Chapter 12

A $20 par-value stock in a 2:1 stock split will yield a new par value of $40. $30. $20. $10.

$10

Which was the first company to offer multiple classes of stock?

Hershey

On the balance sheet, the balance of Treasury Stock is added to stockholders' equity. deducted from stockholders' equity. disclosed only in the notes. not reported.

deducted from stockholders' equity.

A stock dividend __________ of a corporation. increases the assets and decreases the liabilities decreases the assets and increases the stockholders' equity increases the assets and decreases the total stockholders' equity does not change the assets, liabilities, or total stockholders' equity

does not change the assets, liabilities, or total stockholders' equity

All of the following are considered advantages of the corporate form of business EXCEPT limited liability. double taxation. continuous life. separate legal existence.

double taxation.

A corporation may reacquire (purchase) its own stock for all of the following reasons EXCEPT to provide shares for resale to employees. to reissue as bonuses to employees. to support the market price of the stock. to pay dividends on the reacquired shares.

to pay dividends on the reacquired shares

A stock split applies to all common shares including the

unissued. issued. treasury shares. all of the above.

A corporation has a $500,000 beginning balance in Retained Earnings. Its net income for the year was $200,000. Sales revenue amounted to $1,000,000, and dividends declared and paid by year-end amounted to $100,000. What was the ending balance in Retained Earnings? $600,000 $700,000 $1,200,000 $1,400,000

$600,000

Which is the argument in favor of super voting shares?

The founders can concentrate on the long-term goals of the company without concern for the more short-term goals public shareholders may have.

On March 10, Blarney Corporation issued 10,000 shares of no-par common stock at $40 a share. The journal entry to record the issuance of the stock would include a debit to __________ for __________. Cash; $10,000 Cash; $400,000 Common Stock; $400,000 Common Stock; $10,000

Cash; $400,000

Which class of stock shares in the Facebook example holds the most voting rights?

Class B

When only one class of stock is issued, it is called __________ stock. common preferred no-par cumulative preferred

Common

Which of the following controls a corporation? Chief executive officer (CEO) Board of directors Chief financial officer (CFO) Stockholders

Stockholders

Changes in retained earnings may be reported in all of the following EXCEPT a separate retained earnings statement. a combined income and retained earnings statement. a statement of stockholders' equity. a balance sheet.

a balance sheet.

A journal entry to record the issuance of preferred stock at a premium would include a __________ to __________. credit; Cash debit; Paid-In Capital in Excess of Par debit; Preferred Stock credit; Preferred Stock

credit; Preferred Stock

On February 10, a corporation purchases 2,000 shares of its common stock at $50 per share. The entry to record the purchase would include a __________ to __________ for $100,000. debit; Cash credit; Treasury Stock debit; Treasury Stock debit; Common Stock

debit; Treasury Stock

The date of __________ is the date the board of directors formally authorizes the payment of the dividend. declaration record payment authorization

declaration

Warren Buffet has never declared a split on Berkshire Hathaway's Class A stock because he believes

high-priced stock attracts more sophisticated investors.

The journal entry on the declaration date for a cash dividend would include a debit to Cash. include a credit to Cash. include a credit to Cash Dividends Payable. not require a journal entry.

include a credit to Cash Dividends Payable.

Companies whose stock is traded in a public market must report EPS in the notes of their financial statements. must report EPS on their income statement. must report EPS on their balance sheet. are not required to report EPS.

must report EPS on their income statement.

EPS is calculated as __________ divided by __________. net income; average number of common shares outstanding revenue; average number of shares issued and outstanding net income less preferred dividends; average number of common shares outstanding net income; average number of preferred shares outstanding

net income less preferred dividends; average number of common shares outstanding

In order to make their stock more attractive to investors, many corporations pay special dividends. pay quarterly cash dividends. refrain from paying cash dividends. pay extra dividends.

pay quarterly cash dividends.

A major objective of a stock split is to __________ of the stock. increase the par value reduce the market price per share decrease the number of stockholders reduce the number of shares outstanding

reduce the market price per share

A major objective of a stock split is to

reduce the market price per share.