Question 1

Treasury stock is a (n) :

Accepted Answer

A)  asset account.
B)  liability account.
C)  contra-asset account.
D)  contra-equity account.E) A) and B)
F) A) and C)

Question 2

The price the corporation agrees to pay to repurchase its preferred stock, which is set when the stock is issued, is called the:

Accepted Answer

A)  book value.
B)  redemption value.
C)  fair market value.
D)  callable value.E) B) and C)
F) A) and D)

Question 3

Which of the following is a disadvantage of the corporate form of business organization?

Accepted Answer

A)  Governmental regulation at both the federal and state levels
B)  Difficulty in transferring ownership
C)  Unlimited liability
D)  Mutual agencyE) None of the above
F) A) and B)

Question 4

For a successful company:

Accepted Answer

A)  return on assets is always higher than return on equity.
B)  return on equity is always higher than return on assets.
C)  return on equity is the same as return on assets.
D)  there is no relationship between the two ratios.E) A) and D)
F) All of the above

Question 5

The entry to record the issuance of 13,000 shares of no-par value common stock at $25 per share includes a:

Accepted Answer

A)  credit to Common Stock for $325,000.
B)  debit to Retained Earnings for $325,000.
C)  credit to Retained Earnings for $325,000.
D)  credit to Paid-in Capital in Excess of Par Value-Common for $325,000.E) None of the above
F) B) and D)

Question 6

The date, which follows the date of declaration, and determines which shareholders will receive the dividend is the:

Accepted Answer

A)  date of record.
B)  distribution date.
C)  payment date.
D)  determination date.E) A) and B)
F) A) and C)

Question 7

When reporting stockholders' equity on the balance sheet, a corporation lists the accounts in the following order:

Accepted Answer

A)  Common stock, preferred stock, retained earnings
B)  Preferred stock, common stock, retained earnings
C)  Retained earnings, preferred stock, common stock
D)  There is no preferred order.E) All of the above
F) None of the above

Question 8

The issuance of common stock in exchange for cash will:

Accepted Answer

A)  not affect the statement of cash flows.
B)  affect the financing activities section of the statement of cash flows.
C)  affect the operating activities section of the statement of cash flows.
D)  affect the investing activities section of the statement of cash flows.E) B) and C)
F) A) and B)

Question 9

The entry to record the sale of 7,000 shares of treasury stock that cost $11 per share for $13 per share includes a:

Accepted Answer

A)  credit to Paid-in Capital in Excess of Par Value-Common for $98,000.
B)  debit to debit to Retained Earnings for $98,000.
C)  credit to Paid-in Capital from Treasury Stock transactions for $14,000.
D)  debit to Treasury stock for $24,000.E) None of the above
F) B) and C)

Question 10

Double taxation means that the:

Accepted Answer

A)  corporation pays tax on its earnings and the shareholders pay tax on dividends.
B)  corporation pays income tax and unemployment taxes.
C)  earnings of a corporation are subject to state and federal income taxes.
D)  shareholders tax rate is twice the amount of the corporate tax rate.E) C) and D)
F) B) and D)

Question 11

Preferred stock is a hybrid between common stock and long-term debt.

Accepted Answer

A) True 
 B)False

Question 12

The number of shares of stocks outstanding is the same as the number of stock that is:

Accepted Answer

A)  issued to the shareholders.
B)  authorized by the board of directors.
C)  currently in the hands of the stockholders.
D)  ready to be sold to shareholders.E) A) and B)
F) A) and C)

Question 13

A stock split increases total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 14

The formula for the rate of return on total assets ratio is:

Accepted Answer

A)  net income less interest expense divided by total assets at the end of the year.
B)  net income plus interest expense divided by total assets at the end of the year.
C)  net income plus interest expense divided by average total assets.
D)  net income less interest expense divided by average total assets.E) None of the above
F) All of the above

Question 15

Another name for paid-in capital in excess of par is additional paid-in capital.

Accepted Answer

A) True 
 B)False

Question 16

The amount of stock the state charter allows a corporation to issue is called authorized stock.

Accepted Answer

A) True 
 B)False

Question 17

All corporations have common stock, but few have preferred stock.

Accepted Answer

A) True 
 B)False

Question 18

When the board of directors declares a cash dividend, the owners of noncumulative preferred stock must receive:

Accepted Answer

A)  neither the current year's dividend nor dividends in arrears.
B)  dividends in arrears, but not the current year's dividend.
C)  all dividends in arrears plus the current year's dividend.
D)  the current year's dividend, but no dividends in arrears.E) C) and D)
F) A) and B)

Question 19

Golden Eagle Corporation issues 100 shares of $10 par value common stock for $50 per share. This transaction will include a credit to Common Stock for:

Accepted Answer

A)  $1,000 and a Gain on Issue of Common Stock for $4,000.
B)  $1,000 and a credit to Retained Earnings for $4,000.
C)  $1,000 and a credit to Paid-in Capital in Excess of Par for $4,000.
D)  $5,000.E) C) and D)
F) A) and D)

Question 20

In a corporation, the ownership is separate from the management.

Accepted Answer

A) True 
 B)False

Exam 9: Stockholders Equity

The formula for the rate of return on total assets ratio is:

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All corporations have common stock, but few have preferred stock.

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The entry to record the sale of 7,000 shares of treasury stock that cost $11 per share for $13 per share includes a:

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In a corporation, the ownership is separate from the management.

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Golden Eagle Corporation issues 100 shares of $10 par value common stock for $50 per share. This transaction will include a credit to Common Stock for:

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Which of the following is a disadvantage of the corporate form of business organization?

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For a successful company:

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Double taxation means that the:

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The entry to record the issuance of 13,000 shares of no-par value common stock at $25 per share includes a:

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The issuance of common stock in exchange for cash will:

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When the board of directors declares a cash dividend, the owners of noncumulative preferred stock must receive:

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Treasury stock is a (n) :

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When reporting stockholders' equity on the balance sheet, a corporation lists the accounts in the following order:

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Another name for paid-in capital in excess of par is additional paid-in capital.

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A stock split increases total stockholders' equity.

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The date, which follows the date of declaration, and determines which shareholders will receive the dividend is the:

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The number of shares of stocks outstanding is the same as the number of stock that is:

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The amount of stock the state charter allows a corporation to issue is called authorized stock.

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Preferred stock is a hybrid between common stock and long-term debt.

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The price the corporation agrees to pay to repurchase its preferred stock, which is set when the stock is issued, is called the:

Correct AnswerverifiedShow Answer

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