Question 1

Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called:

Accepted Answer

A)  Noncumulative preferred stock.
B)  Participating preferred stock.
C)  Cumulative preferred stock.
D)  Convertible preferred stock.
E)  Callable preferred stock.F) C) and E)
G) A) and B)

Question 2

Book value per common share is computed by:

Accepted Answer

A)  Dividing the number of common shares outstanding by stockholders' equity applicable to common shares.
B)  Dividing total assets by the number of shares outstanding.
C)  Dividing stockholders' equity applicable to common shares by the number of common shares outstanding.
D)  Multiplying the number of common shares outstanding times the market price per common share.
E)  Multiplying the number of common shares outstanding by par value per share.F) B) and E)
G) D) and E)

Question 3

A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $70,000. The entry to record this exchange is:

Accepted Answer

A)  Debit Land $50,000; credit Common Stock $50,000.
B)  Debit Common Stock $50,000; debit Paid-In Capital in Excess of Par Value, Common Stock $20,000; credit Land $70,000.
C)  Debit Common Stock $70,000; credit Land $70,000.
D)  Debit Land $70,000; credit Common Stock $50,000; credit Paid-In Capital in Excess of Par Value, Common Stock $20,000.
E)  Debit Land $70,000; credit Common Stock $70,000.F) C) and D)
G) A) and B)

Question 4

Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

Accepted Answer

A) True 
 B)False

Question 5

A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

Accepted Answer

A) True 
 B)False

Question 6

On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

Accepted Answer

A)  Debit Retained Earnings $250,000; credit Common Stock $250,000.
B)  No entry is made for this transaction.
C)  Debit Retained Earnings $750,000; credit Common Stock $750,000.
D)  Debit Retained Earnings $750,000; credit Common Stock Split Distributable $750,000.
E)  Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.F) A) and D)
G) C) and D)

Question 7

A proxy is:

Accepted Answer

A)  A contractual commitment by an investor to purchase unissued shares of stock.
B)  An arbitrary amount assigned to no-par stock by the corporation's board of directors.
C)  A document that delegates a stockholder's voting rights to an agent.
D)  An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
E)  The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation.F) A) and B)
G) A) and C)

Question 8

If a company has noncumulative preferred stock, basic earnings per share is equal to net income less preferred dividends declared divided by the number of weighted average common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 9

The date the directors vote to declare and pay a dividend is called the:

Accepted Answer

A)  Date of declaration.
B)  Date of payment.
C)  Date of stockholders' meeting.
D)  Date of record.
E)  Liquidating date.F) C) and D)
G) None of the above

Question 10

A company has net income of $90,000; its weighted-average common shares outstanding are 18,000. Its dividend per share is $0.45, its market price per share is $88, and its book value per share is $76. Its price-earnings ratio equals:

Accepted Answer

A)  12.5.
B)  17.6.
C)  15.2.
D)  9.0.
E)  16.9.F) None of the above
G) C) and D)

Question 11

Explain how to calculate the price-earnings ratio and describe how it is used in analysis of a company's financial condition and performance.

Accepted Answer

The price-earnings ratio of a common sto...

Question 12

Prior period adjustments to financial statements can result from:

Accepted Answer

A)  Unacceptable accounting practices.
B)  Changes in accounting estimates.
C)  Discontinued operations.
D)  Extraordinary items.
E)  Changes in tax law.F) B) and E)
G) B) and D)

Question 13

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Accepted Answer

A) True 
 B)False

Question 14

A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $110, and its book value per share is $96. Its price-earnings ratio equals:

Accepted Answer

A)  19.2.
B)  10.0.
C)  1.15.
D)  11.46.
E)  0.87.F) B) and E)
G) A) and B)

Question 15

A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80. Its price-earnings ratio equals 13.

Accepted Answer

A) True 
 B)False

Question 16

Common Stock Dividend Distributable is an equity account.

Accepted Answer

A) True 
 B)False

Question 17

Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record the dividend declaration is:

Accepted Answer

A)  No entry is made until the stock is issued.
B)  Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000.
C)  Debit Retained Earnings $135,000; credit Cash $135,000.
D)  Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000.
E)  Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.F) A) and B)
G) A) and E)

Question 18

The Paid-in Capital, Treasury Stock account can never have a debit balance.

Accepted Answer

A) True 
 B)False

Question 19

The price at which a share of stock is bought or sold is known as par value.

Accepted Answer

A) True 
 B)False

Question 20

Stockholders' equity consists of paid-in capital and retained earnings.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

The price at which a share of stock is bought or sold is known as par value.

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Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record the dividend declaration is:

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Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

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A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $110, and its book value per share is $96. Its price-earnings ratio equals:

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A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

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Book value per common share is computed by:

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On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

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Prior period adjustments to financial statements can result from:

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A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $70,000. The entry to record this exchange is:

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Stockholders' equity consists of paid-in capital and retained earnings.

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Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

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The Paid-in Capital, Treasury Stock account can never have a debit balance.

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Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called:

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A company has net income of $90,000; its weighted-average common shares outstanding are 18,000. Its dividend per share is $0.45, its market price per share is $88, and its book value per share is $76. Its price-earnings ratio equals:

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Explain how to calculate the price-earnings ratio and describe how it is used in analysis of a company's financial condition and performance.

Correct AnswerverifiedThe price-earnings ratio of a common sto...View AnswerShow Answer

If a company has noncumulative preferred stock, basic earnings per share is equal to net income less preferred dividends declared divided by the number of weighted average common shares outstanding.

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A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80. Its price-earnings ratio equals 13.

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A proxy is:

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The date the directors vote to declare and pay a dividend is called the:

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Common Stock Dividend Distributable is an equity account.

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The price-earnings ratio of a common sto...
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