Question 1

The price-earnings ratio is calculated by dividing:

Accepted Answer

A)  Dividends per share by market value per share.
B)  Market value per share by earnings per share.
C)  Dividends per share by earnings per share.
D)  Earnings per share by market value per share.
E)  Market value per share by dividends per share.F) A) and B)
G) None of the above

Question 2

A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

Accepted Answer

A)  6.4%.
B)  6.25%.
C)  15.00%.
D)  6.67%.
E)  2.4%.F) A) and E)
G) B) and E)

Question 3

A liability for a dividend does not exist until the directors declare a dividend.

Accepted Answer

A) True 
 B)False

Question 4

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 dividend declaration is:

Accepted Answer

A)  Debit Common Dividends Payable $90,000; credit Cash $90,000.
B)  Debit Common Dividends Payable $95,000; credit Cash $95,000.
C)  Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.
D)  Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
E)  Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.F) A) and B)
G) None of the above

Question 5

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Accepted Answer

A) True 
 B)False

Question 6

A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

Accepted Answer

A) True 
 B)False

Question 7

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 5,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.   Dividend Declared  year 1 $2,000 year 2 $6,000 year 3 $32,000\begin{array}{l}\begin{array} { l r r } &	ext { Dividend Declared }\	ext { year 1 } & \$ 2,000 \	ext { year 2 } & \$ 6,000 \	ext { year 3 } & \$ 32,000 \\end{array}\end{array} year 1  year 2  year 3 ​ Dividend Declared $2,000$6,000$32,000​​  The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Accepted Answer

A)  $12,000 preferred; $28,000 common.
B)  $10,000 preferred; $30,000 common.
C)  $15,000 preferred; $25,000 common.
D)  $5,000 preferred; $35,000 common.
E)  $11,000 preferred; $29,000 common. F) A) and E)
G) C) and D)

Question 8

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Accepted Answer

A large stock dividend is a distribution...

Question 9

Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

Accepted Answer

A)  $100.
B)  $2,600.
C)  $1,200.
D)  $5,050.
E)  $0.F) C) and E)
G) A) and D)

Question 10

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared
Year 1 $ 2,000
Year 2 $ 6,000
Year 3 $ 32,00
0
The amount of dividends paid to preferred and common shareholders in year 3 is:

Accepted Answer

A)  $32,000 preferred; $0 common.
B)  $15,000 preferred; $17,000 common.
C)  $5,000 preferred; $27,000 common.
D)  $7,000 preferred; $25,000 common.
E)  $0 preferred; $32,000 common.F) A) and D)
G) A) and C)

Question 11

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IFRS is true except:

Accepted Answer

A)  U. S. GAAP applies the principle that companies do not record gains or losses on transactions involving their own stock.
B)  Gains are not recognized on retirements of treasury stock under U. S. GAAP.
C)  A company's assets and equity are always reduced by the amount paid for the retiring stock.
D)  Only gains are recognized on retirements of treasury stock under IFRS.
E)  IFRS applies the principle that companies do not record gains or losses on transactions involving their own stock.F) B) and D)
G) All of the above

Question 12

The board of directors of a corporation:

Accepted Answer

A)  Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
B)  Are elected by the corporate registrar.
C)  Are responsible for and have final authority for managing corporate activities.
D)  Are responsible for day-to-day operations of the business.
E)  May not also be executive officers of the corporation, due to the separate entity principle.F) A) and B)
G) A) and C)

Question 13

The amount of income earned per share of a company's outstanding common stock is known as:

Accepted Answer

A)  Continuing operations per share.
B)  Earnings per share.
C)  Dividends per share.
D)  Restricted retained earnings per share.
E)  Book value per share.F) A) and B)
G) A) and C)

Question 14

Stated value of no-par stock is:

Accepted Answer

A)  The difference between the par value of stock and the amount below or above par value paid-in by the stockholder.
B)  An amount assigned to no-par stock by the corporation's board of directors.
C)  The market value of the stock on the date of issuance.
D)  An amount assigned to par value stock by the state of incorporation.
E)  Another name for redemption value.F) D) and E)
G) C) and D)

Question 15

Dividend yield is computed by dividing earnings per share by the market value per share.

Accepted Answer

A) True 
 B)False

Question 16

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Accepted Answer

A)  Authorized.
B)  Subscribed.
C)  Outstanding.
D)  Issued.
E)  In treasury.F) C) and E)
G) None of the above

Question 17

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

Accepted Answer

Book value per common share is calculate...

Question 18

Prior to May 1, Fortune Company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on May 1 for $5,000. On July 1, it reissued 50 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?

Accepted Answer

A)  $0.
B)  $100.
C)  $50.
D)  $5,050.
E)  $2,600.F) B) and E)
G) B) and D)

Question 19

A dividend preference for preferred stock means that:

Accepted Answer

A)  Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders.
B)  Preferred stockholders prefer dividends more than common stockholders.
C)  Dividends are paid quarterly.
D)  Preferred shareholders are guaranteed dividends.
E)  Dividends must be declared on preferred stock.F) A) and C)
G) A) and B)

Question 20

A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

Accepted Answer

A)  $490,000.
B)  $116,250.
C)  $433,750.
D)  $546,250.
E)  $426,250.F) B) and C)
G) C) and E)

Exam 13: Accounting for Corporations

The price-earnings ratio is calculated by dividing:

Correct Answer
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The board of directors of a corporation:

Correct Answer
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A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

Correct Answer
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Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Correct Answer
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The amount of income earned per share of a company's outstanding common stock is known as:

Correct Answer
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A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Correct Answer
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Stated value of no-par stock is:

Correct Answer
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A liability for a dividend does not exist until the directors declare a dividend.

Correct Answer
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A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

Correct Answer
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Dividend yield is computed by dividing earnings per share by the market value per share.

Correct Answer
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All of the following regarding accounting for Treasury Stock under U.S. GAAP and IFRS is true except:

Correct Answer
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Correct Answer
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Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Correct Answer
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A large stock dividend is a distribution...
View Answer

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

Correct Answer
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Book value per common share is calculate...
View Answer

A dividend preference for preferred stock means that:

Correct Answer
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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 dividend declaration is:

Correct Answer
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A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

Correct Answer
verified

Exam 13: Accounting for Corporations

The price-earnings ratio is calculated by dividing:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The board of directors of a corporation:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

Correct AnswerverifiedShow Answer

Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.

Correct AnswerverifiedShow Answer

The amount of income earned per share of a company's outstanding common stock is known as:

Correct AnswerverifiedShow Answer

A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:

Correct AnswerverifiedShow Answer

Stated value of no-par stock is:

Correct AnswerverifiedShow Answer

A liability for a dividend does not exist until the directors declare a dividend.

Correct AnswerverifiedShow Answer

A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

Correct AnswerverifiedShow Answer

Dividend yield is computed by dividing earnings per share by the market value per share.

Correct AnswerverifiedShow Answer

All of the following regarding accounting for Treasury Stock under U.S. GAAP and IFRS is true except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

Correct AnswerverifiedA large stock dividend is a distribution...View AnswerShow Answer

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

Correct AnswerverifiedBook value per common share is calculate...View AnswerShow Answer

A dividend preference for preferred stock means that:

Correct AnswerverifiedShow Answer

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 dividend declaration is:

Correct AnswerverifiedShow Answer

A company paid $0.48 in cash dividends per share. Its earnings per share is $3.20 and its market price per share is $20.00. Its dividend yield equals:

Correct AnswerverifiedShow Answer

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A large stock dividend is a distribution...
View Answer

Correct Answer
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Book value per common share is calculate...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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