
A)  report Dividends Payable. 
B)  report Dividends Arrears Payable. 
C)  not report any Dividends Payable. 
D)  report Dividends Expense.

Question 18

Advantages of the corporate form include all of the following except:

Accepted Answer

A)  easy to raise capital. 
B)  shares can be purchased in small amounts. 
C)  ownership interests are transferrable. 
D)  legal liability of its owners is unlimited. 
A)  easy to raise capital. 
B)  shares can be purchased in small amounts. 
C)  ownership interests are transferrable. 
D)  legal liability of its owners is unlimited.

Question 19

Which of the following statements about dividends is correct?

Accepted Answer

A)  Companies sometimes issue stock dividends to lower the market price per share of stock. 
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)  Companies sometimes issue stock dividends to lower the market price per share of stock. 
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 20

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

Accepted Answer

A) True 
 B)False

Preferred stockholders:

Ms.Jessica Duffy purchased 1 share of $10 par value common stock from Ohio Corporation for $50 per share.Ms.Duffy sold that share to Mike Truesdale for $60 per share.As a result of the sale by Duffy to Truesdale sale,Ohio Corporation would:

On September 1,a corporation with 50,000 shares of $5 par value common stock and $1,000,000 of Retained Earnings issues a 2-for-1 stock split.The market price of the stock on that date is $12 per share.Which of the following statements is correct concerning this stock split?

A company has net income of $5.6 million and earnings per share of $2.00.Average common stockholders' equity is $32 million.The company's current stock price is $10 per share.What is its Price/Earnings (P/E)ratio?

Just In Thyme,Inc.has the following December 31,2014 equity balances: Common stock of $20,000; Additional paid-in capital of $30,000; and Retained earnings of $50,000.If Just In Thyme repurchases shares of its stock for $10,000,the total stockholders' equity balance would equal:

When should a corporation record a liability for dividends in arrears on its cumulative preferred stock?

Which of the following organizations is required by law to apply for a charter?

Which of the following statements about the benefits enjoyed by the owners of common stock is not correct?

Which of the following statements about when cash dividends can be paid is not correct?

The Dewie,Cheatum,and Howe partnership paid each of the partners $100,000 for the work they performed during the year.As a result of these payments,the closing process will include a:

Corporations are governed by federal law.

Stock options:

A company issued 8% preferred stock with a $100 par value.This means:

Stockit Inc.has 1,000 shares of 5%,$100 par value,cumulative preferred stock outstanding.In its first two years of business,Stockit did not declare a dividend.As a result,Stockit's balance sheets at the end of its first two years of business should:

Advantages of the corporate form include all of the following except:

Which of the following statements about dividends is correct?

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

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

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

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

Preferred stockholders:

Ms.Jessica Duffy purchased 1 share of $10 par value common stock from Ohio Corporation for $50 per share.Ms.Duffy sold that share to Mike Truesdale for $60 per share.As a result of the sale by Duffy to Truesdale sale,Ohio Corporation would:

On September 1,a corporation with 50,000 shares of $5 par value common stock and $1,000,000 of Retained Earnings issues a 2-for-1 stock split.The market price of the stock on that date is $12 per share.Which of the following statements is correct concerning this stock split?

A company has net income of $5.6 million and earnings per share of $2.00.Average common stockholders' equity is $32 million.The company's current stock price is $10 per share.What is its Price/Earnings (P/E)ratio?

Just In Thyme,Inc.has the following December 31,2014 equity balances: Common stock of $20,000; Additional paid-in capital of $30,000; and Retained earnings of $50,000.If Just In Thyme repurchases shares of its stock for $10,000,the total stockholders' equity balance would equal:

When should a corporation record a liability for dividends in arrears on its cumulative preferred stock?

Which of the following organizations is required by law to apply for a charter?

Which of the following statements about the benefits enjoyed by the owners of common stock is not correct?

Which of the following statements about when cash dividends can be paid is not correct?

The Dewie,Cheatum,and Howe partnership paid each of the partners $100,000 for the work they performed during the year.As a result of these payments,the closing process will include a:

Corporations are governed by federal law.

Stock options:

A company issued 8% preferred stock with a $100 par value.This means:

Stockit Inc.has 1,000 shares of 5%,$100 par value,cumulative preferred stock outstanding.In its first two years of business,Stockit did not declare a dividend.As a result,Stockit's balance sheets at the end of its first two years of business should:

Advantages of the corporate form include all of the following except:

Which of the following statements about dividends is correct?

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

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

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

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