Week 10 Textbook

Question 1

Another common term for stockholders’ equity is:

Multiple choice question.

undistributed equity
investment equity
retained equity
shareholders’ equity

Answer 1

shareholders’ equity

Question 2

________ capital is the amount of money paid into a company by its owners.

Answer 2

Invested, Contributed, or Paid-in

Question 3

When a business incorporates, it must file its Blank______ with the state in which it incorporates.

Multiple choice question.

federal tax return
articles of incorporation
proxy statement
initial public offering

Answer 3

articles of incorporation

Question 4

The owners of a corporation are its

Multiple choice question.

bondholders.
stockholders.
managers.
board of directors.

Answer 4

stockholders.

Question 5

The total number of shares that a company may sell is referred to as _______
shares.

Answer 5

authorized

Question 6

Shareholders’ equity is another common term for _____ equity.

Answer 6

stockholders

Question 7

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

Multiple choice question.

95,000
55,000
105,000
45,000
50,000

Answer 7

45,000

Question 8

The amount of money paid into a company by its owners is referred to as:

Multiple choice question.

investment in common stock
retained earnings
owners’ surplus
contributed capital

Answer 8

contributed capital

Question 9

Select all that apply

A corporate charter:

Multiple select question.

names the board of directors.
specifies the number of shares outstanding.
specifies the shares of stock to be issued.
describes the business activities.
is required only for publicly-traded corporations.

Answer 9

names the board of directors.

specifies the shares of stock to be issued.

describes the business activities.

Question 10

The legal capital per share of stock that is assigned when the corporation is first established is referred to as __________

Answer 10

par value

Question 11

A corporation is owned by its ___________

Answer 11

stockholders

Question 12

No-par value stock is common stock that:

Multiple choice question.

is not publicly traded
has no current value
has not been assigned a par value

Answer 12

has not been assigned a par value

Question 13

The number of shares authorized is set forth in the company’s:

Multiple choice question.

articles of incorporation
general ledger
general journal

Answer 13

articles of incorporation

Question 14

The number of shares issued represents the number of shares:

Multiple choice question.

sold less repurchased
repurchased
the company is allowed to sell
sold

Answer 14

the company is allowed to sell

Question 15

___________ capital is the amount of money paid into a company by its owners.

Answer 15

Invested, Contributed, or Paid-in

Question 16

Select all that apply

Preferred stock is advantageous in that it:

receives dividends before creditors are to receive any interest payments.
has priority over common stock when dividends are declared.
has priority over common stock at liquidation.
has priority over creditors at liquidation.

Answer 16

has priority over common stock when dividends are declared.
has priority over common stock at liquidation.

Question 17

Historically, par value was considered to be

Multiple choice question.

the value of the company’s shares of stock.
the amount of cash that must be maintained in the corporation for contingencies.
the amount of retained earnings that must be appropriated for future dividends.
the maximum amount of money the company could borrow.

Answer 17

the value of the company’s shares of stock.

Question 18

Shares of stock previously sold by the corporation that are repurchased are called

Multiple choice question.

available for sale securities.
additional paid-in capital.
treasury stock.
investments in securities.

Answer 18

treasury stock.

Question 19

Common stock that has not been assigned a par value is referred to as:

Multiple choice question.

registered stock
zero-value stock
penny stock
no-par stock

Answer 19

no-par stock

Question 20

The contra account used to record a company’s repurchase of its own common stock is the _____ stock account.

Answer 20

treasury

Question 21

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals Blank______ shares.

Multiple choice question.

10,000
100,000
1,000,000
90,000
910,000

Answer 21

100,000

Reason: The number of shares authorized equals 1,000,000 which is the maximum shares the company is allowed to sell. Of the 1,000,000 shares, the company has sold 100,000 and bought back 10,000 leaving 90,000 shares outstanding. The total issued shares is the full 100,000.

Question 22

Select all that apply

Preferred stock:

is useful for raising capital without reducing common stockholders’ control.
generally does not have voting rights.
has preference as to dividends.
must be issued before any common stock is issued.

Answer 22

is useful for raising capital without reducing common stockholders’ control.
generally does not have voting rights.
has preference as to dividends.

Question 23

The term treasury stock refers to

Multiple choice question.

stock that is repurchased by the issuing corporation.
a security that is held as a long-term investment.
government securities that are held for sale.
a class of stock that is subordinate to common stock.

Answer 23

stock that is repurchased by the issuing corporation.

Question 24

When a company repurchases its own securities, the stock is recorded in which account?

Multiple choice question.

Trading securities
Common stock
Investments
Treasury stock

Answer 24

Treasury stock

Question 25

A company’s past profits that are not paid out in dividends are Blank______.

Multiple choice question.

cash
retained earnings
dividends
reported as income for the current year

Answer 25

retained earnings

Question 26

When a corporation distributes assets of the company to its stockholders, it is referred to as a(n)

Multiple choice question.

warrant.
expense.
dividend.
option.

Answer 26

dividend.

Question 27

The number of shares outstanding equals the number of shares Blank______.

Multiple choice question.

authorized minus the number of shares issued
issued plus the number of shares in treasury
issued minus the number of shares in treasury
authorized plus the number of shares issued

Answer 27

issued minus the number of shares in treasury

Question 28

Dividends payable is increased on the

Multiple choice question.

date of record.
declaration date.
date of payment.

Answer 28

declaration date.

Question 29

Preferred stock generally (has/does not have) Blank______ voting rights and (has/does not have) ______ preference as to dividends.

Multiple choice question.

does not have; has
has; does not have
does not have; does not have
has; has

Answer 29

does not have; has

Question 30

The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the

Multiple choice question.

payment date
declaration date.
record date.
ex-dividend date.

Answer 30

record date.

Question 31

Gosling Corp. has 100,000 shares of common stock authorized and 60,000 shares outstanding. Gosling declares a dividend of $0.10 per share. For Gosling, the financial statement effects of the dividend declaration include a(n):

Multiple select question.

increase in liabilities of $6,000
increase in stockholders’ equity of $10,000
increase in liabilities of $10,000
decrease in stockholders’ equity of $10,000
decrease in stockholders’ equity of $6,000

Answer 31

increase in liabilities of $6,000

decrease in stockholders’ equity of $6,000

Question 32

Retained earnings are:

Multiple select question.

equal to cash.
increased by net income.
decreased by dividends.
decreased by purchases of land.
all of the company’s earnings not distributed to stockholders.

Answer 32

all of the company’s earnings not distributed to stockholders.
decreased by dividends.
increased by net income.

Question 33

Select all that apply

Distributions of stock to current shareholders of a corporation are called what type of distribution?

Multiple select question.

Treasury stock
Stock split
Property dividend
Stock dividend

Answer 33

Stock split
Stock dividend

Question 34

Select all that apply

A company’s declaration of a dividend that will be paid at a later date results in a(n):

decrease in Dividends
increase in Cash
increase in Dividends
decrease in Dividends Payable
decrease in Cash
increase in Dividends Payable

Answer 34

increase in Dividends

increase in Dividends Payable

Question 35

Which of the following occurs on the date of record?

Multiple choice question.

Dividends are paid to shareholders.
A list of shareholders that are entitled to receive a dividend is made.
The board of directors announces that a dividend will be paid.
A liability is recorded for the future dividend payment.

Answer 35

A list of shareholders that are entitled to receive a dividend is made.

Question 36

Select all that apply

On March 1, Fresh Corp. declared a dividend of $0.50 on its 6,000 outstanding shares. The record date is March 20, and the payment date is April 1. On March 1, Fresh Corp. will:

Multiple select question.

increase Dividends by $6,000
increase Retained Earnings by $3,000
increase Dividends Payable by $6,000
increase Dividends by $3,000
increase Dividends Payable by $3,000

Answer 36

increase Dividends by $3,000

increase Dividends Payable by $3,000

Question 37

Compensation plans that are tied to equity performance targets and that are used to motivate key employees are referred to as Blank______ compensation plans.

Multiple choice question.

cash
stock-based
portfolio

Answer 37

stock-based

Question 38

Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders’ equity section of the balance sheet?

Multiple choice question.

The sequence is unimportant
Preferred stock
Common stock

Answer 38

Preferred stock

Question 39

Additional shares issued to existing owners without an exchange of cash may be in the form of stock __________or stock ____________.

Answer 39

Blank 1: dividends or dividend
Blank 2: splits or split

Question 40

Dividends payable is increased on the

Multiple choice question.

date of payment.
date of record.
declaration date.

Answer 40

declaration date.

Question 41

he statement of stockholders’ equity reports

Multiple choice question.

assets, liabilities, and owners’ equity for the period.
the changes to assets over the period.
the changes in each equity account balance over time.
the revenues and expenses for the period.

Answer 41

the changes in each equity account balance over time.

Question 42

Positive ________ represent the key to a company’s long-run survival. (Enter only one word.)

Answer 42

earnings, income, profit, or earning

Question 43

The primary goal of awarding stock-based compensation to employees is to

Multiple choice question.

increase assets
align the incentives of employees with those of stockholders
decrease net income
decrease legal liability

Answer 43

align the incentives of employees with those of stockholders

Question 44

Which of the following reports net income relative to average stockholders’ equity in dollars?

Multiple choice question.

ROA
ROE
P/E ratio
EPS
Debt/equity ratio

Answer 44

ROE

Question 45

Which of the following is typically presented first in the equity section of the balance sheet?

Multiple choice question.

Preferred stock
Common stock
Treasury stock
Retained earnings

Answer 45

Preferred stock

Question 46

Return on _____ measures the ability of company management to generate earnings from the resources provided by owners.

Answer 46

equity

Question 47

Select all that apply

Distributions of stock to current shareholders of a corporation are called what type of distribution?

Stock split
Property dividend
Treasury stock
Stock dividend

Answer 47

Stock split

Stock dividend

Question 48

Which financial statement summarizes the changes in the balance of each equity over time?

Multiple choice question.

Statement of stockholders’ equity only
Balance sheet - stockholders’ equity section only
Both the balance sheet and the statement of stockholders’ equity

Answer 48

Statement of stockholders’ equity only

Question 49

The amount of dividends paid out relative to the share price is referred to as:

Multiple choice question.

dividend margin
return on dividends
dividend yield
dividend payout ratio

Answer 49

dividend yield

Question 50

Evaluation of the company’s profitability requires consideration of the amount of a company’s earnings in relation to the size of the

Multiple choice question.

market share.
investment.
debt.

Answer 50

investment.

Question 51

ROE relates Blank______.

Multiple choice question.

net income to the average stockholders’ equity
average stockholders’ equity to the price per share
total assets to the average stockholders’ equity
EPS to the average stockholders’ equity
net income to the price per share

Answer 51

net income to the average stockholders’ equity

Reason: ROE equals net income divided by average stockholders’ equity.

Question 52

Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide?

Multiple choice question.

Return on assets
Return on equity
Dividend yield
Earnings per share

Answer 52

Return on equity

Question 53

The dividend yield is calculated by dividing:

Multiple choice question.

dividends per share by earnings per share
dividends per share by the stock price per share
earnings per share by dividends per share
total dividends for the year by the book value of stockholders’ equity

Answer 53

dividends per share by the stock price per share

Question 54

A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document?

Multiple select question.

Corporate charter
Articles of incorporation
Corporate proxy
Corporate tax return

Answer 54

Corporate charter
Articles of incorporation