Question 1

Phelps,Inc.,had assets of $67,646 and liabilities of $15,466 at the close of 2008 with 10,718 shares of outstanding common shares.Net income for 2008 was $7,829.At the end of 2009,assets were $79,571 and liabilities were $18,551,and the company had 10,771 shares of outstanding stock.Net income for 2009 was $9,993.
a)Calculate EPS for 2009.
b)Calculate ROE for 2009.

Accepted Answer

a)EPS = Net income/average number of out...

Question 2

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is true?

Accepted Answer

A)  Harry's net income was $47,800.
B)  Harry will debit the drawing account for $24,500 and credit the capital account for $24,500.
C)  Harry will debit the capital account for $24,500 and credit the drawings account for $24,500.
D)  Harry's retained earnings account was $47,800.

Question 3

A company reported net income of $5.6 million.At the beginning of the year,3.4 million shares of common shares were outstanding while during the year the average number of common shares outstanding was 3.5 million.There were 400,000 shares of preferred shares outstanding on average and no dividends were declared.The EPS is approximately:

Accepted Answer

A)  $1.60.
B)  $1.51.
C)  $1.65.
D)  $1.75.

Question 4

If a corporation declares and distributes a 10% stock dividend on its common shares,the account debited is:

Accepted Answer

A)  Dividends Payable.
B)  Common Stock.
C)  Share Capital.
D)  Retained Earnings.

Question 5

Stock dividends immediately increase the total value of the shareholders' investment.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 6

A common loan covenant involves limiting the ability of the borrower to pay dividends.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 7

Dividends in arrears do not have to be disclosed to shareholders.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 8

The effects of the transaction described above will be reported on the balance sheet in the:

Accepted Answer

A)  liabilities section.
B)  retained earnings account.
C)  preferred shares account.
D)  common shares account.

Question 9

The XYZ Corporation sells 1 million shares of common shares,no par value,for $17 per share.One year later the corporation repurchases 100,000 shares at a market price of $14 a share.
For each transaction,prepare the journal entry and show the effect on assets,liabilities and shareholders' equity.

Accepted Answer

a.Original issuance of shares: <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30">   \[\begin ...

Question 10

A company sells 1 million shares of stock with no par value for $15 a share.In recording the transaction,it would:

Accepted Answer

A)  debit Cash for $20,000 and credit Common Shares for $20,000.
B)  debit Cash for $15 million and credit Common Shares for $15 million.
C)  debit Cash for $15 million,credit Common Shares for $20,000 and credit Contributed surplus for $14,980,000.
D)  debit Cash for $20,000,debit Capital Receivable for $14,980,000,credit Common Shares for $20,000 and credit Contributed surplus for $14,980,000.

Question 11

A partnership is any business owned by two or more people.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements would explain why a company may want to repurchase its shares?

Accepted Answer

A)  To demonstrate to investors that it believes its own shares are worth purchasing.
B)  To obtain shares to reissue to employees as part of an employee stock option plan.
C)  To obtain shares that can be reissued as payment for purchase of another company.
D)  All of the above.

Question 13

A company issues a 4 % stock dividend when the price of the stock was $6 per share.The company has 20 million common shares outstanding prior to the stock dividend.How would the company account for this stock dividend?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option D

Question 14

Shareholders' equity is:

Accepted Answer

A)  the amount the company received for all shares when issued plus the amount of retained earnings and the amount of contributed surplus minus treasury shares.
B)  the amount the company received for all shares authorized plus the amount of retained earnings and treasury shares.
C)  the par value the company received for all shares issued plus the amount of retained earnings and contributed surplus minus treasury shares.
D)  the amount the company received for all shares when issued minus the amount of retained earnings and treasury shares.

Question 15

Jackson and O'Neill open a partnership that produces gates.Jackson provides $30,000 of capital while O'Neill contributes $90,000 of capital; they agree to split net income by the same proportion.The partnership's net income is $80,000 for the first year.They did not draw any income out of the business or add any additional capital during the first year.At the end of the year,the partners' equity is:

Accepted Answer

A)  $70,000 for Jackson and $130,000 for O'Neill for a total of $200,000.
B)  $200,000 minus income tax expense for the partnership.
C)  $200,000 minus the income tax paid by each partner.
D)  $50,000 for Jackson and $150,000 for O'Neill for a total of $200,000.

Question 16

If a company's EPS and ROE rise:

Accepted Answer

A)  it could mean that net income is rising or it could mean that the number of outstanding shares is falling.The first is sustainable; the second cannot be continued indefinitely.
B)  it means that the company is becoming more profitable and shareholders will see greater returns.
C)  it means that the company's tax liability will rise in the future and cause a decline in profitability.
D)  it could mean that net income is rising or it could mean that the number of outstanding shares is falling.In either case,shareholders can expect greater future returns indefinitely.

Question 17

A corporate charter specifies that the company may sell up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.Of the 3 million shares bought back,the company cancels 2 million and holds 1 million.The number of authorized shares after these transactions are:

Accepted Answer

A)  12 million shares.
B)  20 million shares.
C)  9 million shares.
D)  18 million shares.

Question 18

A restriction on retained earnings will:

Accepted Answer

A)  decrease assets.
B)  decrease retained earnings.
C)  be included in the liabilities section of the balance sheet.
D)  be disclosed in the notes to the financial statements.

Question 19

A current dividend preference means that:

Accepted Answer

A)  preferred shareholders are paid dividends before common shareholders are paid dividends.
B)  unpaid dividends to preferred shareholders accumulate and must be paid before common shareholders receive dividends.
C)  preferred shareholders are paid their full fixed dividend rate each period as long as the company is in operation.
D)  unpaid cash dividends to preferred shareholders must be replaced with stock dividends during the current period.

Question 20

A company issues 1 million shares of preferred shares with a price of $26 per share.The issuance should be recorded as:

Accepted Answer

A)  a debit to Cash of $26 million and a credit to Preferred Shares of $26 million.
B)  a debit to preferred shares of $26 million and a credit to cash of $26 million.
C)  a debit to Cash of $24 million,a debit to Treasury Shares of $2 million,and a credit to Preferred Shares of $26 million.
D)  a debit to Cash of $26 million,a credit to Preferred Shares of $2 million,and a credit to Additional Paid-in Capital of $24 million.

Exam 11: Stockholders Equity

A common loan covenant involves limiting the ability of the borrower to pay dividends. BT: Comprehension

Correct Answer
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The XYZ Corporation sells 1 million shares of common shares,no par value,for $17 per share.One year later the corporation repurchases 100,000 shares at a market price of $14 a share. For each transaction,prepare the journal entry and show the effect on assets,liabilities and shareholders' equity.

Correct Answer
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a.Original issuance of shares: \[\begin ...
View Answer

Correct Answer
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Dividends in arrears do not have to be disclosed to shareholders. BT: Knowledge

Correct Answer
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A partnership is any business owned by two or more people. BT: Knowledge

Correct Answer
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A restriction on retained earnings will:

Correct Answer
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Which of the following statements would explain why a company may want to repurchase its shares?

Correct Answer
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Stock dividends immediately increase the total value of the shareholders' investment. BT: Comprehension

Correct Answer
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Correct Answer
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Shareholders' equity is:

Correct Answer
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A company issues a 4 % stock dividend when the price of the stock was $6 per share.The company has 20 million common shares outstanding prior to the stock dividend.How would the company account for this stock dividend?

Correct Answer
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Correct Answer
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Correct Answer
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a)EPS = Net income/average number of out...
View Answer

A current dividend preference means that:

Correct Answer
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A company issues 1 million shares of preferred shares with a price of $26 per share.The issuance should be recorded as:

Correct Answer
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At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is true?

Correct Answer
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The effects of the transaction described above will be reported on the balance sheet in the:

Correct Answer
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If a corporation declares and distributes a 10% stock dividend on its common shares,the account debited is:

Correct Answer
verified

A company sells 1 million shares of stock with no par value for $15 a share.In recording the transaction,it would:

Correct Answer
verified

If a company's EPS and ROE rise:

Correct Answer
verified

Exam 11: Stockholders Equity

A common loan covenant involves limiting the ability of the borrower to pay dividends. BT: Comprehension

Correct AnswerverifiedShow Answer

The XYZ Corporation sells 1 million shares of common shares,no par value,for $17 per share.One year later the corporation repurchases 100,000 shares at a market price of $14 a share. For each transaction,prepare the journal entry and show the effect on assets,liabilities and shareholders' equity.

Correct Answerverified a.Original issuance of shares: \[\begin ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Dividends in arrears do not have to be disclosed to shareholders. BT: Knowledge

Correct AnswerverifiedShow Answer

A partnership is any business owned by two or more people. BT: Knowledge

Correct AnswerverifiedShow Answer

A restriction on retained earnings will:

Correct AnswerverifiedShow Answer

Which of the following statements would explain why a company may want to repurchase its shares?

Correct AnswerverifiedShow Answer

Stock dividends immediately increase the total value of the shareholders' investment. BT: Comprehension

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Shareholders' equity is:

Correct AnswerverifiedShow Answer

A company issues a 4 % stock dividend when the price of the stock was $6 per share.The company has 20 million common shares outstanding prior to the stock dividend.How would the company account for this stock dividend?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverifieda)EPS = Net income/average number of out...View AnswerShow Answer

A current dividend preference means that:

Correct AnswerverifiedShow Answer

A company issues 1 million shares of preferred shares with a price of $26 per share.The issuance should be recorded as:

Correct AnswerverifiedShow Answer

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is true?

Correct AnswerverifiedShow Answer

The effects of the transaction described above will be reported on the balance sheet in the:

Correct AnswerverifiedShow Answer

If a corporation declares and distributes a 10% stock dividend on its common shares,the account debited is:

Correct AnswerverifiedShow Answer

A company sells 1 million shares of stock with no par value for $15 a share.In recording the transaction,it would:

Correct AnswerverifiedShow Answer

If a company's EPS and ROE rise:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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a.Original issuance of shares: \[\begin ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a)EPS = Net income/average number of out...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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