Accounting Chapter 10
Treasury Stock is normally reported as:
A reduction of total stockholder's equity
Advantages of the corporate form of business include which of the following?
-Ability to raise capital -Ability to transfer ownership -Limited Liability
The Retained Earnings balance reported on the balance sheet typically is not affected by:
-Net income -Net loss -Dividends paid -ALL OF THE ABOVE
Which of the following is TRUE regarding the accounting for treasury stock?
-Treasury stock is reported on the balance sheet in the equity section -The purchase and sale of treasury stock has no impact on the income statement. -Treasury stock represents a negative a equity account -ALL OF THESE
Which of the following is not a potential feature of preferred stock?
-convertible -redeemable -cumulative -They are all potential features of preferred stock
The par value of shares issued is normally recorded in the:
Common Stock account
In terms of total sales, assets, and earnings, the dominant form of business organization is a:
Corporation
A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?
Credit additional paid in capital $4,000
Journal Entries to record cash dividends are made on the:
Declaration date and payment date
When treasury stock is acquired, what is the effect on totals stockholders' equity?
Decrease
What would be the impact on the accounting equation when a company acquires treasury stock?
Decrease assets and decrease stockholders' equity
Which of the statements regarding the corporate form of business is correct?
Disadvantages are that the business is subject to government regulations and double taxation on its income.
Preferred stock is called preferred because it usually has two preferences over common stock. These preferences related to:
Dividends and distributions of assets if the corporations is dissolved
Dividend Yield is calculated as:
Dividends per share divided by the stock price
The declaration and issuance of a stock dividend:
Does not change total assets, liabilities, or total stockholders' equity
Which of the following statements is not true regarding earnings per share?
Earnings per share is useful in comparing earnings performance across companies at the same point in time.
The statement of stockholders' equity shows:
How each equity account changed over time
If a company issued 1,000 shares $1 par value common stock for $20 per share, what would be the effect on the account equation?
Increase the assets and increase stockholder's equity
Retained Earnings
Increases stockholders Equity
When treasury stock is resold at a gain, the difference between its cost and the cash received when resold:
Increases stockholders' equity
Which of the following stages of equity financing comes last in the traditional order of progression?
Initial public offering (IPO)
Which of the following stages of equity financing comes first in the traditional order of progression?
Investment by the founders of the business
Earnings per share (EPS)
Is useful in comparing earnings performance for the same company over time.
Outstanding common stock refers to the total number of shares:
Issued less treasury stock
Why doesn't stockholders' equity equal the market value of equity?
It's related to the use of historical cost to report many long-term assets and the expensing of value generating costs such as research and development and advertising.
Advantages of the corporate form that have led to the growth of this form of business ownership include all of the following expect:
Low government regulation
The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should debit stock dividends for an amount equal to the
Market value of the shares issued
The statement of stockholders' equity shows:
More information than the stockholders' equity section in the balance sheet
Return on equity is calculated as:
Net income dividend by average stockholders' equity
Retained Earnings represent a company's:
Net income less dividends since the company first began operations
When shares of another corporation are purchased, what is the effect on total stockholders' equity?
No effect
Issued stock refers to the number of shares:
Outstanding plus treasury shares
The correct order from the smallest number of shares to the largest number of shares is:
Outstandstanding, issued and authorized
The issuer of a 100% common stock dividend (large stock dividend) to common stockholders should credit common stock for an amount equal to the:
Par value of the shares issued
The issuer of a 100% common stock dividend (large stock dividend) to common stockholders should debit stock dividends for an amount equal to the
Par value of the shares issued
Both cash dividends and stock dividends:\
Reduce retained earnings
Which of the following is a disadvantage of an S Corporation?
Restrictions on number of stockholders
Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?
Sales Revenue
Outstanding common stock specifically refers to:
Stock in the hands of stockholders
The Retained Earnings balance reported on the balance sheet typically is not affected by:
Stock splits
which of the following statements about treasury stock transactions is true?
Stockholder's equity is reduced when treasury stock is acquired
The PE ratio:
Tends to be higher for growth stocks.
Authorized common stock refers to the number of shares:
That can be issued
The par value of common stock represents:
The legal capital per share of stock assigned when the corporation was first established
the common stock account on a company's balance sheet is measured as:
The number of common shares issued times the stock's par value per share
Which of the following is a reason that a corporation would prefer to issue stock instead of bonds?
The risk of going bankrupt is less
All publicly help corporations are regulated by what government organization?
The securities and exchange commission
How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity?
The stockholders' equity section shows balances at a point in time, whereas the statement of stockholders' equity shows activity over a period of time.
Common stockholders usually have all of the following rights expect:
To participate in the day to day operations
The balance in retained earnings at the end of the year represents:
Total earnings less payments to owners over the life of the company
The corporation's own stock that has been issued and then repurchased by the company is referred to as:
Treasury Stock
When treasury stock is resold at a price above cost:
additional paid- in capital is increased
which of the following financing alternatives has the highest preference of payment in a case where the company liquidates its assets?
bonds
which of the following has the lowest expected return to the investor?
bonds
Preferred Stock:
can have features of both liabilities and stockholder's equity
which of the following has the highest expected return to the investor?
common stock
which of the following is the most likely to have voting rights?
common stock
The entry to record a large stock dividend would include a:
debit to stock dividends
A feature common to both stock splits and stock dividends is
that there is no effect on total stockholders' equity
The stockholders' equity section in the balance sheet shows:
the ending balance in each stockholders' equity account
If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?
Additional paid-in capital
The disadvantages of the corporate form of business include:
Additional taxes
When treasury stock is acquired, what is the effect on assets and stockholders' equity?
Assets and stockholders' equity decrease
Treasury Stock
decreases stockholders' equity
Large stock dividends and stock splits are issued primarily to:
lower the trading price of the stock per share
The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should credit common stock for an amount equal to the
market value of the shares issued
