Chapter 13 MCQ

A company has the following data at the end of the current​ year: Number of shares of Common Stock issued 200,000 Number of shares of Common Stock outstanding 185,000 Net Income $395,000 Income from Continuing Operations ​$363,000 Income from Discontinued Operations $12,000 What is the earnings per share on the​ company's net​ income? (Round to two decimal​ places.)

$2.14

Sweet Smiles Bakery issued 15,900 shares of $7 stated value common stock for $24 per share. The total increase to the Paid−in Capital in Excess of Stated Value account would be​ ___________.

$270,300

Element Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $13.25 per share. Common​ Stock, $5 ​par, 324,000 shares​ authorized, 140,000 shares issued and outstanding $700,000 Paid−In Capital in Excess of Par—Common 129,000 Retained Earnings 298,000 Total​ Stockholders' Equity $1,127,000 After a 2−for−1 stock​ split, what is the number of issued​ shares?

$280,000

The following information is from the December​ 31, 2024 balance sheet of Millner Corporation. Preferred​ Stock, $100 par $540,000 Paid−In Capital in Excess of Par—Preferred 40,000 Common​ Stock, $1 par 250,000 Paid−In Capital in Excess of Par—Common 590,000 Retained Earnings 201,500 Total​ Stockholders' Equity $1,621,500 What was the average issue price of the common stock​ shares? ​(Round your answer to the nearest​ cent.)

$3.36

Midtown, Inc. had the following transactions in​ 2024, its first year of​ operations: •Issued 39,000 shares of common stock. Stock has par value of $1.00 per share and was issued at $22.00 per share. •Earned net income of $70,000. •Paid no dividends. At the end of​ 2024, what is total​ stockholders' equity?

$928,000

The 2024 and 2025 comparative balance sheet for Travel​ Services, Inc. reported the following​ items: Balance Sheet As of December​ 31, 2025 Balance Sheet As of December​ 31, 2024 Total Assets $590,000 ​$460,000 Total Liabilities ​300,000 ​200,000 Total​ Stockholders' Equity​ (all common) 290,000 260,000 Total Liabilities and ​Stockholders' Equity ​$590,000 ​$460,000 Net income for 2025 was $38,000. Compute the rate of return on common​ stockholders' equity for 2025.​ (Round your final answer to two decimal​ places.)

13.82%

Anderson Corporation received cash from issuing 29,000 shares of no−par common stock for $1 per share on January​ 1, 2018. Which is the correct journal entry to record this​ transaction?

Cash 29,000 Common Stock — No−Par Value 29,000

Thompson​ Company's common stock carries a par value of $1 per share. The company is authorized to issue an additional 19,000 shares of common stock. What would the journal entry be for the issuance of 5,000 shares of common stock at par​ value?

Cash 5,000 Common Stock − $1 Par Value 5,000

​Ballard, Inc. issued 11,000 shares of preferred stock for $796,000. The stock had a par value of $45 per share. The journal entry to record this transaction would​ be:

Cash 796,000 Preferred Stock−​$45 Par Value 495,000 Paid−in Capital in Excess of Par − Preferred 301,000

Roberts​ Company's common stock has a​ $3 stated value per share. The company issued​ 8,000 shares at​ $8 per share on January 30 of the current year. Which is the correct journal entry to record this​ transaction?

Cash ​64,000 Common Stock − ​$3 Stated Value ​24,000 Paid−in Capital in Excess of Stated − Common ​40,000

Allridge Corporation received cash from issuing​ 26,000 shares of common stock at​ $3 per share on January​ 1, 2018. The stock has a par value of​ $1 per share. Which is the correct journal entry to record this​ transaction?

Cash ​78,000 Common Stock − ​$1 Par Value ​26,000 Paid−in Capital in Excess of Par − Common ​52,000

Fancy Clothing Company is authorized to issue 120,000 shares of​ $2 par common stock. The company issued 5,700 shares at​ $6 per​ share, when the market price of the common stock was​ $10 per share.​ Later, Charter declared and paid a $0.30 per share cash dividend. The journal entry to declare the cash dividend would​ be:

Cash Dividends 1,710 Dividends Payable − Common 1,710

A corporation declares a dividend of $1.50 per share on 13,000 shares of common stock. Which of the following is included in the entry to record the​ declaration?

Cash Dividends is debited for $19,500.

On November​ 1, 2024,​ Uno, Inc. declared a dividend of $4.25 per share.​ Uno, Inc. has 23,000 shares of common stock outstanding and no preferred stock. Which of the following is the journal entry needed to record the declaration of the​ dividend?

Debit Cash Dividends $97,750​, and credit Dividends Payable—Common $97,750.

Which of the following statements regarding earnings per share​ (EPS) is​ incorrect?

EPS reports the amount of income​ (loss) for each share of the​ company's issued common stock.

When a previously declared dividend is​ paid, which of the following​ occurs?

Liabilities decrease.

Which of the following is true of a stock split and a stock​ dividend?

Neither a stock split nor a stock dividend will increase total​ stockholders' equity.

On November​ 1, 2025,​ Juno, Inc. declared a dividend of​ $3.00 per share on common stock.​ Juno, Inc. has​ 10,000 shares of common stock outstanding and​ 20,000 shares of preferred stock. The date of record is November​ 15, and the payment date is November​ 30, 2025. Regarding the date of​ record, which of the following statements is​ true?

No journal entry is made on the date of record.

Which of the following is a basic right of stockholders?

Stockholders may receive dividends from corporate earnings.

Which of the following is a true​ statement?

Stockholders receive their proportionate share of any assets remaining after the corporation pays its debts and liquidates.

A corporation has 20,000 shares of 17​%, $50 par cumulative preferred stock outstanding and 36,000 shares of no−par common stock outstanding. Preferred dividends of $18,500 are in arrears. At the end of the current​ year, the corporation declares a dividend of $236,000. How is the dividend allocated between preferred and common​ stockholders?

The dividend is allocated $188,500 to preferred stockholders and $47,500 to common stockholders.

Which of the following occurs when the board of directors declares a 3−for−1 stock split on 18,000 outstanding shares of $19 par common​ stock?

The number of outstanding shares increases to 54,000.

Which of the following statements regarding the​ price/earnings ratio is​ incorrect?

The​ price/earnings ratio represents the market price of one share of common stock.

Which of the following occurs when a corporation distributes a stock​ dividend?

Total​ stockholders' equity would be unchanged.

A corporation originally issued​ $19 par value common stock for​ $21 per share. Which of the following is included in the entry to record the purchase of 100 shares of treasury stock for​ $29 per​ share?

Treasury Stock—Common is debited for​ $2,900.

Paid in capital in excess of par is also called ​ __________________.

additional paid−in capital

Outstanding stock represents shares of stock that

are held by the stockholders

The maximum number of shares of stock that the corporate charter allows the corporation to issue is​ _______________________.

authorized stock

Stock that represents basic ownership of a corporation is​ _______________________.

common stock

Preferred stock whose owners must receive all dividends in arrears plus the current year dividend before dividends are paid to common stockholders is​ _____________.

cumulative preferred stock

On the​ ________, cash dividends become a liability of a corporation.

declaration date

Treasury stock​ ________.

decreases the number of shares outstanding

On the date of record for a​ dividend, the company​ ________.

determines who owns the shares of stock

A distribution of a​ corporation's earnings to shareholders is​ _______________________.

dividends

The​ price/earnings ratio​ _________.

is most useful when comparing one company to another

Stock that has been issued but may or may not be held by stockholders is​ _______________________.

issued stock

Preferred stock that does not require unpaid dividends from past periods to be paid before dividends are paid for the current year to preferred and common stockholders is ​ _____________.

noncumulative preferred stock

The two basic sources of​ stockholders' equity are​ ________.

paid−in capital and retained earnings

Dividends in arrears are​ ________.

passed dividends on cumulative preferred stock

Preferred stockholders​ ________.

receive a dividend preference over common stockholders

Rate of return on common​ stockholders' equity is often called​ ____________.

return on equity

A reason a company may purchase treasury stock is to​ __________.

reward valued employees with stock

A reason a company may purchase treasury stock is to​ __________.

support the​ company's stock price

Preferred stock is stock​ ________.

that gives its owners certain advantages over common stockholders

The par value of stock is​ ________.

the amount assigned by a company to a share of its stock

Which of the following is NOT a reason for which a company may purchase treasury​ stock?

to avoid a takeover by an outside party by increasing the number of outstanding shares that have voting rights

A​ company's own stock that it has previously issued and later reacquired is called​ ___________.

treasury stock

Valley, Inc. has​ 8,000 shares of preferred stock outstanding. The preferred stock has a​ $160 par​ value, a​ 11% dividend​ rate, and is noncumulative. If Valley has sufficient funds to pay​ dividends, what is the total amount of dividends that will be paid out to preferred​ stockholders?

​$140,800

Healthy​ Farmer, Inc. has​ 42,000 shares of common stock outstanding and​ 3,000 shares of preferred stock outstanding. The common stock is​ $0.09 par​ value; the preferred stock is​ 4% noncumulative with a​ $100.00 par value. On October​ 15, 2025, the company declares a total dividend payment of​ $45,000. What is the total amount of dividends that will be paid to the common​ stockholders?

​$33,000