Question 1

A feature common to both stock splits and stock dividends is

Accepted Answer

A)   A transfer to earned capital of a corporation.
B)   No impact on total stockholders' equity.
C)   An increase in total liabilities of a corporation.
D)   A reduction in the contributed capital of a corporation.

Question 2

Distinguish between noncompensitory and compensatory stock option plans.

Accepted Answer

A noncompensatory stock option plan was ...

Question 3

Obtain the financial statements of a company and ask the students to compute the:
a. Return on common stockholders' equity.
b. Financial structure ratio

Accepted Answer

a. Return on common stockholde...

Question 4

When a stock option plan for employees is compensatory, the measurement date for determining compensation cost is the

Accepted Answer

A)   Date the option plan is adopted, provided it precedes the date on which the options may first be exercised by less than one operating cycle
B)   Date on which the options may first be exercised (if the first actual exercise is within the same operating period)  or the date on which a recipient first exercises any of his options
C)   First date on which are known both the number of shares than an individual employee is entitled to receive and the option or purchase price, if any
D)   Date each option is granted

Question 5

Discuss the difference between a stock dividend and a stock split. Include in your discussion, the reasons a company might issue either a stock dividend or a stock split.

Accepted Answer

Corporations may have accumulated earnin...

Question 6

List and discuss four advantages of the corporate form of organization.

Accepted Answer

Several advantages accrue to the corpora...

Question 7

On December 31, 2017, when the Conn Company's stock was selling at $36 per share, its capital accounts were as follows: Capital stock (par value $20, 100,000 shares issued)  $2,000,000
Premium on capital stock 800,000
Retained Earnings 4,550,000
If a 100 percent stock dividend were declared and the par value per share remained at
$20

Accepted Answer

A)   No entry would need to be made to record the dividend
B)   Capital stock would increase to $5,600,000
C)   Capital stock would increase to $4,000,000
D)   Total capital would decrease

Question 8

The rate of return on common stock equity is calculated by dividing

Accepted Answer

A)   Net income less preferred dividends by average common stockholders' equity.
B)   Net income by average common stockholders' equity.
C)   Net income less preferred dividends by ending common stockholders' equity.
D)   Net income by ending common stockholders' equity.

Question 9

Stockholders' equity is generally classified into two major categories:

Accepted Answer

A)   Contributed capital and appropriated capital.
B)   Appropriated capital and retained earnings.
C)   Retained earnings and unappropriated capital.
D)   Earned capital and contributed capital.

Question 10

How would a stock split affect each of the following? 
Assets \quad Total Stockholders’Equity   \quad Additional Paid-in Capital

Accepted Answer

A)  	       Increase  \quad                            Increase         \quad                             No effect    
B)  	       No effect        \quad                     No effect     \quad                               No effect
C)  	       No effect    \quad                         No effect            \quad                        Increase
D)  	       Decrease   \quad                          Decrease                   \quad                 Decrease

Question 11

Under which of the theories of equity is a manager's goals considered as important as those of the common stockholder.

Accepted Answer

A)   Proprietary theory.
B)   Commander theory.
C)   Entity theory.
D)   Enterprise theory.

Question 12

Define and discuss the two methods of accounting for treasury stock.

Accepted Answer

Two methods of accounting for treasury s...

Question 13

How did SFAS No. 123R change accounting for stock options?

Accepted Answer

SFAS 123R (FASB ASC 718), requires compa...

Question 14

When a stock dividend is small, for example a 10% stock dividend,

Accepted Answer

A)   Retained earnings is not reduced because the dividend is immaterial.
B)   Retained earnings is reduced by the fair value of the stock.
C)   Retained earnings is reduced to the par value of the stock.
D)   Paid-in capital in excess of par value is unaffected.

Question 15

The directors of Corel Corporation, whose $40 par value common stock is currently selling at $50 per share, have decided to issue a stock dividend. The corporation has an authorization for 200,000 shares of common, has issued 110,000 shares of which 10,000 shares are now held as treasury stock, and desires to capitalize $400,000 of the retained earnings balance. To accomplish this, the percentage of stock dividend that the directors should declare is

Accepted Answer

A)   10
B)   8
C)   5
D)   2

Question 16

When employees are granted options as part of a compensatory stock option plan,

Accepted Answer

A)   Total compensation is measured using a fair value method.
B)   Total compensation is measured using the intrinsic method.
C)   Total compensation is measured when the options are in the money.
D)   Total compensation is measured using the difference between the strike price and the fair value of the options on the grant date.

Question 17

According to the FASB ASC, redeemable preferred stock should be

Accepted Answer

A)   Included in the common stock section.
B)   Included as a liability.
C)   Excluded from the stockholders' equity section.
D)   Included as a contra item in the stockholders' equity section.

Question 18

Assuming the issuing company has only one class of stock, a transfer from retained earnings to capital stock equal to the market value of the shares issued is ordinarily a characteristic of

Accepted Answer

A)   Either a stock dividend or a stock split
B)   Neither a stock dividend nor a stock split
C)   A stock split but not a stock dividend
D)   A stock dividend but not a stock split

Question 19

As a minimum, how large in relation to total outstanding shares may a stock distribution be before it should be accounted for as a stock split instead of a stock dividend?

Accepted Answer

A)   No less than 2 to 5 percent
B)   No less than 10 to 15 percent
C)   No less than 20 to 25 percent
D)   No less than 45 to 50 percent

Question 20

What is mandatorily redeemable preferred stock and how is it accounted for under the provisions of SFAS No. 150 (FASB ASC 480-10)?

Accepted Answer

Redemption provisions on preferred stock...

Exam 15: Equity

How would a stock split affect each of the following? Assets $\quad$ Total Stockholders’Equity $\quad$ Additional Paid-in Capital

Correct Answer
verified

When a stock dividend is small, for example a 10% stock dividend,

Correct Answer
verified

List and discuss four advantages of the corporate form of organization.

Correct Answer
verified
Several advantages accrue to the corpora...
View Answer

Distinguish between noncompensitory and compensatory stock option plans.

Correct Answer
verified
A noncompensatory stock option plan was ...
View Answer

What is mandatorily redeemable preferred stock and how is it accounted for under the provisions of SFAS No. 150 (FASB ASC 480-10)?

Correct Answer
verified
Redemption provisions on preferred stock...
View Answer

The rate of return on common stock equity is calculated by dividing

Correct Answer
verified

Stockholders' equity is generally classified into two major categories:

Correct Answer
verified

When a stock option plan for employees is compensatory, the measurement date for determining compensation cost is the

Correct Answer
verified

Obtain the financial statements of a company and ask the students to compute the: a. Return on common stockholders' equity. b. Financial structure ratio

Correct Answer
verified
a. Return on common stockholde...
View Answer

Under which of the theories of equity is a manager's goals considered as important as those of the common stockholder.

Correct Answer
verified

Correct Answer
verified

As a minimum, how large in relation to total outstanding shares may a stock distribution be before it should be accounted for as a stock split instead of a stock dividend?

Correct Answer
verified

When employees are granted options as part of a compensatory stock option plan,

Correct Answer
verified

Correct Answer
verified

Discuss the difference between a stock dividend and a stock split. Include in your discussion, the reasons a company might issue either a stock dividend or a stock split.

Correct Answer
verified
Corporations may have accumulated earnin...
View Answer

A feature common to both stock splits and stock dividends is

Correct Answer
verified

According to the FASB ASC, redeemable preferred stock should be

Correct Answer
verified

Assuming the issuing company has only one class of stock, a transfer from retained earnings to capital stock equal to the market value of the shares issued is ordinarily a characteristic of

Correct Answer
verified

Define and discuss the two methods of accounting for treasury stock.

Correct Answer
verified
Two methods of accounting for treasury s...
View Answer

How did SFAS No. 123R change accounting for stock options?

Correct Answer
verified
SFAS 123R (FASB ASC 718), requires compa...
View Answer

Exam 15: Equity

How would a stock split affect each of the following? Assets \quad Total Stockholders’Equity \quad Additional Paid-in Capital

Correct AnswerverifiedShow Answer

When a stock dividend is small, for example a 10% stock dividend,

Correct AnswerverifiedShow Answer

List and discuss four advantages of the corporate form of organization.

Correct AnswerverifiedSeveral advantages accrue to the corpora...View AnswerShow Answer

Distinguish between noncompensitory and compensatory stock option plans.

Correct AnswerverifiedA noncompensatory stock option plan was ...View AnswerShow Answer

What is mandatorily redeemable preferred stock and how is it accounted for under the provisions of SFAS No. 150 (FASB ASC 480-10)?

Correct AnswerverifiedRedemption provisions on preferred stock...View AnswerShow Answer

The rate of return on common stock equity is calculated by dividing

Correct AnswerverifiedShow Answer

Stockholders' equity is generally classified into two major categories:

Correct AnswerverifiedShow Answer

When a stock option plan for employees is compensatory, the measurement date for determining compensation cost is the

Correct AnswerverifiedShow Answer

Obtain the financial statements of a company and ask the students to compute the: a. Return on common stockholders' equity. b. Financial structure ratio

Correct Answerverifieda. Return on common stockholde...View AnswerShow Answer

Under which of the theories of equity is a manager's goals considered as important as those of the common stockholder.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As a minimum, how large in relation to total outstanding shares may a stock distribution be before it should be accounted for as a stock split instead of a stock dividend?

Correct AnswerverifiedShow Answer

When employees are granted options as part of a compensatory stock option plan,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Discuss the difference between a stock dividend and a stock split. Include in your discussion, the reasons a company might issue either a stock dividend or a stock split.

Correct AnswerverifiedCorporations may have accumulated earnin...View AnswerShow Answer

A feature common to both stock splits and stock dividends is

Correct AnswerverifiedShow Answer

According to the FASB ASC, redeemable preferred stock should be

Correct AnswerverifiedShow Answer

Assuming the issuing company has only one class of stock, a transfer from retained earnings to capital stock equal to the market value of the shares issued is ordinarily a characteristic of

Correct AnswerverifiedShow Answer

Define and discuss the two methods of accounting for treasury stock.

Correct AnswerverifiedTwo methods of accounting for treasury s...View AnswerShow Answer

How did SFAS No. 123R change accounting for stock options?

Correct AnswerverifiedSFAS 123R (FASB ASC 718), requires compa...View AnswerShow Answer

How would a stock split affect each of the following? Assets $\quad$ Total Stockholders’Equity $\quad$ Additional Paid-in Capital

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Several advantages accrue to the corpora...
View Answer

Correct Answer
verified
A noncompensatory stock option plan was ...
View Answer

Correct Answer
verified
Redemption provisions on preferred stock...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Return on common stockholde...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Corporations may have accumulated earnin...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Two methods of accounting for treasury s...
View Answer

Correct Answer
verified
SFAS 123R (FASB ASC 718), requires compa...
View Answer