Question 1

Which of the following statements is not correct?

Accepted Answer

A) Cash flow from financing activities increases when treasury shares are reissued. 
B) Cash dividends decrease cash flow from financing activities. 
C) Cash flow from investing activities decreases when treasury shares are purchased. 
D) Issuance of a seasoned new issuance of stock increases cash flow from financing activities. 
E) AACSB Tag: Relative Thinking 
A) Cash flow from financing activities increases when treasury shares are reissued. 
B) Cash dividends decrease cash flow from financing activities. 
C) Cash flow from investing activities decreases when treasury shares are purchased. 
D) Issuance of a seasoned new issuance of stock increases cash flow from financing activities. 
E) AACSB Tag: Relative Thinking

Question 2

Rye Company has provided the following information:
Number of issued common shares,225,000;
 Net income,$500,000;
 Number of authorized common shares,400,000;
 Number of treasury shares,25,000.
What is Rye's earnings per share?

Accepted Answer

A) $2.50 
B) $1.25 
C) $2.22 
D) $1.33 
A) $2.50 
B) $1.25 
C) $2.22 
D) $1.33

Question 3

Stockholders' equity decreases when a company purchases treasury stock.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following doesn't correctly describe preferred stock?

Accepted Answer

A) Preferred stock has a higher priority status relative to common stock. 
B) Preferred shareholders are guaranteed to receive dividends. 
C) Preferred stock usually does not carry voting rights. 
D) Preferred stockholders receive dividends in arrears only if the shares are cumulative. 
A) Preferred stock has a higher priority status relative to common stock. 
B) Preferred shareholders are guaranteed to receive dividends. 
C) Preferred stock usually does not carry voting rights. 
D) Preferred stockholders receive dividends in arrears only if the shares are cumulative.

Question 5

When a company reissues treasury stock,it creates a cash inflow from an investing activity because treasury stock is an investment asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 6

Wendell Company provided the following pertaining to its recent year of operation:
 Common stock with a $10,000 par value was sold for $50,000 cash.
 Cash dividends totaling $20,000 were declared,of which $15,000 were paid.
 Net income was $70,000.
 A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value.
Treasury stock costing $9,000 was sold for $7,000.
How much did Wendell's total stockholders' equity increase during the recent year of operation?

Accepted Answer

A) $107,000 
B) $84,000 
C) $80,000 
D) $112,000 
A) $107,000 
B) $84,000 
C) $80,000 
D) $112,000

Question 7

The dividend yield ratio is dividends per share divided by the number of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 8

The declaration of a common stock dividend by a corporation's board of directors creates a liability on the declaration date.

Accepted Answer

A) True 
 B)False

Question 9

Wendell Company provided the following pertaining to its recent year of operation:
 Common stock with a $10,000 par value was sold for $50,000 cash.
 Cash dividends totaling $20,000 were declared,of which $15,000 were paid.
 Net income was $70,000.
 A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value.
 Treasury stock costing $9,000 was sold for $7,000.
How much did Wendell's contributed capital increase during the recent year of operation?

Accepted Answer

A) $15,000 
B) $73,000 
C) $58,000 
D) $75,000 
A) $15,000 
B) $73,000 
C) $58,000 
D) $75,000

Question 10

Which of the following statements about treasury stock transactions is correct?

Accepted Answer

A) The total number of shares issued increases when treasury stock is purchased. 
B) The total number of shares authorized changes when treasury stock is purchased. 
C) Gains and losses on treasury stock transactions are reported on the income statement. 
D) A stockholders' equity account is debited when treasury stock is purchased. 
A) The total number of shares issued increases when treasury stock is purchased. 
B) The total number of shares authorized changes when treasury stock is purchased. 
C) Gains and losses on treasury stock transactions are reported on the income statement. 
D) A stockholders' equity account is debited when treasury stock is purchased.

Question 11

Earnings per share are calculated by dividing net income by the number of outstanding shares of common stock at year-end.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements incorrectly describes earnings per share?

Accepted Answer

A) Earnings per share are per common share. 
B) An increase in the market price per common share does not result in a decrease in earnings per share. 
C) An increase in dividends per share results in an increase in earnings per share. 
D) The reissue of treasury stock decreases earnings per share. 
A) Earnings per share are per common share. 
B) An increase in the market price per common share does not result in a decrease in earnings per share. 
C) An increase in dividends per share results in an increase in earnings per share. 
D) The reissue of treasury stock decreases earnings per share.

Question 13

There would be 100,000 shares of common stock outstanding when the number of shares authorized was 150,000,issued shares totaled 120,000,and 20,000 shares were being held in the treasury.

Accepted Answer

A) True 
 B)False

Question 14

Constance Corporation reported a $750,000 balance in its common stock account at the end of 2010.The company held 50,000 shares of treasury stock and had 700,000 shares outstanding.Calculate the par value per share of the company's common stock.

Accepted Answer

To calculate the par value per share of

Question 15

A company reported total stockholders' equity of $170,000 on its balance sheet dated December 31,2010.During the year ended December 31,2011,the company reported net income of $20,000,declared and paid a cash dividend of $4,000,declared and distributed a 10% stock dividend with a $5,000 total market value,and issued additional common stock for $40,000.What is total stockholders' equity as of December 31,2011?

Accepted Answer

A) $234,000 
B) $226,000 
C) $231,000 
D) $221,000 
A) $234,000 
B) $226,000 
C) $231,000 
D) $221,000

Question 16

During 2010,Thomas Corporation repurchased some shares of its own common stock.What effect did this transaction have on 2010 stockholders' equity and earnings per share,respectively? $$\begin{array} { l l l } 
& \text { Stockholders' Equity } & \text { Earnings Per Share } \
\text { A. } & \text { Decrease } & \text { No effect } \
\text { B. } & \text { Increase } & \text { No effect } \
\text { C. } & \text { Decrease } & \text { Decrease } \
\text { D. } & \text { Decrease } & \text { Increase }
\end{array}$$

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

Question 17

When a company issues common stock in exchange for cash,a cash inflow from a financing activity is reported.

Accepted Answer

A) True 
 B)False

Question 18

Atkins Company had 20,000 shares of $5 par value common stock outstanding prior to a 10% common stock dividend declaration and distribution.The market value of the common stock on the declaration date was $11.Which of the following statements correctly describes the affect of the common stock dividend and declaration?

Accepted Answer

A) Retained earnings decreased $22,000. 
B) Retained earnings decreased $10,000. 
C) Total stockholders' equity decreased $22,000. 
D) Total stockholders' equity decreased $10,000. 
A) Retained earnings decreased $22,000. 
B) Retained earnings decreased $10,000. 
C) Total stockholders' equity decreased $22,000. 
D) Total stockholders' equity decreased $10,000.

Question 19

A stock dividend

Accepted Answer

A) results in a transfer of retained earnings to contributed capital. 
B) increases the number of shares outstanding and involves a pro rata reduction in the par value per share. 
C) is accounted for in exactly the same manner as a stock split. 
D) results in a transfer of retained earnings to contributed capital and also increases the number of shares outstanding and involves a pro rata reduction in the par value per share. 
A) results in a transfer of retained earnings to contributed capital. 
B) increases the number of shares outstanding and involves a pro rata reduction in the par value per share. 
C) is accounted for in exactly the same manner as a stock split. 
D) results in a transfer of retained earnings to contributed capital and also increases the number of shares outstanding and involves a pro rata reduction in the par value per share.

Question 20

Slickers,Inc.had the following capital structure during 2010:
Preferred stock,7%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for 2008 and 2009.
Common stock,$100 par value,2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000.How much of the dividend is paid to the common stockholders during 2010 assuming the preferred stock is noncumulative?

Accepted Answer

A) $3,500 
B) $7,000 
C) $21,500 
D) $14,500 
A) $3,500 
B) $7,000 
C) $21,500 
D) $14,500

Which of the following statements is not correct?

Rye Company has provided the following information: Number of issued common shares,225,000; Net income,$500,000; Number of authorized common shares,400,000; Number of treasury shares,25,000. What is Rye's earnings per share?

Stockholders' equity decreases when a company purchases treasury stock.

Which of the following doesn't correctly describe preferred stock?

When a company reissues treasury stock,it creates a cash inflow from an investing activity because treasury stock is an investment asset on the balance sheet.

The dividend yield ratio is dividends per share divided by the number of shares outstanding.

The declaration of a common stock dividend by a corporation's board of directors creates a liability on the declaration date.

Which of the following statements about treasury stock transactions is correct?

Earnings per share are calculated by dividing net income by the number of outstanding shares of common stock at year-end.

Which of the following statements incorrectly describes earnings per share?

There would be 100,000 shares of common stock outstanding when the number of shares authorized was 150,000,issued shares totaled 120,000,and 20,000 shares were being held in the treasury.

Constance Corporation reported a $750,000 balance in its common stock account at the end of 2010.The company held 50,000 shares of treasury stock and had 700,000 shares outstanding.Calculate the par value per share of the company's common stock.

When a company issues common stock in exchange for cash,a cash inflow from a financing activity is reported.

A stock dividend

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 is not correct?

Rye Company has provided the following information: Number of issued common shares,225,000; Net income,$500,000; Number of authorized common shares,400,000; Number of treasury shares,25,000. What is Rye's earnings per share?

Stockholders' equity decreases when a company purchases treasury stock.

Which of the following doesn't correctly describe preferred stock?

When a company reissues treasury stock,it creates a cash inflow from an investing activity because treasury stock is an investment asset on the balance sheet.

The dividend yield ratio is dividends per share divided by the number of shares outstanding.

The declaration of a common stock dividend by a corporation's board of directors creates a liability on the declaration date.

Which of the following statements about treasury stock transactions is correct?

Earnings per share are calculated by dividing net income by the number of outstanding shares of common stock at year-end.

Which of the following statements incorrectly describes earnings per share?

There would be 100,000 shares of common stock outstanding when the number of shares authorized was 150,000,issued shares totaled 120,000,and 20,000 shares were being held in the treasury.

Constance Corporation reported a $750,000 balance in its common stock account at the end of 2010.The company held 50,000 shares of treasury stock and had 700,000 shares outstanding.Calculate the par value per share of the company's common stock.

When a company issues common stock in exchange for cash,a cash inflow from a financing activity is reported.

A stock dividend

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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