Chapter 10 Stockholders' Equity

Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50, and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares are outstanding? A. 95,000 B. 100,000 C. 105,000 D. 150,000

(50,000/.50)-5000 A. 95,000

Which of the following statements is true regarding a corporation's purchase of treasury stock? A. The cost of treasury stock is a reduction in stockholders' equity. B. Dividends must still be paid on treasury stock because it is still issued. C. Treasury stock is reported as an asset because it is considered an investment in the corporation's own stock. D. Treasury stock is no longer considered issued once it is back in the hands of the issuer.

A. The cost of treasury stock is a reduction in stockholders' equity.

Which of the following statements is true with regard to equity capital? A. The number of shares actually in the hands of stockholders are called outstanding shares B. It is unusual for corporations to have more than one class of stock outstanding at any point in time. C. Preferred stock represents the shares of stock that have been permanently retired. D. Outstanding shares represent the maximum number of shares that can be issued by a corporation.

A. The number of shares actually in the hands of stockholders are called outstanding shares

Par value represents the A. arbitrary amount that establishes a minimum price for the stock when it is first issued. B. current market price of the stock. C. amount for which any treasury shares have been acquired by the corporation. D. amount for which treasury shares may be reissued.

A. arbitrary amount that establishes a minimum price for the stock when it is first issued.

Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In addition to the increase in cash, what effect does this transaction have on the accounting equation? A. Retained earnings increases $150,000. B. Paid-in capital in excess of par increases $145,000. C. Common stock increases $150,000. D. Gain on stock issuance increases $145,000

B. Paid-in capital in excess of par increases $145,000.

When is a liability for dividends created? A. at the end of each fiscal year B. at the date of declaration C. at the date of record D. at the date of payment

B. at the date of declaration

All of the following are reasons that a corporation may purchase treasury stock except A. it needs the stock for its employee stock bonus program. B. it desires to make an investment in its own stock. C. to buy out the ownership of stockholders. D. to increase the reported amount of earnings per share.

B. it desires to make an investment in its own stock.

Issued shares represent the A. number of previously issued shares that have been repurchased by the corporation. B. number of shares that the corporation has sold. C. number of shares that are currently held by stockholders D. maximum number of shares that can be sold by the corporation.

B. number of shares that the corporation has sold.

Earnings per share is an indication of how much A. cash the company has for each share of outstanding common stock. B. the company earned for each share of outstanding common stock. C. the company paid as dividends for each share of common stock held by stockholders. D. the company earned for each share of outstanding common and preferred stock.

B. the company earned for each share of outstanding common stock.

The stockholders' equity section of a balance sheet at December 31, 2015 is provided below: Common stock, $0.50 par value $10,000 Paid-in capital in excess of par--common stock 40,000 Total capital stock 50,000 Retained earnings 25,000 Less: Treasury stock (at cost, $20 per share) < 2,000> Total Stockholders' Equity $73,000 How many shares of stock are issued? A. 18,000 B. 19,800 C. 20,000 D. 20,200

C. 20,000

Which of the following types of information is not set forth within the corporate charter? A. Name and purpose of the corporation B. Names of those responsible for incorporating the business. C. Dates of future dividend distributions D. Provisions describing how stock may be issued.

C. Dates of future dividend distributions

Many stockholders choose to invest in preferred stock because A. preferred stock can always be converted into common stock at the stockholder's option B. the preferred dividend distributions are generally increased each year. C. dividends are distributed to preferred stockholders before common stockholders. D. preferred stock includes the right to participate in management decisions through voting privileges.

C. dividends are distributed to preferred stockholders before common stockholders.

Which of the following is one of the elements of stockholders' equity? A. net income B. dividends payable C. retained earnings D. loss on the sale of equipment

C. retained earnings

Common stock usually has all of the following features except A. voting rights. B. preemptive right. C. residual claim to net assets. D. conversion privilege.

D. conversion privilege.

Authorized stock represents the A. number of previously issued shares that have been repurchased by the corporation. B. number of shares that the corporation has sold. C. number of shares that are currently held by stockholders D. maximum number of shares that can be issued for each class of stock.

D. maximum number of shares that can be issued for each class of stock.