Question 1

Treasury stock:

Accepted Answer

A)  does not appear on the balance sheet. 
B)  is a contra-equity account. 
C)  is an asset account. 
D)  is recorded as additional paid-in capital. 
A)  does not appear on the balance sheet. 
B)  is a contra-equity account. 
C)  is an asset account. 
D)  is recorded as additional paid-in capital.

Question 2

Groucho,Harpo,and Chico go into partnership on January 1,2015.Groucho contributes $90,000,Harpo $70,000,and Chico $40,000 to a business called Marx Brothers' Partnership.On a monthly basis,each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided.Assume that Groucho receives $2,700 cash per month.
Required:
Part a.Prepare the journal entry for the initial investment.
Part b.Determine the monthly distribution amounts for each of the three partners.
Part c.Prepare the journal entry that would be made in one month for the monthly distribution.
Part d.Prepare the journal entry for the allocation of an annual net income of $84,000.For purposes of this journal entry,assume Sales Revenue totaled $116,000 and that all expenses,totaling $32,000,were recorded in a single account called Operating Expenses.
Part e.Prepare the journal entry to close the Drawings accounts at the end of the year.
Part f.Prepare a Statement of Partners' Equity (assume no additional investments made).

Accepted Answer

Part a
 @#IMG-DLM& 
Part b
Partners' proportion of

Question 3

Which of the following statements would not explain why a company may want to repurchase its stock?

Accepted Answer

A)  To demonstrate to investors that it believes its own stock is worth purchasing. 
B)  To obtain shares to reissue to employees as part of an employee stock plan. 
C)  To obtain shares that can be reissued as payment for purchase of another company. 
D)  To increase the number of shares of outstanding stock. 
A)  To demonstrate to investors that it believes its own stock is worth purchasing. 
B)  To obtain shares to reissue to employees as part of an employee stock plan. 
C)  To obtain shares that can be reissued as payment for purchase of another company. 
D)  To increase the number of shares of outstanding stock.

Question 4

The number of shares outstanding equals the number of shares:

Accepted Answer

A)  issued minus the number of shares in treasury. 
B)  authorized minus the number of shares issued. 
C)  issued plus the number of shares in treasury. 
D)  authorized plus the number of shares issued. 
A)  issued minus the number of shares in treasury. 
B)  authorized minus the number of shares issued. 
C)  issued plus the number of shares in treasury. 
D)  authorized plus the number of shares issued.

Question 5

Seasoned new issues are:

Accepted Answer

A)  the selling of additional new shares. 
B)  the repurchase of previously issued shares. 
C)  the shares issued in an IPO. 
D)  required before a corporation goes public. 
A)  the selling of additional new shares. 
B)  the repurchase of previously issued shares. 
C)  the shares issued in an IPO. 
D)  required before a corporation goes public.

Question 6

Use the information above to answer the following question.What was the amount of Retained Earnings reported in the balance sheet on December 31,2010?

Accepted Answer

A)  $184,000 
B)  $2,000 
C)  $71,000 
D)  $51,500 
A)  $184,000 
B)  $2,000 
C)  $71,000 
D)  $51,500

Question 7

You form a partnership with your best friend.You have contributed 65% of the capital and can claim 65% of the net income.At the end of the first year,you discover that your partner has run up $40,000 in debt using the business' credit card.The maximum you could be liable for is:

Accepted Answer

A)  $0. 
B)  $40,000. 
C)  $20,000. 
D)  $26,000. 
A)  $0. 
B)  $40,000. 
C)  $20,000. 
D)  $26,000.

Question 8

Delta Inc.had 1,000,000 shares of $4 par value common stock authorized.On December 31,2015,there were 400,000 shares issued and outstanding.The market value of its common stock on that date was $100 per share.On January 5,2016,the board of directors declared a stock dividend.
Required:
Part a.Assume that you have 100 shares of Delta Inc.common stock.Determine how many shares will you have after a 100% stock dividend.
Part b.Briefly explain the how a 100% stock dividend affects the stockholders' equity accounts and the total resources of the company.(Do not quantify the impacts or prepare a journal entry.)
Part c.Assume instead that the board declared a 10% stock dividend.Briefly explain how that 10% stock dividend affects the stockholders' equity accounts and the total resources of the company.(Do not quantify the impacts or prepare a journal entry.)
Part d.Identify three possible explanations for the declaration of a stock dividend.

Accepted Answer

Part a
A 100% stock dividend means that

Question 9

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 10

Treasure This,Inc.had total assets of $100,000,total liabilities of $60,000 and stockholders' equity of $40,000 before repurchasing 1,000 shares of its $1 par value common stock for $5 per share.After this repurchase,total assets equal _____,total liabilities equal ______ and stockholders' equity equals ______:

Accepted Answer

A)  $95,000; $60,000; $35,000 
B)  $100,000; $55,000; $45,000 
C)  $100,000; $65,000; $35,000 
D)  $105,000; $60,000; $45,000 
A)  $95,000; $60,000; $35,000 
B)  $100,000; $55,000; $45,000 
C)  $100,000; $65,000; $35,000 
D)  $105,000; $60,000; $45,000

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

With regards to the Dividends Payable and Dividends accounts,one of the closing entries required at year end,includes a:

Accepted Answer

A)  credit to Retained Earnings. 
B)  credit to Dividends Payable. 
C)  debit to Dividends Payable. 
D)  debit to Retained Earnings. 
A)  credit to Retained Earnings. 
B)  credit to Dividends Payable. 
C)  debit to Dividends Payable. 
D)  debit to Retained Earnings.

Question 13

A stock dividend:

Accepted Answer

A)  is accounted for like a stock split. 
B)  will reduce stockholders' equity like a cash dividend does. 
C)  will not change any of the accounts within stockholders' equity. 
D)  will reduce Retained Earnings like a cash dividend does. 
A)  is accounted for like a stock split. 
B)  will reduce stockholders' equity like a cash dividend does. 
C)  will not change any of the accounts within stockholders' equity. 
D)  will reduce Retained Earnings like a cash dividend does.

Question 14

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

Accepted Answer

A)  3 million shares. 
B)  8 million shares. 
C)  9 million shares. 
D)  17 million shares. 
A)  3 million shares. 
B)  8 million shares. 
C)  9 million shares. 
D)  17 million shares.

Question 15

Hopkins,Inc.has 1,000 shares of common stock and 1,000 shares of preferred stock outstanding.The preferred stock has a cumulative dividend preference.Both classes of stock have a par value of $10.The preferred stock has a dividend rate of 6 percent.Hopkins failed to pay a dividend during the prior year.During the current year,the board of directors declares dividends totaling $2,000.Accordingly,the company will distribute dividends in the amount of:

Accepted Answer

A)  $2,000 to the preferred shareholders. 
B)  $1,000 to each class of shareholders. 
C)  $1,200 to the preferred shareholders and $800 to the common shareholders. 
D)  $1,600 to the preferred shareholders and $400 to the common shareholders. 
A)  $2,000 to the preferred shareholders. 
B)  $1,000 to each class of shareholders. 
C)  $1,200 to the preferred shareholders and $800 to the common shareholders. 
D)  $1,600 to the preferred shareholders and $400 to the common shareholders.

Question 16

An increase in EPS is an indicator of:

Accepted Answer

A)  higher profitability. 
B)  lower profitability. 
C)  lower financial leverage. 
D)  lower return on equity. 
A)  higher profitability. 
B)  lower profitability. 
C)  lower financial leverage. 
D)  lower return on equity.

Question 17

Advantages of equity financing over debt financing include that:

Accepted Answer

A)  dividends are mandatory. 
B)  equity financing does not require repayment. 
C)  dividends are tax deductible. 
D)  stockholders' control will increase. 
A)  dividends are mandatory. 
B)  equity financing does not require repayment. 
C)  dividends are tax deductible. 
D)  stockholders' control will increase.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Double Vision,Inc.had 10,000 shares issued and outstanding of its $1 par value common stock.At December 31,Common Stock equaled $10,000,Retained Earnings equaled $20,000 and Total stockholders' equity equaled $50,000 prior to a 2-for-1 stock split.As a result of a 2-for-1 stock split:

Accepted Answer

A)  par value equals $0.50. 
B)  the number of shares outstanding equals 5,000. 
C)  the common stock equals $20,000 
D)  Retained Earnings equals $40,000. 
A)  par value equals $0.50. 
B)  the number of shares outstanding equals 5,000. 
C)  the common stock equals $20,000 
D)  Retained Earnings equals $40,000.

Question 20

Typically,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.

Treasury stock:

Which of the following statements would not explain why a company may want to repurchase its stock?

The number of shares outstanding equals the number of shares:

Seasoned new issues are:

Use the information above to answer the following question.What was the amount of Retained Earnings reported in the balance sheet on December 31,2010?

You form a partnership with your best friend.You have contributed 65% of the capital and can claim 65% of the net income.At the end of the first year,you discover that your partner has run up $40,000 in debt using the business' credit card.The maximum you could be liable for is:

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

Treasure This,Inc.had total assets of $100,000,total liabilities of $60,000 and stockholders' equity of $40,000 before repurchasing 1,000 shares of its $1 par value common stock for $5 per share.After this repurchase,total assets equal _,total liabilities equal and stockholders' equity equals ____:

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

With regards to the Dividends Payable and Dividends accounts,one of the closing entries required at year end,includes a:

A stock dividend:

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

An increase in EPS is an indicator of:

Advantages of equity financing over debt financing include that:

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

Double Vision,Inc.had 10,000 shares issued and outstanding of its $1 par value common stock.At December 31,Common Stock equaled $10,000,Retained Earnings equaled $20,000 and Total stockholders' equity equaled $50,000 prior to a 2-for-1 stock split.As a result of a 2-for-1 stock split:

Typically,a profitable company that pays relatively high dividends:

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

Treasury stock:

Which of the following statements would not explain why a company may want to repurchase its stock?

The number of shares outstanding equals the number of shares:

Seasoned new issues are:

Use the information above to answer the following question.What was the amount of Retained Earnings reported in the balance sheet on December 31,2010?

You form a partnership with your best friend.You have contributed 65% of the capital and can claim 65% of the net income.At the end of the first year,you discover that your partner has run up $40,000 in debt using the business' credit card.The maximum you could be liable for is:

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

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

With regards to the Dividends Payable and Dividends accounts,one of the closing entries required at year end,includes a:

A stock dividend:

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

An increase in EPS is an indicator of:

Advantages of equity financing over debt financing include that:

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

Double Vision,Inc.had 10,000 shares issued and outstanding of its $1 par value common stock.At December 31,Common Stock equaled $10,000,Retained Earnings equaled $20,000 and Total stockholders' equity equaled $50,000 prior to a 2-for-1 stock split.As a result of a 2-for-1 stock split:

Typically,a profitable company that pays relatively high dividends:

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