Question 1

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.

Question 2

State laws often restrict dividends to the amount of Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 3

Advantages of debt financing over equity financing are that:

Accepted Answer

A)  repayment of debt principal is optional. 
B)  interest payments on debt are not tax deductible. 
C)  control is not diluted. 
D)  more money is available. 
A)  repayment of debt principal is optional. 
B)  interest payments on debt are not tax deductible. 
C)  control is not diluted. 
D)  more money is available.

Question 4

Which of the following statements about dividends is not correct?

Accepted Answer

A)  Dividends represent a sharing of corporate profits with owners. 
B)  Both stock dividends and cash dividends reduce Retained Earnings. 
C)  Cash dividends paid to stockholders reduce net income. 
D)  Dividends are declared at the discretion of the board of directors. 
A)  Dividends represent a sharing of corporate profits with owners. 
B)  Both stock dividends and cash dividends reduce Retained Earnings. 
C)  Cash dividends paid to stockholders reduce net income. 
D)  Dividends are declared at the discretion of the board of directors.

Question 5

A company reported net income of $6 million.During the year the average number of common shares outstanding was 3 million.The price of a share of common stock at the end of the year was $5.There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative.
-Use the information above to answer the following question.The Price/Earnings ratio is approximately:

Accepted Answer

A)  2.00. 
B)  2.50. 
C)  2.84. 
D)  12.50. 
A)  2.00. 
B)  2.50. 
C)  2.84. 
D)  12.50.

Question 6

All of the following are a part of contributed capital except:

Accepted Answer

A)  Common Stock. 
B)  Additional Paid-in Capital. 
C)  Preferred Stock. 
D)  Retained Earnings. 
A)  Common Stock. 
B)  Additional Paid-in Capital. 
C)  Preferred Stock. 
D)  Retained Earnings.

Question 7

A company issues 1 million shares of preferred stock with a par value of $2 at its market price of $26 per share.The issuance should be recorded with a debit to Cash for:

Accepted Answer

A)  $26 million and a credit to Preferred Stock for $26 million. 
B)  $2 million and a credit to Preferred Stock for $2 million. 
C)  $26 million, a credit to Additional Paid-in Capital for $2 million, and a credit to Preferred Stock for $24 million. 
D)  $26 million, a credit to Preferred Stock for $2 million, and a credit to Additional Paid-in Capital for $24 million. 
A)  $26 million and a credit to Preferred Stock for $26 million. 
B)  $2 million and a credit to Preferred Stock for $2 million. 
C)  $26 million, a credit to Additional Paid-in Capital for $2 million, and a credit to Preferred Stock for $24 million. 
D)  $26 million, a credit to Preferred Stock for $2 million, and a credit to Additional Paid-in Capital for $24 million.

Question 8

Which of the following statements about the par value of common stock is not correct?

Accepted Answer

A)  The par value is not the same as the market value of the stock. 
B)  The par value is a nominal amount identified in the corporate charter. 
C)  The par value is the amount credited to the common stock account when the stock is issued. 
D)  The par value is the amount credited to common stock when treasury stock is reissued. 
A)  The par value is not the same as the market value of the stock. 
B)  The par value is a nominal amount identified in the corporate charter. 
C)  The par value is the amount credited to the common stock account when the stock is issued. 
D)  The par value is the amount credited to common stock when treasury stock is reissued.

Question 9

Equity and debt financing both have their advantages and disadvantages.Which of the following pairs of phrases below accurately reflect the advantages of both types of financing?

Accepted Answer

The answer of Equity and debt financing both have their...

Question 10

Why is Additional Paid-In Capital recorded for a small stock dividend?

Accepted Answer

A)  Because small stock dividends are recorded at market value. 
B)  Because large stock dividends are recorded at par value. 
C)  Because small stock dividends are recorded at par value. 
D)  Because large stock dividends are recorded at market value. 
A)  Because small stock dividends are recorded at market value. 
B)  Because large stock dividends are recorded at par value. 
C)  Because small stock dividends are recorded at par value. 
D)  Because large stock dividends are recorded at market value.

Question 11

Which of the following would be the best investment?

Accepted Answer

A)  A company that pays no dividends, but has substantial net income. 
B)  A company that pays substantial dividends, but whose earnings per share has been declining over the past several years. 
C)  A company whose stock price has increased steadily, but pays no dividends. 
D)  It depends on one's investment objectives. 
A)  A company that pays no dividends, but has substantial net income. 
B)  A company that pays substantial dividends, but whose earnings per share has been declining over the past several years. 
C)  A company whose stock price has increased steadily, but pays no dividends. 
D)  It depends on one's investment objectives.

Question 12

A company that pays no dividends is always a poor investment.

Accepted Answer

A) True 
 B)False

Question 13

The following information is available from the accounting records of the First Corporation:
 
What is the amount of stockholders' equity for First Corporation?

Accepted Answer

A)  $350,000 
B)  $430,000 
C)  $500,000 
D)  $520,000 
A)  $350,000 
B)  $430,000 
C)  $500,000 
D)  $520,000

Question 14

The information below was extracted from the most recent financial statements of Milton Technologies (in millions, except for stock price):
  
-Use the information above to answer the following question.What is the P/E ratio for the company's stock for the current year?

Accepted Answer

A)  17.7 
B)  15.3 
C)  14.2 
D)  13.9 
A)  17.7 
B)  15.3 
C)  14.2 
D)  13.9

Question 15

Jackson and O'Neill form a partnership that produces gates.Jackson provides $30,000 of capital while O'Neill contributes $90,000 of capital; they agree to split net income by the same proportion.The partnership's net income is $80,000 for the first year.They did not draw any income out of the business or add any additional capital during the first year.At the end of the year,the partners' equity is:

Accepted Answer

A)  $70,000 for Jackson and $130,000 for O'Neill for a total of $200,000. 
B)  $200,000 minus income tax expense for the partnership. 
C)  $200,000 minus the income tax paid by each partner. 
D)  $50,000 for Jackson and $150,000 for O'Neill for a total of $200,000. 
A)  $70,000 for Jackson and $130,000 for O'Neill for a total of $200,000. 
B)  $200,000 minus income tax expense for the partnership. 
C)  $200,000 minus the income tax paid by each partner. 
D)  $50,000 for Jackson and $150,000 for O'Neill for a total of $200,000.

Question 16

At what governmental level are corporate charters issued?

Accepted Answer

A)  State 
B)  Local 
C)  Federal 
D)  International 
A)  State 
B)  Local 
C)  Federal 
D)  International

Question 17

Which of the following is not a characteristic of corporate ownership?

Accepted Answer

A)  Stockholders have no liability for the debts of the corporation. 
B)  Ownership interests are freely transferable. 
C)  Shares of stock can be purchased in small increments. 
D)  Corporate earnings are distributed as interest payments. 
A)  Stockholders have no liability for the debts of the corporation. 
B)  Ownership interests are freely transferable. 
C)  Shares of stock can be purchased in small increments. 
D)  Corporate earnings are distributed as interest payments.

Question 18

If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

Accepted Answer

A)  Investors are willing to pay 12 times the current year's earnings per share of stock. 
B)  Squid Roe's stockholders earned 12 times the owners' average investment. 
C)  Squid Roe's average stockholders' equity is 12 times its earnings. 
D)  Squid Roe's net income was 12 times its stockholders' equity. 
A)  Investors are willing to pay 12 times the current year's earnings per share of stock. 
B)  Squid Roe's stockholders earned 12 times the owners' average investment. 
C)  Squid Roe's average stockholders' equity is 12 times its earnings. 
D)  Squid Roe's net income was 12 times its stockholders' equity.

Question 19

One reason why a company may choose a stock split over a stock dividend is that the stock split does not reduce Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 20

Dividends Payable is recorded as a credit on the:

Accepted Answer

A)  declaration date. 
B)  date of record. 
C)  date of payment. 
D)  last day of the fiscal year. 
A)  declaration date. 
B)  date of record. 
C)  date of payment. 
D)  last day of the fiscal year.

Par value of a stock refers to the:

State laws often restrict dividends to the amount of Retained Earnings.

Advantages of debt financing over equity financing are that:

Which of the following statements about dividends is not correct?

All of the following are a part of contributed capital except:

A company issues 1 million shares of preferred stock with a par value of $2 at its market price of $26 per share.The issuance should be recorded with a debit to Cash for:

Which of the following statements about the par value of common stock is not correct?

Equity and debt financing both have their advantages and disadvantages.Which of the following pairs of phrases below accurately reflect the advantages of both types of financing?

Why is Additional Paid-In Capital recorded for a small stock dividend?

Which of the following would be the best investment?

A company that pays no dividends is always a poor investment.

The following information is available from the accounting records of the First Corporation: What is the amount of stockholders' equity for First Corporation?

The information below was extracted from the most recent financial statements of Milton Technologies (in millions, except for stock price): -Use the information above to answer the following question.What is the P/E ratio for the company's stock for the current year?

At what governmental level are corporate charters issued?

Which of the following is not a characteristic of corporate ownership?

If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

One reason why a company may choose a stock split over a stock dividend is that the stock split does not reduce Retained Earnings.

Dividends Payable is recorded as a credit on the:

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

Par value of a stock refers to the:

State laws often restrict dividends to the amount of Retained Earnings.

Advantages of debt financing over equity financing are that:

Which of the following statements about dividends is not correct?

All of the following are a part of contributed capital except:

A company issues 1 million shares of preferred stock with a par value of $2 at its market price of $26 per share.The issuance should be recorded with a debit to Cash for:

Which of the following statements about the par value of common stock is not correct?

Equity and debt financing both have their advantages and disadvantages.Which of the following pairs of phrases below accurately reflect the advantages of both types of financing?

Why is Additional Paid-In Capital recorded for a small stock dividend?

Which of the following would be the best investment?

A company that pays no dividends is always a poor investment.

The following information is available from the accounting records of the First Corporation: What is the amount of stockholders' equity for First Corporation?

The information below was extracted from the most recent financial statements of Milton Technologies (in millions, except for stock price): -Use the information above to answer the following question.What is the P/E ratio for the company's stock for the current year?

At what governmental level are corporate charters issued?

Which of the following is not a characteristic of corporate ownership?

If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

One reason why a company may choose a stock split over a stock dividend is that the stock split does not reduce Retained Earnings.

Dividends Payable is recorded as a credit on the:

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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