1. Treasury stock is classified as: y A contra equity account. 2.

Buying stock in a corporation is attractive to investors because: y Stockholders are not liable for the corporation s actions and debts. y A corporation has unlimited life. y Stock is easily transferred. y Shareholders are not agents of the corporation. 3. A company has earning per share of $9.60. Its dividend per share is $0.50 and its market price per share is &120. Its price-earnings ratio equals : y 12.5 4. The price-earnings ratio is calculated by dividing: y Market value per share by earnings per share. 5. A liquidating dividend is: y A return of a part of the original investment back to the stockholders. 6. Stated value of no-par stock is: y An amount assigned to no-par stock by the corporation s broad of directors. 7. A stock dividend: y Does not reduce a corporation s assets and stockholders equity. y Does not affect total equity but does affect the components of equity. y Is not a liability on the balance sheet. y Transfers a portion of equity from retained earnings to pain-in-capital. 8. A company has net income of $850,000 it has $125,000 weighted-average common shares outstanding and a market value per share of $115. The company s price: y 16.9 9. Changes in accounting estimates are: y Accounted for in current and future periods. 10. A company made an error in recording the 2009 purchase of machinery. This was discovered in 2011. The item should be reported as a prior period adjustment: y On the 2011 statement of retained earnings. 11. Stock that was reacquired and is still held by the issuing corporation is called: y Treasury stock.

19. Book value per share: y Reflects the value per share if a company is liquidated at balance sheet amounts.12. The book value per share is: y $11.000 and the par value per common share is$10. 13. Prior period adjustment are reported in the: y Statement of retained earnings. A liability for dividends exists: y On the date of declaration.000 shares of common stock outstanding. . A corporation is authorized to issue 9. The right purchase common stock at a fixed price over a specified period is: y Stock option. Preferred stock is often issued: y To prevent dilution of common stock.000 shares of its $10 par value common stock at a cash of $13 per share. 16. y To appeal to investors who believe that common stock is too risky. A corporation sold $14. 17. 18. 20. 14. 22. 21. Book value per common share is computed by: y Dividing stockholders equity applicable to common shares by the number of common shares outstanding. y To initiate of increase financial leverage. The entry to record this transaction would include: y A credit to Common Stock for $140. The stockholders equity applicable to common shares is $470. The date a board of directors votes to pay a dividend is called the: y Date of declaration. A company has 40. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as: y Noncumulative preferred stock. the corporation should report paid-in-capital from the issuance of common stock of: y $0.000.000 shares of $5 common stock.75. 15. y To boost the return earned by common shareholders.

y To avoid a hostile take-over. and the call price if its preferred stock is $60 per share. 32. The book value per common share is: y $16.000 shares of common stock outstanding and the total value of its stockholders equity is $680. A common statutory restriction is reported on the: y Statement of stockholders equity. The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is: y Referred to as paid-in capital. The company s book value per common share equals: y $32. The total amount of paid-in capital in excess of par is: y $1. 30.000 shares its $10 par value common stock in exchange for land that has a market value of $84. 31. The Discount on Common Stock account reflects: y The difference between the par value of stock and its issue price when it is issued at a price below par value.000. 26. The entry to record this transaction would include: y A credit to Paid-in Capital in Excess of Par Value. 27. The dividend yield is computed by dividing: y Cash dividends per share by the market price per share.000.23. Dividend yield is the percent of cash dividends paid to common shareholders relative to the: y Common stock s market value.000.50.00. It also has 25.000. A company issued 60 shares of $100 par value stock for $7. y To maintain market value for the company stock. y To have shares available for merger or acquisition. 28.000. Common Stock for $24. 24.000 shares of common stock outstanding and its total stockholders equity equals $500. .000 shares of $100 par preferred stock. 25. A corporation issued 6.000 cash. 29. Corporation often buy back their own stock: y To have shares available for employee compensation. It also has 20. A company has 1. A company has 500 shares of $50 par value preferred stock outstanding.

A dividend preference for preferred stock means that: y Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders. the number of shares if common stock outstanding were 8. y Take a long-run approach. 41.800 charge from its accountant for assistance in filing its charter with the state.33. A corporation issued 300 shares of its $5 par value common stock in payment of a $1.000. 34. 39. Owners of preferred stock often do not have: y Voting rights.000 shares authorized. and 9. . A company s board of directors votes to declare a cash dividend of 75¢ per share.000 issued . 37. The company has 15.500 shares outstanding. Stock option are often used to encourage employee to: y Focus on company performance.75*9500 42. y To help save for retirement by participation in profit-sharing plans. ->0. Common Stock. 35. 38. 36. There were no other transactions. A premium on common stock: y Is the amount paid in excess of par by purchasers of newly issued stock. 10. Shamrock Company had net income of $30. The total amount of the cash dividend is: y $7. The statement of changes in stockholders equity: y Describes changes in paid-in capital and retained earning subcategories. On January 1.000. A liquidating dividend is: y A return of a part of the original investment back to the stockholders. The company s earnings per share is: y $3.125. 40. The entry to record this transaction will include: y A $300 credit to Paid-in Capital in Excess of Par Value. y Remain with the company. The annual amount of cash dividends distributed to common shareholders relative to the common stock s market value is the: y Dividend yield.75.

Its net income is $1. Retained earnings: y Can be subject to restrictions due to loan agreements.000. Par value of a stock refers to the: y Value assigned to a share of stock by the corporate charter.000 and the weighted-average number of shares outstanding is 350. The company s price-earnings ratio equals: y 14. . Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent of dollar amount stated on the preferred stock is called: y Participating preferred stock. 49.41. Prior period adjustments to financial statements can result from: y Using unacceptable accounting principles.43. nonparticipating preferred stock. y Can be subject to appropriation by a corporation s director to limit dividends. 45. and can usually be issued at any price without creating a minimum legal capital deficiency . 47.750. 46.000. 51. The total amount of stock that a corporation s charter allows it to issue is referred to as: y Authorized Stock. A class of stock that does not have a par value. The company declared a $2. This means that: y The amount of the potential dividend is $7 per year per preferred share. On January 1. y Can be subject to a statutory restriction by a state.6.000. Shamrock Company had net income of $30. The company s earnings per share is: y $3.700 dividend on its noncumulative. the number of shares of common stock outstanding was 8.00. A company issued 7% preferred stock with a $100 par value. 50. There were no other transactions. 48. y Generally consists of a company s cumulative net income less any net losses and dividend declared since its inception. A stock dividend transfers: y Retained earnings to paid-in capital. A company has a market value per share of $73. 52. 44. is called: y No-par stock.

20 and its market value price per share is $30. 56. A premium on common stock: y ----------------------------------------------------------- .5% cumulative and nonparticipating preferred stock and 10. y Removes all paid-in capital amounts related to the retired shares. A company issued 60 shares of $100 par value stock for $7. Its earnings per share is $4.00.48 in cash dividends per share. 61. Its dividend yield equals: y 1. 55. y Does not reduce the number of authorized shares.000 cash. The retirement of stock: y Reduces the number of issued shares. 57. The cost of bringing a corporation into existence.000 in its first year of operation.000. y Loan contracts.53. The total amount of paid-in capital is: y $7. y Reduces retained earnings if the purchase price exceeds the net amount removed from paid-in capital.000 shares of $50 par value. A company has 1.000 shares 0f $10 value common stock outstanding. 58.60%. and amounts paid to obtain a charter are called: y Organization costs. 60. 4. A corporation s distribution of additional shares of its own stock to its stockholders without the receipt of any payment is return is called a: y Stock dividend. y Merger negotiations. Book value per share is often used as a starting point for: y Price setting for public utilities. 59. A company paid $0. y Stock valuation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is: y $3. 54. including legal fees. promoter fees. The company paid total cash dividends of $1. Stockholders equity consists of: y Paid-in capital and retained earnings.500.

375.62. Xtreme Sports also has $500. $22. Xtreme Sports paid cash dividends of $30. 65. In the company s first year.000 preferred. -> [115 / (850. Stocks that pay relatively large cash dividends on a regular basis are called: y Income stocks. This dividend should be distributed as follows: y $8. A proxy is: y A legal document that gives a designated agent of a stockholder the power of vote the stock.000 of 8% noncumulative.000)] 66. A company had a beginning balance in retained earnings of $43. A company has net income of $850. Xtreme Sports has $100.625 in the current period. is called the: y Minimum legal capital. It has 125. 70. Preferred stock that the issuing corporation at its option may retire by paying a specified amount to the preferred stockholders plus any dividends in arrears is called: y Callable preferred stock. 69. 71.000. nonparticipating. 63. The Discount on Common Stock account reflects: y The difference between the par value of stock and its issue price when it is issued at a price below par value. During the second year.000 weighted-average common shares outstanding and a market value per share of $115.000 of common stock outstanding.000 common. 68.000. . 64. An amount of assets defined by state law that stockholders must invest and leave invested in a corporation. preferred stock outstanding. no dividends were paid.000. The ending balance in retained earnings equals: y $43. The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a: y Preemptive right. The statement of retained earnings may be combined with the: y Statement of Stockholders Equity. The company s price: y 16. It had net income of $6.000/125. 67.000 and paid out cash dividend of $5. which is intended to protect the creditors of the corporation.9.

000 shares of $10 par value common stock. ) and ( To provide evidence of management s confidence that the company is doing well. Achieving an increased on common stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called: y Financial leverage. 76. The entry to record this transaction would include: y A debit to Organization Expenses for $5. 74. The corporate charter authorized 100.72. During the first month of operation. A corporation was formed on January 1. Companies can use stock dividends: y Both (To keep the market price of the stock affordable.000. . ) 73.000 charge for drawing up the articles of incorporation. The amount of income earned per share of a company s common stock is called: y Earnings per share. the corporation issued 300 shares to its attorneys in payment of a $5. The board of directors of a corporation: y Are responsible for and have final authority for managing corporate activities. 75.

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