Question 1

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 2

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) B) and E)
G) B) and D)

Question 3

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) A) and E)
G) A) and D)

Question 4

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) A) and D)
G) B) and D)

Question 5

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 6

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 7

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) A) and E)
G) All of the above

Question 8

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 D)
G) C) and D)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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) A) and E)
G) None of the above

Question 14

Common Stock Dividend Distributable is an equity account.

Accepted Answer

A) True 
 B)False

Question 15

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 E)
G) None of the above

Question 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

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) B) and D)
G) All of the above

Question 19

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) None of the above
G) A) and B)

Question 20

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) D) and E)
G) C) and E)

Exam 13: Accounting for Corporations

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Common Stock Dividend Distributable is an equity account.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow 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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Prior period adjustments to financial statements can result from:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Book value per common share is computed by:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

A proxy is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The price-earnings ratio of a common sto...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified