Question 1

Earnings per share is useful in comparing earnings performance across companies.Earnings per share is useful in comparing earnings performance for the same company over time.Earnings per share cannot be used to compare across companies because of differences in the number of shares outstanding among companies.

Accepted Answer

A) True 
 B)False

Question 2

The par value of shares issued is normally recorded in the:

Accepted Answer

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

Question 3

Authorized stock is the number of shares that have been sold to investors.Authorized stock is the total number of shares available to sell,stated in the company's articles of incorporation.Issued stock is the number of shares that have been sold to investors.

Accepted Answer

A) True 
 B)False

Question 4

We calculate earnings per share as net income divided by the average shares outstanding during the period.

Accepted Answer

A) True 
 B)False

Question 5

Treasury Stock:

Accepted Answer

A)  Has a normal credit balance.
B)  Decreases stockholders' equity.
C)  Is recorded as an investment.

Question 6

Why doesn't stockholders' equity equal the market value of equity?

Accepted Answer

A)  Stockholders' equity usually does equal the market value of equity.
B)  Investors tend to incorrectly price the market value of equity.
C)  It's related to the use of historical cost to report many long-term assets and the expensing of value generating costs such as research and development and advertising.

Question 7

If a company issues 1,000 shares of $1 par value common stock for $20 per share,what would be the effect on the accounting equation?

Accepted Answer

A)  Increase assets and increase liabilities.
B)  Increase assets and increase revenue.
C)  Increase assets and increase stockholders' equity.

Question 8

Stock repurchases reduce the number of shares outstanding,thereby increasing earnings per share.

Accepted Answer

A) True 
 B)False

Question 9

All publicly held corporations are regulated by what government organization?

Accepted Answer

A)  The Financial Accounting Standards Board.
B)  The Commission on Accounting Procedures.
C)  The Accounting Principles Board.
D)  The Securities and Exchange Commission.

Question 10

Return on equity is calculated as:

Accepted Answer

A)  Net income divided by average stockholders' equity.
B)  Net income divided by ending stockholders' equity.
C)  Net income divided by average market value of equity.

Question 11

Which of the following stages of equity financing comes last in the traditional order of progression?

Accepted Answer

A)  Investment by friends and family of the founders.
B)  Investment by the founders of the business.
C)  Initial public offering (IPO) .

Question 12

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share.What is true about the journal entry to record the issuance?

Accepted Answer

A)  Debit Common Stock $10,000.
B)  Credit Cash $50,000.
C)  Credit Common Stock $50,000.
D)  Credit Additional Paid-In Capital $40,000.

Question 13

When a company issues 25,000 shares of $1 par value common stock for $10 per share,the journal entry for this issuance would include:

Accepted Answer

A)  A debit to Cash for $25,000.
B)  A debit to Additional Paid-in Capital for $25,000.
C)  A credit to Additional Paid-in Capital for $250,000.
D)  A credit to Common Stock for $25,000.

Question 14

The Surf's Up issues 1,000 shares of 6%,$100 par value preferred stock at the beginning of 2017.All remaining shares are common stock.The company was not able to pay dividends in 2017,but plans to pay dividends of $18,000 in 2018.Assuming the preferred stock is cumulative,how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018?

Accepted Answer

A)  $6,000 to preferred stockholders and $12,000 to common stockholders.
B)  $18,000 to preferred stockholders and $0 to common stockholders.
C)  $12,000 to preferred stockholders and $6,000 to common stockholders.

Question 15

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

Accepted Answer

A)  Treasury Stock.
B)  Common Stock.
C)  Sales Revenue.

Question 16

In terms of total sales,assets,and earnings,the dominant form of business organization is a:

Accepted Answer

A)  Sole proprietorship.
B)  Partnership.
C)  Corporation.

Question 17

Small stock dividends are recorded by debiting Retained Earnings for the par value per share.Small stock dividends are recorded by debiting Retained Earnings for the market value,rather than the par value,per share.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  Treasury stock is recorded as an asset by the acquiring company.
B)  Only losses on the sale of treasury stock are recorded on the income statement.
C)  Stockholders' equity is reduced when treasury stock is acquired.

Question 19

The statement of stockholders' equity shows:

Accepted Answer

A)  Only the ending balance in each stockholders' equity account.
B)  More information than the stockholders' equity section in the balance sheet.
C)  Only the beginning balance in each stockholders' equity account.

Question 20

The statement of stockholders' equity shows how each equity account changed during the year.

Accepted Answer

A) True 
 B)False

Exam 10: Stockholders Equity

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

Correct Answer
verified

If a company issues 1,000 shares of $1 par value common stock for $20 per share,what would be the effect on the accounting equation?

Correct Answer
verified

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

Correct Answer
verified

When a company issues 25,000 shares of $1 par value common stock for $10 per share,the journal entry for this issuance would include:

Correct Answer
verified

Why doesn't stockholders' equity equal the market value of equity?

Correct Answer
verified

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share.What is true about the journal entry to record the issuance?

Correct Answer
verified

All publicly held corporations are regulated by what government organization?

Correct Answer
verified

The par value of shares issued is normally recorded in the:

Correct Answer
verified

Small stock dividends are recorded by debiting Retained Earnings for the par value per share.Small stock dividends are recorded by debiting Retained Earnings for the market value,rather than the par value,per share.

Correct Answer
verified

Which of the following stages of equity financing comes last in the traditional order of progression?

Correct Answer
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Treasury Stock:

Correct Answer
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Correct Answer
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The statement of stockholders' equity shows:

Correct Answer
verified

Authorized stock is the number of shares that have been sold to investors.Authorized stock is the total number of shares available to sell,stated in the company's articles of incorporation.Issued stock is the number of shares that have been sold to investors.

Correct Answer
verified

Stock repurchases reduce the number of shares outstanding,thereby increasing earnings per share.

Correct Answer
verified

Correct Answer
verified

In terms of total sales,assets,and earnings,the dominant form of business organization is a:

Correct Answer
verified

The statement of stockholders' equity shows how each equity account changed during the year.

Correct Answer
verified

Return on equity is calculated as:

Correct Answer
verified

We calculate earnings per share as net income divided by the average shares outstanding during the period.

Correct Answer
verified

Exam 10: Stockholders Equity

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

Correct AnswerverifiedShow Answer

If a company issues 1,000 shares of $1 par value common stock for $20 per share,what would be the effect on the accounting equation?

Correct AnswerverifiedShow Answer

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

Correct AnswerverifiedShow Answer

When a company issues 25,000 shares of $1 par value common stock for $10 per share,the journal entry for this issuance would include:

Correct AnswerverifiedShow Answer

Why doesn't stockholders' equity equal the market value of equity?

Correct AnswerverifiedShow Answer

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share.What is true about the journal entry to record the issuance?

Correct AnswerverifiedShow Answer

All publicly held corporations are regulated by what government organization?

Correct AnswerverifiedShow Answer

The par value of shares issued is normally recorded in the:

Correct AnswerverifiedShow Answer

Small stock dividends are recorded by debiting Retained Earnings for the par value per share.Small stock dividends are recorded by debiting Retained Earnings for the market value,rather than the par value,per share.

Correct AnswerverifiedShow Answer

Which of the following stages of equity financing comes last in the traditional order of progression?

Correct AnswerverifiedShow Answer

Treasury Stock:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The statement of stockholders' equity shows:

Correct AnswerverifiedShow Answer

Authorized stock is the number of shares that have been sold to investors.Authorized stock is the total number of shares available to sell,stated in the company's articles of incorporation.Issued stock is the number of shares that have been sold to investors.

Correct AnswerverifiedShow Answer

Stock repurchases reduce the number of shares outstanding,thereby increasing earnings per share.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In terms of total sales,assets,and earnings,the dominant form of business organization is a:

Correct AnswerverifiedShow Answer

The statement of stockholders' equity shows how each equity account changed during the year.

Correct AnswerverifiedShow Answer

Return on equity is calculated as:

Correct AnswerverifiedShow Answer

We calculate earnings per share as net income divided by the average shares outstanding during the period.

Correct AnswerverifiedShow Answer

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