Question 1

A company issues 1 million shares of preferred stock with a par value of $2 and a market price of $26 per share.The issuance should be recorded as:

Accepted Answer

A)  a debit to Cash of $26 million and a credit to Preferred Stock of $26 million.
B)  a debit to Cash of $2 million and a credit to Preferred Stock of $2 million.
C)  a debit to Cash of $26 million,a credit to Additional Paid-in Capital of $2 million,and a credit to Preferred Stock of $24 million.
D)  a debit to Cash of $26 million,a credit to Preferred Stock of $2 million,and a credit to Additional Paid-in Capital of $24 million.E) A) and C)
F) B) and C)

Question 2

Earnings per share can be affected by all of the following except:

Accepted Answer

A)  how the company chose to finance its operations.
B)  the method of depreciation.
C)  the inventory cost method.
D)  classification of debt as current or long-term.E) None of the above
F) B) and C)

Question 3

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 issued shares after these transactions have been accounted for is:

Accepted Answer

A)  12 million shares.
B)  9 million shares.
C)  10 million shares.
D)  17 million shares.E) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A liability for dividends is recorded on the date of record.

Accepted Answer

A) True 
 B)False

Question 6

A corporation does not have a legal obligation to pay dividends.

Accepted Answer

A) True 
 B)False

Exam 11: Stockholders Equity

Earnings per share can be affected by all of the following except:

Correct Answer
verified

A corporation does not have a legal obligation to pay dividends.

Correct Answer
verified

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

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 issued shares after these transactions have been accounted for is:

Correct Answer
verified

A company issues 1 million shares of preferred stock with a par value of $2 and a market price of $26 per share.The issuance should be recorded as:

Correct Answer
verified

A liability for dividends is recorded on the date of record.

Correct Answer
verified

Exam 11: Stockholders Equity

Earnings per share can be affected by all of the following except:

Correct AnswerverifiedShow Answer

A corporation does not have a legal obligation to pay dividends.

Correct AnswerverifiedShow Answer

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

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 issued shares after these transactions have been accounted for is:

Correct AnswerverifiedShow Answer

A company issues 1 million shares of preferred stock with a par value of $2 and a market price of $26 per share.The issuance should be recorded as:

Correct AnswerverifiedShow Answer

A liability for dividends is recorded on the date of record.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified