Question 1

Typically, all other things equal, 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.

Question 2

Stockholders' equity is:

Accepted Answer

A)   the amount the company received for all stock when issued plus the amount of retained earnings minus treasury stock.
B)   the amount the company received for all stock authorized plus the amount of retained earnings and treasury stock.
C)   the par value the company received for all stock issued plus the amount of retained earnings minus treasury stock.
D)   the amount the company received for all stock when issued minus the amount of retained earnings and

Question 3

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

Accepted Answer

A)   dividends paid on common stock divided by the average number of outstanding common shares.
B)   net income divided by the average number of outstanding common shares.
C)   total dividends paid divided by the average number of total stock shares.
D)   net income divided by average stockholders' equity.

Question 4

A stock dividend:

Accepted Answer

A)   is the same thing as a stock split.
B)   will reduce stockholders' equity just like a cash dividend.
C)   will not change any of the accounts within stockholders' equity.
D)   will reduce retained earnings just like a cash dividend.

Question 5

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

Accepted Answer

A)   $36.00.
B)   $25.50.
C)   $16.00.
D)   $6.25.

Question 6

A corporation's charter establishes the market value of the company's stock.

Accepted Answer

A) True 
 B)False

Question 7

A company originally issues 180,000 shares of stock at a price of $22; one year later the stock price is $40 per share, the number of outstanding shares is unchanged, and the company's net income for the year is $230,400. The P/E ratio at the end of the year is:

Accepted Answer

A)   0.0002.
B)   24.22.
C)   31.25.
D)   0.0001.

Question 8

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

Accepted Answer

A)   12 million shares.
B)   20 million shares.
C)   9 million shares.
D)   17 million shares.

Question 9

The retained earnings balance was $22,900 on January 1. Net income for the year was $18,100. If retained earnings had a credit balance of $23,800 after closing entries were made for the year, and if additional stock of $5,200 was issued during the year, what was the amount of dividends declared during the year?

Accepted Answer

A)   $17,200
B)   $23,700
C)   $23,300
D)   $13,000

Question 10

Which of the following statements regarding a stock split is true?

Accepted Answer

A)   A stock split decreases retained earnings.
B)   Stock splits do not require a journal entry.
C)   Stock splits are the same as stock dividends.
D)   Stock splits increase the par value per share.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is true?

Accepted Answer

A)   Stock splits and stock dividends both reduce the market price of a share, but only stock splits reduce the par value of a share.
B)   Stock splits and stock dividends both reduce the market price of a share and the par value of a share.
C)   Stock splits and stock dividends both reduce the market price of a share, but only stock dividends reduce the par value of a share.
D)   Stock splits and stock dividends both reduce the market price of a share and reduce retained earnings.

Question 13

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

Accepted Answer

A) True 
 B)False

Question 14

A stock split increases total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 15

What is the journal entry to record the reissuance on July 3?

Accepted Answer

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

Question 16

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.

Question 17

Which of the following statements regarding business forms is true?

Accepted Answer

A)   A sole proprietorship is an unincorporated business owned by one person.
B)   All partnerships are owned by two people.
C)   A corporation is not a legal entity.
D)   An LLC (limited liabilitycompany)  has the same tax treatment as a corporation.

Question 18

The owner's salary is frequently the largest expense of a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 19

At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

Accepted Answer

A) True 
 B)False

Question 20

If a company's preferred stock is 7%, $1 par value, then the dividend on the stock is $.07 per share.

Accepted Answer

A) True 
 B)False

Exam 11: Reporting and Interpreting Stockholders Equity

Stockholders' equity is:

Correct Answer
verified

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

Correct Answer
verified

At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

Correct Answer
verified

Which of the following statements regarding a stock split is true?

Correct Answer
verified

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

Correct Answer
verified

The owner's salary is frequently the largest expense of a sole proprietorship.

Correct Answer
verified

Which of the following statements regarding business forms is true?

Correct Answer
verified

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

Correct Answer
verified

What is the journal entry to record the reissuance on July 3?

Correct Answer
verified

Typically, all other things equal, a profitable company that pays relatively high dividends:

Correct Answer
verified

A company originally issues 180,000 shares of stock at a price of $22; one year later the stock price is $40 per share, the number of outstanding shares is unchanged, and the company's net income for the year is $230,400. The P/E ratio at the end of the year is:

Correct Answer
verified

A stock split increases total stockholders' equity.

Correct Answer
verified

A corporation's charter establishes the market value of the company's stock.

Correct Answer
verified

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

A stock dividend:

Correct Answer
verified

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

Correct Answer
verified

If a company's preferred stock is 7%, $1 par value, then the dividend on the stock is $.07 per share.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Exam 11: Reporting and Interpreting Stockholders Equity

Stockholders' equity is:

Correct AnswerverifiedShow Answer

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

Correct AnswerverifiedShow Answer

At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

Correct AnswerverifiedShow Answer

Which of the following statements regarding a stock split is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The owner's salary is frequently the largest expense of a sole proprietorship.

Correct AnswerverifiedShow Answer

Which of the following statements regarding business forms is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the journal entry to record the reissuance on July 3?

Correct AnswerverifiedShow Answer

Typically, all other things equal, a profitable company that pays relatively high dividends:

Correct AnswerverifiedShow Answer

A company originally issues 180,000 shares of stock at a price of $22; one year later the stock price is $40 per share, the number of outstanding shares is unchanged, and the company's net income for the year is $230,400. The P/E ratio at the end of the year is:

Correct AnswerverifiedShow Answer

A stock split increases total stockholders' equity.

Correct AnswerverifiedShow Answer

A corporation's charter establishes the market value of the company's stock.

Correct AnswerverifiedShow Answer

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A stock dividend:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a company's preferred stock is 7%, $1 par value, then the dividend on the stock is $.07 per share.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified