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Q:
The dividend yield is computed by dividing:
A. Annual cash dividends per share by earnings per share.
B. Earnings per share by cash dividends per share.
C. Annual cash dividends per share by the market value per share.
D. Market price per share by cash dividends per share.
E. Cash dividends per share by retained earnings.
Q:
The annual amount of cash dividends distributed to common shareholders relative to the common stock's market value is the:
A. Dividend payout ratio.
B. Dividend yield.
C. Price-earnings ratio.
D. Current yield.
E. Earnings per share.
Q:
A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $120, and its book value per share is $96. Its price-earnings ratio equals:
A. 9.6.
B. 19.2.
C. 12.5.
D. 10.0.
E. 8.5.
Q:
A company has earnings per share net income of $900,000; its weighted-average common shares outstanding are 180,000. 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:
A. 9.0.
B. 17.6
C. 12.5.
D. 15.2.
E. 16.9.
Q:
The price-earnings ratio is calculated by dividing:
A. Market value per share by earnings per share.
B. Earnings per share by market value per share.
C. Dividends per share by earnings per share.
D. Dividends per share by market value per share.
E. Market value per share by dividends per share.
Q:
Shamrock Company had net income of $30,000. The weighted-average common shares outstanding were 8,000. The company declared a $2,700 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:
A. $2.87.
B. $2.73.
C. $3.41.
D. $3.16.
E. $3.75.
Q:
Shamrock Company had net income of $30,000. The weighted-average common shares outstanding were 8,000. The company sold 3,000 shares before the end of the year. There were no other stock transactions. The company's earnings per share is:
A. $3.75.
B. $3.00.
C. $3.33.
D. $10.00.
E. $3.16.
Q:
The amount of income earned per share of a company's outstanding common stock is known as:
A. Restricted retained earnings per share.
B. Earnings per share.
C. Continuing operations per share.
D. Dividends per share.
E. Book value per share.
Q:
The statement of changes in stockholders' equity:
A. Is part of the statement of retained earnings.
B. Shows only the ending balances in stockholders' equity.
C. Describes changes in paid-in capital and retained earnings subcategories.
D. Does not include changes in treasury stock.
E. Is reported by very few companies.
Q:
A company made an error in calculating and reporting depreciation expense in 2013. The error was discovered in 2014. The item should be reported as a prior period adjustment:
A. on the 2013 statement of retained earnings.
B. on the 2013 income statement.
C. on the 2014 statement of retained earnings.
D. on the 2014 income statement.
E. accounted for with a cumulative "catch-up" adjustment.
Q:
Changes in retained earnings may be reported in the:
A. Statement of cash flows.
B. Balance sheet.
C. Statement of stockholders' equity.
D. Multiple-step income statement.
E. Single-step income statement.
Q:
Companies report the cost of stock options in the:
A. Statement of cash flows.
B. Balance sheet.
C. Statement of retained earnings.
D. Income statement.
E. No disclosure is required.
Q:
Rights to purchase common stock at a fixed price over a specified period are:
A. Preferred stocks.
B. Class B stocks.
C. Stock options.
D. Stock restrictions.
E. Preemptive rights.
Q:
A company had a beginning balance in retained earnings of $43,000. It had net income of $6,000 and paid out cash dividends of $5,625 in the current period. The ending balance in retained earnings equals:
A. $54,625.
B. $42,625.
C. $11,625.
D. $43,375.
E. $49,000.
Q:
Changes in accounting estimates are:
A. Considered accounting errors.
B. Reported as prior period adjustments.
C. Accounted for with a cumulative "catch-up" adjustment.
D. Extraordinary items.
E. Accounted for in current and future periods.
Q:
Prior period adjustments are reported in the:
A. Multiple-step income statement.
B. Balance sheet.
C. Statement of retained earnings.
D. Statement of cash flows.
E. Single-step income statement.
Q:
Prior period adjustments to financial statements can result from:
A. Changes in accounting estimates.
B. Unacceptable accounting practices.
C. Discontinued operations.
D. Changes in tax law.
E. Extraordinary items.
Q:
Retained earnings:
A. Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
B. Can only be appropriated by setting aside a cash fund.
C. Represent an amount of cash available to pay shareholders.
D. Are never adjusted for anything other than net income or dividends.
E. All of the choices are correct.
Q:
A corporation's minimum legal capital is established by recording the par or stated value of the number of shares:
A. Issued.
B. Authorized.
C. Subscribed.
D. Outstanding.
E. In treasury.
Q:
A class of stock that does not have a par value, and can usually be issued at any price without creating a minimum legal capital deficiency, is called:
A. Convertible stock.
B. No-par stock.
C. Callable stock.
D. Noncumulative stock.
E. Discounted stock.
Q:
Stockholders' equity consists of:
A. Long-term assets.
B. Paid-in capital and retained earnings.
C. Paid-in capital and par value.
D. Retained earnings and cash.
E. Premiums and discounts.
Q:
Stated value of no-par stock is:
A. Another name for redemption value.
B. An amount assigned to par value stock by the state of incorporation.
C. The market value of the stock on the date of issuance.
D. The difference between the par value of stock and the amount below or above par value paid-in by the stockholder.
E. An amount assigned to no-par stock by the corporation's board of directors.
Q:
The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:
A. Always equal to its par value.
B. Always equal to its stated value.
C. Referred to as paid-in capital.
D. Referred to as retained earnings.
E. Always below its stated value.
Q:
In many states, the minimum amount that stockholders must contribute to the corporation, and which is intended to protect the creditors of the corporation, is called the:
A. Par value of preferred.
B. Minimum legal capital.
C. Premium capital.
D. Stated value.
E. Working capital.
Q:
When all of the authorized shares have the same rights and characteristics, the stock is called
A. Preferred stock.
B. Common stock.
C. Par value stock.
D. Stated value stock.
E. No-par value stock.
Q:
Par value of a stock refers to the:
A. Issue price of the stock.
B. Value assigned per share of stock by the corporate charter.
C. Market value of the stock on the date of the financial statements.
D. Maximum selling price of the stock.
E. Dividend value of the stock.
Q:
The number of shares that a corporation's charter allows it to sell is referred to as:
A. Issued stock.
B. Outstanding stock.
C. Common stock.
D. Preferred stock.
E. Authorized stock.
Q:
The board of directors of a corporation:
A. Are elected by the corporate registrar.
B. Are responsible for day-to-day operations of the business.
C. Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
D. May not also be executive officers of the corporation, due to the separate entity principle.
E. Are responsible for and have final authority for managing corporate activities.
Q:
A proxy is:
A. A document that gives a designated agent of a stockholder the right to vote the stock.
B. A contractual commitment by an investor to purchase unissued shares of stock.
C. An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
D. 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.
E. An arbitrary amount assigned to no-par stock by the corporation's board of directors.
Q:
The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a:
A. Preemptive right.
B. Proxy right.
C. Right to call.
D. Financial leverage.
E. Voting right.
Q:
The costs of bringing a corporation into existence, including legal fees, promoter fees, and amounts paid to obtain a charter are called:
A. Minimum legal capital.
B. Stock subscriptions.
C. Organization expenses.
D. Selling expenses.
E. Prepaid fees.
Q:
If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock is recorded.
Q:
Stock that is retired is the same as authorized and unissued stock.
Q:
If the purchase price of retired stock exceeds the net amount removed from paid-in capital, the excess is debited to Retained Earnings.
Q:
Purchasing treasury stock reduces the corporation's assets and stockholders' equity by equal amounts.
Q:
Treasury stock is stock that has been authorized, issued, and is outstanding.
Q:
Corporations issue preferred stock to raise capital without sacrificing control of the corporation and/or to boost the return earned by common shareholders.
Q:
Participating preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock.
Q:
Callable preferred stock gives its holders the option of exchanging their preferred shares into common shares at a specified rate.
Q:
Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.
Q:
All stock dividends are recorded at par value so there would never be a credit to the paid-in capital in excess of par value account.
Q:
A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.
Q:
Recording of a stock dividend does not result in a liability being recorded.
Q:
A reverse stock split reduces the market value per share and the par value per share of stock.
Q:
A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.
Q:
The journal entry to record the declaration of dividends on common stock includes a debit to Retained Earnings and a credit to Common Dividend Payable.
Q:
A debit balance in retained earnings is referred to as a retained earnings deficit.
Q:
The date of record is the date that directors vote to pay a cash dividend to shareholders.
Q:
When no-par stock is not assigned a stated value, the total amount received is recorded as Common Stock.
Q:
A corporation sometimes gives shares of its stock to promoters in exchange for their services in organizing the corporation.
Q:
If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.
Q:
Book value per common share is calculated by dividing stockholders' equity applicable to common shares by the number of common shares outstanding.
Q:
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.
Q:
Book value per share reflects the value per share if a company is liquidated at balance sheet amounts.
Q:
Dividend yield is computed by dividing annual cash dividends per share by the market value per share.
Q:
Stocks that pay large dividends on a regular basis are growth stocks.
Q:
Dividend yield is defined as the market price per share of a company's stock divided by its earnings per share.
Q:
Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.
Q:
A company has earnings per share of $6.45. Its dividend per share is $0.20, and its market price per share is $80. Its price-earnings ratio equals 12.4.
Q:
The price-earnings ratio is computed by dividing earnings per share by the market price per share.
Q:
Stocks with a price-earnings ratio greater than 20 to 25 are likely to be underpriced.
Q:
The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.
Q:
Sparrow Company had net income of $63,000. The company had 9,000 weighted average common shares outstanding. The basic earnings per share equal $7.00 per share.
Q:
Earnings per share is the amount of income earned per share of a company's outstanding (weighted-average) common stock.
Q:
Changes in accounting estimates are accounted for in current and future periods.
Q:
A company made an error in recording the 2009 purchase of computer equipment as an expense. This was discovered in 2011. The item should be reported as a prior period adjustment on the 2009 income statement.
Q:
If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.
Q:
A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.
Q:
Retained earnings are not part of the stockholders' claims on the company's net assets.
Q:
Retained earnings generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.
Q:
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.
Q:
Special rights often granted to preferred stock include a preference for receiving dividends and for the distribution of assets if the corporation is liquidated.
Q:
Stated value stock is par stock that is assigned a value per share by the corporation's board of directors.
Q:
Minimum legal capital requirements are intended to protect creditors by requiring a minimum level of legal minimum.
Q:
If a corporation is authorized to issue 1,000 shares of $50 common stock, it is said to have $50,000 of stock outstanding.
Q:
Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock.
Q:
Par value per share is the price at which a share of stock is bought or sold.
Q:
A transfer agent keeps stockholder records and prepares official lists of stockholders and dividend payments.
Q:
Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.
Q:
A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.