Question 1

GE buys back 300,000 shares of its stock from investors at $45 a share.Two years later it reissues this stock for $65 a share.The stock reissue would be recorded as:

Accepted Answer

A)  a debit to Cash of $19.5 million and a credit to Treasury Stock of $19.5 million.
B)  a debit to Cash of $13.5 million,a debit to Additional Paid-in Capital of $6 million,a credit to Treasury Stock of $13.5 million,and a credit to Stockholders' Equity of $6 million.
C)  a debit to Cash of $19.5 million,a credit to Treasury Stock of $13.5 million,and a credit to Additional Paid-in Capital of $6 million.
D)  a debit to Cash of $19.5 million,a credit to Treasury Stock of $13.5 million,and a credit to Gain on Sale of Treasury Stock of $6 million.E) None of the above
F) C) and D)

Question 2

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

Accepted Answer

A) True 
 B)False

Question 3

IBM issues 200,000 shares of stock with a par value of $0.01 for $150 per share.Three years later,it repurchases these shares for $80 per share.IBM records the repurchase in which of the following ways?

Accepted Answer

A)  Debit Common Stock for $2,000,debit Additional Paid-in Capital for $29,998,000 and credit Cash for $30 million.
B)  Debit Treasury Stock for $16 million and credit Cash for $16 million.
C)  Debit Common Stock for $2,000,debit Additional Paid-in Capital for $15,998,000 and credit Cash for $16 million.
D)  Debit Stockholders' Equity for $30 million,credit Additional Paid-in Capital for $16 million and credit Cash for $16 million.E) B) and C)
F) A) and D)

Question 4

Use the information above to answer the following question.If the company pays a $35,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?

Accepted Answer

A)  $17,000
B)  $23,000
C)  $29,000
D)  $35,000E) None of the above
F) B) and C)

Question 5

Groucho,Harpo and Chico go into partnership on January 1,2014.Groucho contributes $90,000,Harpo $70,000,and Chico $40,000 to a business called Marx Brothers' Partnership.On a monthly basis,each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided.Groucho receives $2,700 cash per month.
a.Prepare the journal entry for the initial investment.
b.Prepare the journal entry that would be made in one month for the monthly distribution.
c.Prepare the journal entry for the allocation of an annual net income of $84,000.For purposes of this journal entry,assume sales were $116,000 and that all expenses (totaling $32,000)were recorded in a single account called operating expenses.
d.Prepare the journal entry for the closing of the drawings accounts at the end of the year.
e.Prepare a Statement of Partners' Equity (assume no additional investments made).

Accepted Answer

a.Journal entry for the initial investme...

Question 6

All else being equal,when the current stock price for a company's stock falls and net income falls:

Accepted Answer

A)  EPS decreases and ROE increases.
B)  EPS and ROE both decrease.
C)  EPS increases and ROE decreases.
D)  EPS and ROE both increase.E) A) and C)
F) C) and D)

Question 7

The effect of a stock dividend is to:

Accepted Answer

A)  decrease total assets and stockholders' equity.
B)  change the composition of stockholders' equity.
C)  decrease total assets and total liabilities.
D)  increase the market value per share of common shares.E) C) and D)
F) B) and D)

Question 8

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is true?

Accepted Answer

A)  Harry's net income was $47,800.
B)  In closing,Harry will debit the drawing account for $24,500 and credit the capital account for $24,500.
C)  In closing,Harry will debit the capital account for $24,500 and credit the drawing account for $24,500.
D)  Harry's retained earnings account was $47,800.E) All of the above
F) B) and C)

Question 9

A company sells 1 million shares of stock with no par value for $15 a share.In recording the transaction,it would:

Accepted Answer

A)  debit Cash for $15 million and credit Additional Paid-in Capital for $15 million.
B)  debit Cash for $15 million and credit Common Stock for $15 million.
C)  debit Common Stock for $15 million,credit Cash for $15 million.
D)  debit Common Stock for $15 million and credit Additional Paid-in Capital for $15 million.E) B) and D)
F) A) and B)

Question 10

For a business to be considered a corporation:

Accepted Answer

A)  its stock must be sold in very large amounts.
B)  it must be organized as a separate legal entity.
C)  it must issue both common and preferred stock.
D)  it must pay dividends.E) A) and C)
F) C) and D)

Question 11

The par value of stock indicates what the stock is worth.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would be the best investment?

Accepted Answer

A)  A company that pays no dividends,but has substantial net income.
B)  A company that pays substantial dividends,but whose earnings per share has been declining over the past several years.
C)  A company whose stock price has increased steadily,but pays no dividends.
D)  It depends on one's investment objectives.E) A) and B)
F) A) and C)

Question 13

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:

Accepted Answer

A)  the stock is overpriced and should be sold.
B)  the stock has great growth capacity and should be bought.
C)  other financial results and news should be examined to determine the cause of the P/E ratio change.
D)  the stock is underpriced and should be bought.E) C) and D)
F) A) and D)

Question 14

Par value of a stock refers to the

Accepted Answer

A)  issue price of the stock.
B)  value assigned to a share of stock in the corporate charter.
C)  market value of the stock.
D)  maximum selling price of the stock.E) A) and C)
F) A) and D)

Question 15

Use the information above to answer the following question.If the company pays a $15,000 dividend,and the preferred stock is noncumulative,what is the amount the common stockholders will receive?

Accepted Answer

A)  $15,000
B)  $9,000
C)  $9,900
D)  $0E) None of the above
F) A) and C)

Question 16

Preferred stock is generally classified as stockholders' equity under both GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 17

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit of $24,500 in his drawing account and a credit of $126,800 in his capital account.If his capital account has a credit balance of $137,900 after the closing,what was his net income?

Accepted Answer

A)  $11,100
B)  $35,600
C)  $113,400
D)  $13,400E) A) and B)
F) A) and C)

Question 18

All of the following are a part of contributed capital except:

Accepted Answer

A)  Common stock.
B)  Additional paid-in capital.
C)  Preferred stock.
D)  Retained earnings.E) All of the above
F) B) and D)

Question 19

Which one of the following events would not require a journal entry on a corporation's books?

Accepted Answer

A)  2-for-1 stock split
B)  100% stock dividend
C)  2% stock dividend
D)  $1 per share cash dividendE) C) and D)
F) A) and B)

Question 20

Unpaid dividends on cumulative preferred stock are called dividends in arrears.

Accepted Answer

A) True 
 B)False

Exam 11: Stockholders Equity

Correct Answer
verified

Unpaid dividends on cumulative preferred stock are called dividends in arrears.

Correct Answer
verified

Par value of a stock refers to the

Correct Answer
verified

Which of the following would be the best investment?

Correct Answer
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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:

Correct Answer
verified

All of the following are a part of contributed capital except:

Correct Answer
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For a business to be considered a corporation:

Correct Answer
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Use the information above to answer the following question.If the company pays a $15,000 dividend,and the preferred stock is noncumulative,what is the amount the common stockholders will receive?

Correct Answer
verified

A company sells 1 million shares of stock with no par value for $15 a share.In recording the transaction,it would:

Correct Answer
verified

All else being equal,when the current stock price for a company's stock falls and net income falls:

Correct Answer
verified

IBM issues 200,000 shares of stock with a par value of $0.01 for $150 per share.Three years later,it repurchases these shares for $80 per share.IBM records the repurchase in which of the following ways?

Correct Answer
verified

The effect of a stock dividend is to:

Correct Answer
verified

Which one of the following events would not require a journal entry on a corporation's books?

Correct Answer
verified

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

Correct Answer
verified

GE buys back 300,000 shares of its stock from investors at $45 a share.Two years later it reissues this stock for $65 a share.The stock reissue would be recorded as:

Correct Answer
verified

Use the information above to answer the following question.If the company pays a $35,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?

Correct Answer
verified

The par value of stock indicates what the stock is worth.

Correct Answer
verified

Correct Answer
verified
a.Journal entry for the initial investme...
View Answer

Preferred stock is generally classified as stockholders' equity under both GAAP and IFRS.

Correct Answer
verified

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is true?

Correct Answer
verified

Exam 11: Stockholders Equity

Correct AnswerverifiedShow Answer

Unpaid dividends on cumulative preferred stock are called dividends in arrears.

Correct AnswerverifiedShow Answer

Par value of a stock refers to the

Correct AnswerverifiedShow Answer

Which of the following would be the best investment?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

All of the following are a part of contributed capital except:

Correct AnswerverifiedShow Answer

For a business to be considered a corporation:

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.If the company pays a $15,000 dividend,and the preferred stock is noncumulative,what is the amount the common stockholders will receive?

Correct AnswerverifiedShow Answer

A company sells 1 million shares of stock with no par value for $15 a share.In recording the transaction,it would:

Correct AnswerverifiedShow Answer

All else being equal,when the current stock price for a company's stock falls and net income falls:

Correct AnswerverifiedShow Answer

IBM issues 200,000 shares of stock with a par value of $0.01 for $150 per share.Three years later,it repurchases these shares for $80 per share.IBM records the repurchase in which of the following ways?

Correct AnswerverifiedShow Answer

The effect of a stock dividend is to:

Correct AnswerverifiedShow Answer

Which one of the following events would not require a journal entry on a corporation's books?

Correct AnswerverifiedShow Answer

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

Correct AnswerverifiedShow Answer

GE buys back 300,000 shares of its stock from investors at $45 a share.Two years later it reissues this stock for $65 a share.The stock reissue would be recorded as:

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.If the company pays a $35,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?

Correct AnswerverifiedShow Answer

The par value of stock indicates what the stock is worth.

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Journal entry for the initial investme...View AnswerShow Answer

Preferred stock is generally classified as stockholders' equity under both GAAP and IFRS.

Correct AnswerverifiedShow Answer

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is true?

Correct AnswerverifiedShow Answer

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a.Journal entry for the initial investme...
View Answer

Correct Answer
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Correct Answer
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