Chapters 11-13

Question 1

Stockholders Equation

Answer 1

Common Stock + Retained Earnings

Question 2

Sale of Common Stock JE, no par value

Answer 2

debit Cash (+A), credit Common Stock (+SE)

Question 3

Sale of Common Stock JE, w/ par value

Answer 3

debit Cash (+A), credit common stock (+SE), credit APIC (+SE)

Question 4

Calculating Additional Paid in Capital

Answer 4

Cash amount - common stock amount

Question 5

Shares Outstanding Equation

Answer 5

Issued Shares - Treasury Stock

Question 6

Repurchase of Treasury Stock JE

Answer 6

Debit Treasury Stock (+XSE, -SE), credit Cash (-A)

Question 7

Reissuance of Treasury Stock JE

Answer 7

Debit cash(+A),, Treasury Stock (-XSE,+SE)

Question 8

Difference between reselling treasury stock for loss and gain

Answer 8

APIC is recorded as a credit in the profit journal entry, recorded as a debit in the loss journal entry.

Question 9

Journal Entry for a dividend declaration

Answer 9

Debit Retained Earnings (-SE), Credit Dividends Payable (+L)

Question 10

Journal Entry for dividend payment of previously declared dividends.

Answer 10

Debit Dividends Payable (-L), Credit Cash (-A)

Question 11

JE for dividend declaration and simultaneous payment

Answer 11

Debit Retained Earnings (-SE), credit Cash (-A)

Question 12

Dividend Yield Ratio

Answer 12

Dividends per share / Market Price per share

Question 13

Return on Equity

Answer 13

Net Income / Average total Stockholders Equity

Question 14

Retained Earnings Equation

Answer 14

Ending Balance = Beg Balance + net income - dividends
Beg Balance = End Bal - net income + divdends

Question 15

Earnings per share equation

Answer 15

Net Income / Shares Outstanding

Question 16

Determining number of shares issued

Answer 16

Common Stock / par value of shares

Question 17

Indirect Method Procedure

Answer 17

1. Start with Net Income
2. Add non-cash expenses (dep, amort)
3. Add any losses, subtract any gains
4. Add losses on sale of assets, subtract gains on sales of assets.
5. Add gains on liabilities, subtract losses of liabilities.

Question 18

Income statement only includes what ?

Answer 18

Revenue, depreciation, and COGS

Question 19

Quality of Income Ratio

Answer 19

Cash Flow from Operating Activities / Net Income

Question 20

Return on Assets + SE

Answer 20

Assets - Net Income / Avg Total Assets
SE - Net Income / Avg Total SE

Question 21

Gross Profit Margin and Net Profit Margin

Answer 21

Gross Profit % - Gross Profit / Revenue
Net Profit % - Net Income / Revenue

Question 22

Total Asset Turnover Ratio

Answer 22

Net Sales Revenue / Avg Total Assets

Question 23

Receivables Turnover Ratio

Answer 23

Net Credit Sales / Average AR

Question 24

Inventory Turnover Ratio

Answer 24

COGS / Average Inventory

Question 25

EBITDA Prof %

Answer 25

Earnings before interest, taxes, and D&A / Revenue

Question 26

What is the difference between current ratio and quick ratio?

Answer 26

Quick ratio does not contain inventory

Question 27

What is the quick ratio ?

Answer 27

[Cash + short term investments + Accounts Receivables] / Current liabilities

Question 28

What is the debt to equity ratio ?

Answer 28

Total Liabilities / Total Stockholders Equity

Question 29

What is the debt to equity ratio ?

Answer 29

Total Liabilities / Total Stockholders Equity

Question 30

What is the debt-to-equity ratio?

Answer 30

Total Liabilities / Total SE

Question 31

What is the book to market ratio? (Measuring Cheapness)

Answer 31

Stockholders Equity/Market Capitalization
*Market Capitalization = stock price * shares outstanding