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Exam 10: Stockholders Equity

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Question 31

Multiple Choice

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Retained Earnings:

A) has a normal debit balance.
B) decreases stockholders' equity.
C) is equal to the balance in cash.
D) increases stockholders' equity.

E) None of the above
F) All of the above

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Question 32

Multiple Choice

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Which of the following has the highest expected return to the investor?

A) Common Stock.
B) Preferred Stock.
C) Bonds.
D) They all have similar expected returns.

E) A) and C)
F) A) and B)

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Question 33

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Common stock is listed before preferred stock in the balance sheet. Preferred stock is listed before common stock in the balance sheet.

Outstanding common stock is:

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance?

The financial statements of Trail Apparel include the following selected data (in millions):

The Retained Earnings balance reported on the balance sheet typically is not affected by:

Treasury Stock is normally reported as:

The amount of retained earnings equals net income minus dividends for the current year. The amount of retained earnings equals all net income, less all dividends, since the company began.

Preferred stock:

The return on equity measures the ability of company management to generate earnings from the resources that owners provide.

Which of the following financing alternatives has the highest preference of payment in a case where the company liquidates its assets?

Crossroads Mall had 100,000 outstanding shares of common stock. On June 16, 2012, Crossroads repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2012, Crossroads resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation?

In the event a corporation is dissolved, common stockholders receive preference over preferred stockholders in the distribution of assets. Preferred stockholders receive preference over common stockholders in the distribution of assets in the event the corporation is dissolved.

On February 22, Brett Corporation reacquired 200 shares of its $5 par value common stock for $25 each. On March 15, the company reissued 70 shares for $30 each. What is true of the journal entry for reissuing their shares?

If a company has expenses that are more than revenues, the net loss decreases retained earnings.

Treasury stock is a contra-equity account since treasury stock increases total stockholders' equity. Treasury stock is a contra-equity account since treasury stock decreases total stockholders' equity.

Match the following terms with their definitions. Each letter is used only once.

Prom Night Formal Wear has the following stockholders' equity accounts at December 31, 2012: Common Stock, $1 par value, 2,000,000 shares; Additional Paid-in Capital, $22 million; Retained Earnings, $15 million; and Treasury Stock, 50,000 shares, $1.25 million. Prepare the stockholders' equity section of the balance sheet.

Cumulative preferred stock means that dividends accumulate interest during the year. Cumulative preferred stock means shares receive priority for future dividends, if dividends are not paid in a given year.