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| 1 | |
The right to vote at meetings is called the preemptive right. |
| | A) | True |
| | B) | False |
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| 2 | |
The number of shares of stock that have been issued and are outstanding is referred to as the authorized number of shares. |
| | A) | True |
| | B) | False |
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| 3 | |
Par value stock can be issued at par, above par, or below par. |
| | A) | True |
| | B) | False |
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| 4 | |
The right to purchase common stock at a fixed price per share over a specified period of time is called a stock option. |
| | A) | True |
| | B) | False |
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| 5 | |
An appropriation to retained earnings is only done as either a legal or contractual restriction. |
| | A) | True |
| | B) | False |
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| 6 | |
The price-earnings ratio is determined by dividing the current market value per share of stock by the earnings per share. |
| | A) | True |
| | B) | False |
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| 7 | |
A growth stock has a high dividend yield. |
| | A) | True |
| | B) | False |
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| 8 | |
The book value per common share equals the market value of a share of the common stock. |
| | A) | True |
| | B) | False |
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| 9 | |
When one share of no-par common stock with a stated value of $20 is sold for $27, the entire proceeds of the stock issue are credited to Common Stock. |
| | A) | True |
| | B) | False |
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| 10 | |
Generally, in order to pay a cash dividend, a corporation must have a credit balance in its positive balance in its Retained Earnings account. |
| | A) | True |
| | B) | False |
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| 11 | |
A stock dividend increases total stockholders' equity and decreases total assets. |
| | A) | True |
| | B) | False |
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| 12 | |
A stock split is an action by the corporation to call its stock and replace it with less than one new share. |
| | A) | True |
| | B) | False |
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| 13 | |
A company that has cumulative preferred stock must report dividends in arrears as a liability. |
| | A) | True |
| | B) | False |
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| 14 | |
When treasury stock is reissued by selling it for more than its original cost, the gain is shown on the income statement as a gain on sale of treasury stock. |
| | A) | True |
| | B) | False |
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| 15 | |
The Paid-in Capital, Treasury Stock account cannot have a debit balance. |
| | A) | True |
| | B) | False |
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| 16 | |
Which feature is a disadvantage to the corporate form of ownership? |
| | A) | Separate legal entity |
| | B) | Continuous life |
| | C) | Difficulty in capital accumulation |
| | D) | Double taxation |
| | E) | Limited liability of stockholders |
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| 17 | |
What is the amount assigned per share by the corporation in its charter? |
| | A) | Par value |
| | B) | Liquidating cash dividend value |
| | C) | Market value |
| | D) | Book value |
| | E) | None of the above |
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| 18 | |
Which type of stock has special rights that give it a priority over common stock in one or more areas? |
| | A) | Treasury stock |
| | B) | Class A stock |
| | C) | Preferred stock |
| | D) | Favored stock |
| | E) | Participating stock |
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| 19 | |
Which type of stock has the right to receive prior periods' unpaid dividends before any dividend is paid to common stockholders? |
| | A) | Cumulative preferred stock |
| | B) | Participating preferred stock |
| | C) | Convertible preferred stock |
| | D) | Callable preferred stock |
| | E) | Preferred stock |
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| 20 | |
Net income for the period is $55,000, preferred dividends of $10,000 were paid, and common dividends of $30,000 were paid. If there were 100,000 common shares outstanding throughout the year, what were the earnings per common share? |
| | A) | $4.50 |
| | B) | $44.50 |
| | C) | $0.45 |
| | D) | $0.30 |
| | E) | Cannot be determined |
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| 21 | |
The price-earnings ratio (PE ratio) for Company Y is 2.5. The earnings per share are $2.25. What was the market price of Company Y's common stock at the end of the period? |
| | A) | $4.50 |
| | B) | $5.625 |
| | C) | $5.00 |
| | D) | $9.00 |
| | E) | Cannot be determined |
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| 22 | |
How is the dividend yield calculated? |
| | A) | Annual cash dividends per share divided by market value per share |
| | B) | Annual cash dividends per share divided by price earnings ratio |
| | C) | Market value per share divided by earnings per share |
| | D) | Annual cash dividends per share divided by earnings per share |
| | E) | None of the above |
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| 23 | |
What term is used to describe the recorded amount of stockholders' equity applicable to common shares on a per share basis? |
| | A) | Earnings per common share |
| | B) | Market value per common share |
| | C) | Book value per common share |
| | D) | Weighted-average common shares |
| | E) | Price-earnings per common share |
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| 24 | |
A corporation issued 10,000 shares of $40 par value common stock for $45 per share. The journal entry to record the issue of the stock would include which of the following? |
| | A) | A credit to Gain on the Sale of Common Stock, $50,000 |
| | B) | A credit to Paid-In Capital in Excess of Par, Common Stock, $400,000 |
| | C) | A credit to Common Stock, $450,000 |
| | D) | A credit to Common Stock, $40 Par Value, $400,000 |
| | E) | None of the above |
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| 25 | |
On March 1st, a company declares a $.10 cash dividend on its 60,000 shares outstanding payable on March 31st to stockholders on record as of March 15th. What entry should be made on the date of record? |
| | A) | Debit Retained Earnings for $6,000; Credit Dividends Payable for $6,000 |
| | B) | Debit Dividends Payable for $6,000; Credit Cash for $6,000 |
| | C) | Debit Dividends on Record for $6,000; Credit Dividends Payable for $6,000 |
| | D) | Debit Retained Earnings for $6,000; Credit Cash for $6,000 |
| | E) | None of the above |
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| 26 | |
Which of the following statements is incorrect regarding a large stock dividend? |
| | A) | A large stock dividend is a stock dividend of more than 25% of previously outstanding shares. |
| | B) | A large stock dividend is recorded by debiting retained earnings for the fair market value of the shares to be distributed. |
| | C) | Large stock dividends have no effect on total stockholders' equity. |
| | D) | There is no effect on Paid-In Capital in Excess of Par Value for a large stock dividend. |
| | E) | Large stock dividends reduce Retained Earnings. |
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| 27 | |
Which of the following is true with regard to a 2-for-1 stock split of 100,000 shares of $14 par value common stock outstanding? |
| | A) | New par value is $7, total contributed capital increases, total retained earnings decreases, and total stockholders' equity decreases. |
| | B) | New par value is $28, total contributed capital does not change, total retained earnings decreases, and total stockholders' equity decreases. |
| | C) | New par value is $7, total contributed capital does not change, total retained earnings does not change, and total stockholders' equity does not change. |
| | D) | New par value is $7, total contributed capital increases, total retained earnings decreases, and total stockholders' equity does not change. |
| | E) | New par value is $28, total contributed capital decreases, total retained earnings increases, and total stockholders' equity decreases |
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| 28 | |
Whenever the dividend rate on preferred stock is less than the rate the corporation earns on its operations, then which of the following will occur? |
| | A) | The rate earned by the common stockholders decreases |
| | B) | The rate earned by the common stockholders increases |
| | C) | The market price of the common stock decreases |
| | D) | The market price of the preferred stock increases |
| | E) | None of the above will occur |
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| 29 | |
Which of the following statements is correct? |
| | A) | Treasury stock receives cash dividends. |
| | B) | Treasury stock must be sold for more than its cost. |
| | C) | Treasury stock represents unissued shares of the corporation. |
| | D) | The purchase of treasury stock increases total stockholders' equity. |
| | E) | The purchase of treasury stock decreases total stockholders' equity. |
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| 30 | |
A corporation purchases 6,000 of their own shares for $60,000 on January 1st. On January 20th, it reissues 1,000 of the shares by selling them for $12 each. The entry to reissue the shares includes which of the following? |
| | A) | Credit to Cash for $12,000 |
| | B) | Credit to Treasury Stock for $60,000 |
| | C) | Credit to Paid-In Capital, Treasury Stock for $2,000 |
| | D) | Debit to Treasury Stock for $10,000 |
| | E) | Credit to Common Stock for $10,000 |
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