Question 1

Which of the following statements regarding earnings per share (EPS)is correct?

Accepted Answer

A) EPS can't be used to compare different size companies. 
B) Investors expect a higher EPS for companies with higher stock prices. 
C) It is calculated by dividing net income by the number of common shares issued. 
D) It increases when the number of shares of common stock outstanding increases. 
A) EPS can't be used to compare different size companies. 
B) Investors expect a higher EPS for companies with higher stock prices. 
C) It is calculated by dividing net income by the number of common shares issued. 
D) It increases when the number of shares of common stock outstanding increases.

Question 2

A company declares a 40% stock dividend when there were 4 million common shares outstanding with a $1 par value.The current market price is $20 per common share.Which of the following will be the effect of the stock dividend?

Accepted Answer

A) Retained earnings will decrease by $1.6 million and contributed capital will increase by $1.6 million. 
B) Contributed capital will decrease by $1.6 million and retained earnings will increase by $1.6 million. 
C) Retained earnings will decrease by $32 million and contributed capital will increase by $32 million. 
D) Contributed capital will decrease by $32 million and retained earnings will increase by $32 million. 
A) Retained earnings will decrease by $1.6 million and contributed capital will increase by $1.6 million. 
B) Contributed capital will decrease by $1.6 million and retained earnings will increase by $1.6 million. 
C) Retained earnings will decrease by $32 million and contributed capital will increase by $32 million. 
D) Contributed capital will decrease by $32 million and retained earnings will increase by $32 million.

Question 3

The declaration and distribution of a common stock dividend results in a reduction of the issuing corporation's total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 4

Total stockholders' equity increases when treasury stock is sold for an amount less than its cost.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is not correct?

Accepted Answer

A) Issuance of common stock creates a financing activities cash inflow. 
B) Payment of a common stock cash dividend creates an operating activities cash outflow. 
C) Purchase of treasury stock creates a financing activities cash outflow. 
D) Issuance of preferred stock creates a financing activities cash inflow. 
A) Issuance of common stock creates a financing activities cash inflow. 
B) Payment of a common stock cash dividend creates an operating activities cash outflow. 
C) Purchase of treasury stock creates a financing activities cash outflow. 
D) Issuance of preferred stock creates a financing activities cash inflow.

Question 6

CGJ Company has provided the following:
200,000 shares of $5 par value common stock are authorized;
 140,000 shares of common stock were issued for $11 per share;
 130,000 shares are outstanding.
Which of the following statements is false?

Accepted Answer

A) Common stock is reported at $700,000 on the balance sheet. 
B) Additional-paid in capital is reported at $840,000 on the balance sheet. 
C) Stockholders' equity decreased $110,000 when the treasury stock was purchased. 
D) There are 10,000 shares of treasury stock. 
A) Common stock is reported at $700,000 on the balance sheet. 
B) Additional-paid in capital is reported at $840,000 on the balance sheet. 
C) Stockholders' equity decreased $110,000 when the treasury stock was purchased. 
D) There are 10,000 shares of treasury stock.

Question 7

Watson Company has provided the following data about its common stock:
Par value per share,$1; authorized shares,10,000,000; outstanding shares,4,300,000; and issued shares 4,700,000.How many shares of treasury stock are there?

Accepted Answer

A) 0 
B) 5,700,000 
C) 5,300,000 
D) 400,000 
A) 0 
B) 5,700,000 
C) 5,300,000 
D) 400,000

Question 8

Which of the following statements is true about a partnership?

Accepted Answer

A) One capital and drawing account is used for each partnership. 
B) The capital account is used to record each partner's investment and their designated share of the earnings. 
C) Partnerships are subject to income taxes. 
D) The drawings account is closed to retained earnings at the end of the period. 
A) One capital and drawing account is used for each partnership. 
B) The capital account is used to record each partner's investment and their designated share of the earnings. 
C) Partnerships are subject to income taxes. 
D) The drawings account is closed to retained earnings at the end of the period.

Question 9

Which of the following statements is false?

Accepted Answer

A) Stockholders have a residual claim on assets in the event of liquidation. 
B) Shares of stock held in the treasury are deducted from the number of issued shares in the determination of the number of outstanding shares. 
C) Common stockholders have voting rights at annual stockholder meetings. 
D) Corporations are governed by their stockholders. 
A) Stockholders have a residual claim on assets in the event of liquidation. 
B) Shares of stock held in the treasury are deducted from the number of issued shares in the determination of the number of outstanding shares. 
C) Common stockholders have voting rights at annual stockholder meetings. 
D) Corporations are governed by their stockholders.

Question 10

Assume the following capital structure:
Preferred stock,6%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 - 2009).
Common stock,$100 par value,2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000.How much of the 2010 dividend will be paid to the preferred stockholders assuming the preferred stock is cumulative?

Accepted Answer

A) $12,000 
B) $3,000 
C) $47,000 
D) $38,000 
A) $12,000 
B) $3,000 
C) $47,000 
D) $38,000

Question 11

Assume the following capital structure:
Preferred stock,6%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for three prior years (2007 - 2009).
Common stock,$100 par value,2,000 shares issued and outstanding.
Total dividends declared and paid in 2010 were $50,000.How much of the 2010 dividend will be paid to the common stockholders assuming the preferred stock is noncumulative?

Accepted Answer

A) $12,000 
B) $3,000 
C) $47,000 
D) $38,000 
A) $12,000 
B) $3,000 
C) $47,000 
D) $38,000

Question 12

Which of the following statements regarding earnings per share (EPS)is false?

Accepted Answer

A) It increases when treasury stock is acquired. 
B) It increases when net income increases. 
C) It decreases when additional shares of common stock are issued. 
D) It decreases when the number of shares of common stock authorized increases. 
A) It increases when treasury stock is acquired. 
B) It increases when net income increases. 
C) It decreases when additional shares of common stock are issued. 
D) It decreases when the number of shares of common stock authorized increases.

Question 13

A stock split results in the reduction of the par or stated value per share and a proportionate increase in the number of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a correct statement about cumulative and noncumulative preferred stock?

Accepted Answer

A) They both receive dividends in arrears. 
B) Cumulative stock's undeclared dividends accumulate each year until paid, while noncumulative stock's right to receive dividends is forfeited in any year that dividends are not declared. 
C) Cumulative preferred stock is guaranteed to receive their dividends. 
D) Cumulative preferred stock's right to receive dividends is forfeited in any year that dividends are not declared.However, noncumulative stock's undeclared dividends accumulate each year until paid. 
A) They both receive dividends in arrears. 
B) Cumulative stock's undeclared dividends accumulate each year until paid, while noncumulative stock's right to receive dividends is forfeited in any year that dividends are not declared. 
C) Cumulative preferred stock is guaranteed to receive their dividends. 
D) Cumulative preferred stock's right to receive dividends is forfeited in any year that dividends are not declared.However, noncumulative stock's undeclared dividends accumulate each year until paid.

Question 15

Which of the following is true about a proprietorship?

Accepted Answer

A) The capital account is used to record only the investments of the owner. 
B) The drawing account records distribution of assets to the proprietor. 
C) A proprietorship is a separate legal entity from the owner. 
D) A proprietorship is subject to income tax. 
A) The capital account is used to record only the investments of the owner. 
B) The drawing account records distribution of assets to the proprietor. 
C) A proprietorship is a separate legal entity from the owner. 
D) A proprietorship is subject to income tax.

Question 16

Irish Corporation issued (sold)10,000 shares of its no par common stock for $70 per share.The bylaws established a stated value of $10 per share.The transaction would increase the common stock account on the balance sheet by how much?

Accepted Answer

A) $0 
B) $600,000 
C) $100,000 
D) $700,000 
A) $0 
B) $600,000 
C) $100,000 
D) $700,000

Question 17

A company reported total stockholders' equity of $540,000 on its balance sheet dated December 31,2010.During the year ended December 31,2011,the company reported net income of $60,000,declared and paid a cash dividend of $18,000,declared and distributed a 10% stock dividend with a $15,000 total market value,sold treasury stock costing $12,000 for $15,000,and issued additional common stock for $70,000.What is total stockholders' equity as of December 31,2011?

Accepted Answer

A) $650,000 
B) $670,000 
C) $667,000 
D) $655,000 
A) $650,000 
B) $670,000 
C) $667,000 
D) $655,000

Question 18

Most investors that are retired prefer to receive their return on investment in the form of stock price appreciation rather in dividends.

Accepted Answer

A) True 
 B)False

Question 19

Treasury stock is a corporation's own stock that was issued and then repurchased,and is still held by the corporation.

Accepted Answer

A) True 
 B)False

Question 20

What is the correct entry for the sale of 1,000 shares of $10 par value preferred stock for $50,000 cash? $\begin{array}{lr}
\text { A. Cash } & \quad\quad\quad\quad\quad\quad50,000 \
\text { Preferred stock } & &50,000 \
\end{array}$

$\begin{array}{lr}
\text { B. Cash } & \quad\quad\quad\quad\quad\quad10,000 \
\text { Preferred stock } & &10,000 \
\end{array}$

$\begin{array}{lr}
\text { C. Cash } & 50,000 \
\text { Gain on sale of preferred stock} & &40,000 \
\text { Preferred stock } & &10,000 \
\end{array}$

$\begin{array}{lr}
\text { D. Cash } & 50,000 \
\text { Preferred stock } & &10,000 \
\text { Gain on sale of preferred stock} & &40,000 \
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Which of the following statements regarding earnings per share (EPS)is correct?

A company declares a 40% stock dividend when there were 4 million common shares outstanding with a $1 par value.The current market price is $20 per common share.Which of the following will be the effect of the stock dividend?

The declaration and distribution of a common stock dividend results in a reduction of the issuing corporation's total stockholders' equity.

Total stockholders' equity increases when treasury stock is sold for an amount less than its cost.

Which of the following statements is not correct?

CGJ Company has provided the following: 200,000 shares of $5 par value common stock are authorized; 140,000 shares of common stock were issued for $11 per share; 130,000 shares are outstanding. Which of the following statements is false?

Watson Company has provided the following data about its common stock: Par value per share,$1; authorized shares,10,000,000; outstanding shares,4,300,000; and issued shares 4,700,000.How many shares of treasury stock are there?

Which of the following statements is true about a partnership?

Which of the following statements is false?

Which of the following statements regarding earnings per share (EPS)is false?

A stock split results in the reduction of the par or stated value per share and a proportionate increase in the number of shares outstanding.

Which of the following is a correct statement about cumulative and noncumulative preferred stock?

Which of the following is true about a proprietorship?

Irish Corporation issued (sold)10,000 shares of its no par common stock for $70 per share.The bylaws established a stated value of $10 per share.The transaction would increase the common stock account on the balance sheet by how much?

Most investors that are retired prefer to receive their return on investment in the form of stock price appreciation rather in dividends.

Treasury stock is a corporation's own stock that was issued and then repurchased,and is still held by the corporation.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Operating Decisions and the Income Statement

Adjustments,Financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Analyzing Financial Statements

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Exam 11: Reporting and Interpreting Owners Equity

Which of the following statements regarding earnings per share (EPS)is correct?

A company declares a 40% stock dividend when there were 4 million common shares outstanding with a $1 par value.The current market price is $20 per common share.Which of the following will be the effect of the stock dividend?

The declaration and distribution of a common stock dividend results in a reduction of the issuing corporation's total stockholders' equity.

Total stockholders' equity increases when treasury stock is sold for an amount less than its cost.

Which of the following statements is not correct?

CGJ Company has provided the following: 200,000 shares of $5 par value common stock are authorized; 140,000 shares of common stock were issued for $11 per share; 130,000 shares are outstanding. Which of the following statements is false?

Watson Company has provided the following data about its common stock: Par value per share,$1; authorized shares,10,000,000; outstanding shares,4,300,000; and issued shares 4,700,000.How many shares of treasury stock are there?

Which of the following statements is true about a partnership?

Which of the following statements is false?

Which of the following statements regarding earnings per share (EPS)is false?

A stock split results in the reduction of the par or stated value per share and a proportionate increase in the number of shares outstanding.

Which of the following is a correct statement about cumulative and noncumulative preferred stock?

Which of the following is true about a proprietorship?

Irish Corporation issued (sold)10,000 shares of its no par common stock for $70 per share.The bylaws established a stated value of $10 per share.The transaction would increase the common stock account on the balance sheet by how much?

Most investors that are retired prefer to receive their return on investment in the form of stock price appreciation rather in dividends.

Treasury stock is a corporation's own stock that was issued and then repurchased,and is still held by the corporation.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Operating Decisions and the Income Statement

Adjustments,Financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Analyzing Financial Statements

Filters