Question 1

The main limitation in using book value per share for stock valuation models is the potential difference between recorded value and market value for both assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 2

A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

Accepted Answer

A)  $7,500.
B)  $11,250.
C)  $14,625.
D)  $10,250.
E)  $7,125.F) A) and E)
G) B) and C)

Question 3

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average)common stock.

Accepted Answer

A) True 
 B)False

Question 4

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the dividend declaration is:

Accepted Answer

A)  Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
B)  Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
C)  Debit Common Dividends Payable $104,500; credit Cash $104,500.
D)  Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
E)  Debit Common Dividends Payable $100,100; credit Cash $100,100.F) B) and E)
G) A) and B)

Question 5

The term restricted retained earnings refers to statutory but not contractual restrictions.

Accepted Answer

A) True 
 B)False

Question 6

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Accepted Answer

A)  Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
B)  Debit Common Dividends Payable $104,500; credit Cash $104,500.
C)  Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
D)  Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
E)  Debit Common Dividends Payable $100,100; credit Cash $100,100.F) B) and C)
G) B) and E)

Question 7

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Accepted Answer

A) True 
 B)False

Question 8

Changes in accounting estimates are:

Accepted Answer

A)  Accounted for with a cumulative "catch-up" adjustment.
B)  Accounted for in current and future periods.
C)  Considered accounting errors.
D)  Extraordinary items.
E)  Reported as prior period adjustments.F) A) and E)
G) A) and C)

Question 9

A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

Accepted Answer

A)  Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.
B)  Debit Cash $7,000; credit Common Stock $7,000.
C)  Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.
D)  Debit Investment in Common Stock $7,000; credit Cash $7,000.
E)  Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000.F) None of the above
G) All of the above

Question 10

West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Accepted Answer

A)  Debit Common Dividends Payable $90,000; credit Cash $90,000.
B)  Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
C)  Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.
D)  Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.
E)  Debit Common Dividends Payable $95,000; credit Cash $95,000.F) B) and C)
G) B) and E)

Question 11

The Paid-in Capital, Treasury Stock account can have a zero or credit balance.

Accepted Answer

A) True 
 B)False

Question 12

Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

Accepted Answer

A) True 
 B)False

Question 13

A debit balance in retained earnings is referred to as an accumulated deficit.

Accepted Answer

A) True 
 B)False

Question 14

Wiggins Company has 1,000 shares of $10 par preferred stock, which were issued at par. It also has 25,000 shares of common stock outstanding, and its total stockholders' equity equals $500,000. The book value per common share is:

Accepted Answer

A)  $19.60.
B)  $10.00.
C)  $16.00.
D)  $20.00.
E)  $19.96.F) B) and D)
G) D) and E)

Question 15

Alto Company issued 7% preferred stock with a $100 par value. This means that:

Accepted Answer

A)  The market price per share will approximate $100 per share.
B)  The amount of the potential dividend is $7 per year per preferred share.
C)  Preferred shareholders are entitled to 7% of the annual income.
D)  Preferred shareholders have a guaranteed dividend.
E)  Only 7% of the total paid-in capital can be preferred stock.F) A) and E)
G) A) and D)

Question 16

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

Accepted Answer

A) True 
 B)False

Question 17

A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

Accepted Answer

A)  $31.71.
B)  $33.17.
C)  $32.50.
D)  $60.00.
E)  $32.75.F) B) and D)
G) B) and E)

Question 18

The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

Accepted Answer

A) True 
 B)False

Question 19

Preferred stock that allows preferred stockholders to share with common stockholders any dividends paid in excess of the percent or dollar amount stated on the preferred stock is called:

Accepted Answer

A)  Convertible preferred stock.
B)  Participating preferred stock.
C)  Cumulative preferred stock.
D)  Common stock.
E)  Premium stock.F) C) and D)
G) B) and D)

Question 20

A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average)common stock.

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The term restricted retained earnings refers to statutory but not contractual restrictions.

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Changes in accounting estimates are:

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A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

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Wiggins Company has 1,000 shares of $10 par preferred stock, which were issued at par. It also has 25,000 shares of common stock outstanding, and its total stockholders' equity equals $500,000. The book value per common share is:

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A debit balance in retained earnings is referred to as an accumulated deficit.

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The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

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Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

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Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

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A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

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Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the dividend declaration is:

Correct AnswerverifiedShow Answer

A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

Correct AnswerverifiedShow Answer

Alto Company issued 7% preferred stock with a $100 par value. This means that:

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The Paid-in Capital, Treasury Stock account can have a zero or credit balance.

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The main limitation in using book value per share for stock valuation models is the potential difference between recorded value and market value for both assets and liabilities.

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Preferred stock that allows preferred stockholders to share with common stockholders any dividends paid in excess of the percent or dollar amount stated on the preferred stock is called:

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West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the payment of the dividend is:

Correct AnswerverifiedShow Answer

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Correct AnswerverifiedShow Answer

If a company has no preferred stock, basic earnings per share is equal to net income divided by the number of weighted average common shares outstanding.

Correct AnswerverifiedShow Answer

A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

Correct AnswerverifiedShow Answer

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