Exam 11: Reporting and Interpreting Stockholders Equity

A company has outstanding 10 million shares of $2 par common stock and 1 million shares of $4 par preferred stock.The preferred stock has an 8% dividend rate.The board of directors declares $300,000 in total dividends for the year.Which of the following is correct if the preferred stockholders have a cumulative dividend preference?

Company X has a P/E ratio of 16 in year 2013 and 16.5 in 2014.In 2015,its P/E ratio is 24.The best way to interpret these data is to conclude that:

Which of the following line item amounts would be under the Retained Earnings column of a statement of stockholders' equity?

A company has net income of $5.6 million.Stockholders' equity at the beginning of the year is $32.55 million and,at the end of the year,it is $38.15 million.The only change to stockholders' equity came from net income.The return on equity ratio is approximately:

Which of the following statements about equity and debt financing is correct?

Refurbish,Inc.purchased 1,000 shares of its own stock at $8 a share.Later,it reissued the 1,000 shares for $10,000.The effect of the entry to record the sale of treasury stock on the accounting equation includes a(n):

Stock options are given in order to:

Which of the following statements about a stock split is correct?

Core Corporation had 400,000 shares of $2 par value common stock authorized.On December 31,2015,there were 200,000 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 five-to-four stock split (i.e.,a 25% increase in the number of shares). Required: Part a.Briefly explain the how a stock spilt affects the stockholders' equity accounts and the total resources of the company. Part b.Assume that you have 100 shares of Core Corporation common stock.Determine how many shares will you have after the stock split. Part c.Determine how the stock split will impact the number of authorized shares,the number of issued and outstanding shares,and the par value per share. Part d.Determine the total par value of the company's issued and outstanding shares (that is,the balance of the Common Stock account)before the stock split and after the stock split.

A current dividend preference means that:

McEwan Company has outstanding 10 million shares of $2 par value common stock and 1 million shares of $4 par value preferred stock.The preferred stock is noncumulative and has a 7% current dividend preference.The company declares total dividends amounting to $50,000,$250,000,and $600,000 during 2015,2016,and 2017,respectively. Required: Part a.Compute the amount of dividends to be distributed to preferred and common shareholders during 2015. Part b.Compute the amount of dividends to be distributed to preferred and common shareholders during 2016. Part c.Compute the amount of dividends to be distributed to preferred and common shareholders during 2017.

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

A company issued 600 shares of $50 par value stock for $45,000.What is the total amount of contributed capital?

All other things being equal,the higher the return on equity ratio,the better the financial performance of the company.

A company had 300,000 shares of $10 par value common stock outstanding.The amount of additional paid-in capital is $1,500,000,and Retained Earnings is $450,000.The company issues a 2-for-1 stock split.The market price of the stock is $13.What is the balance in the Common Stock account after this issuance?

Issuing stock to obtain financing is called equity financing.

Which of the following statements about business forms is correct?

A stock dividend is considered a large stock dividend if it is ____ than 25% of the outstanding shares,and it is recorded at the ______ value of the additional shares.

If you own 200,000 shares of stock in a company with 8 million shares outstanding and the company issues an additional 2 million shares to its employees through a stock purchase plan,your ownership percentage:

Comparing EPS across companies is not advised because: