Econ 136B FINAL

convertible bonds a) pay interest only in the event earnings are sufficient to cover the interest b) may be exchanged for for equity securities c) have priority over other types of indebtedness d) are usually secured by a first or second mortgage

B

stock that has fixed per-share amount printed on each stock certificate is called a) stated value stock b) par value stock c) fixed value stock d) uniform value stock

B

under the cost method, when treasury stock is sold for more than its cost, the excess is credited to a) paid-in capital in excess of par b) paid-in capital from treasury stock c) gain on sale of treasury stock d) retained earnings

B

stockholders equity is generally classified into 2 categories

contributed capital and earned capital

common stock shares issued will exceed common stock shares outstanding when a) purchase of treasury stock b) declaration of stock dividend c) declaration of stock split d) payment in full of subscribed stock

A

direct costs incurred to sell stock such as underwriting costs should be accounted for as a) a reduction of additional paid-in capital b) an expense in the period in which the stock is issued c) an intangible asset

A

when a property dividend is declared, retained earnings is reduced by a) fair value of the property b) book value of property c) cost of the property d) carrying value of the property

A

when additional consideration is offered to convertible bondholders to encourage conversion, the payment is called a(n) a) sweetener b) forced conversion c) end conversion d) additional converison

A

with regards to cash dividends, an entry is NOT made on the a) date of record b) date of payment and date of declaration c) date of payment d) date of declaration

A

compensation expense resulting from a compensatory stock option plan is generally a) allocated over the periods of the employee's service life to retirement b) allocated to the periods benefitted by the employee's required service c) recognized in the period of grant d) recognized in the period of expense

B

compensation expense resulting from a compensatory stock option plan is generally a) allocated over the periods of the employee's service life to retirement b) allocated to the periods benefitted by the employee's required service c) recognized in the period of the grant d) recognized in the period of exercise

B

the major difference between convertible debt and stock warrants is that upon exercise of the warrants a) the stock involved is restricted and can only be sold by the recipient after a set period of time b) the holder has to pay a certain amount of cash to obtain the shares c) no paid-in capital in excess of par can be apart of the transaction d) the stock is held by the company for a defined period of time before they are issued to the warrant holder

B

which increases the number of shares outstanding and decreases the par value per share? a) small stock dividend b) stock split c) large stock dividend d) treasury stock

B

Which US Based Company has the highest share price for one share?

Berkshire Hathaway = $545,000/share Charlie Munger is Warren Buffet's bestie, part of Berkshire Hathaway

The date on which to measure the compensation element in a stock option granted to a corporate employee is ordinarily the date on which the employee a) can first exercise the option b) exercises the option c) is granted the option d) has performed all conditions precedent to exercising the option

C

stock issued in noncash transactions should be recorded at the a) fair value of stock issued b) fair value of property received c) fair value of stock issued or the fair value of the non-cash consideration received, whichever is more readily determinable d) par value of stock issued

C

the date on which to measure the compensation element in a stock option granted to a corporate employee is ordinarily on the date which the employee a) can first exercise the option b) exercises the option c) is granted the option d) has performed all conditions precedent to exercising the option

C

which is an advantage of a restricted stock plan a) creates new job opportunities b) increases market price of the stock c) never becomes worthless d) issuance of stock increases profit in the company

C

which is an advantage of a restricted stock plan a) the plan creates new job opportunities in a company b) the creation of the plan increases the market price of the stock c) the stock never becomes completely worthless d) the issuance of the stock increases the profit of the company

C

common stockholders are said to be residual owners which means that they a) can negotiate individual contracts on behalf of the enterprise b) have the rights to specific assets in the business c) are entitled to a dividend every year in which the business earns profit d) bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership

D

cumulative preferred dividends in arrears should be shown in a corporation's financial statements as a) an increase in stockholders equity b) an increase in current liabilities c) an increase in current liabilities d) a footnote

D

the balance in common stock dividend distributable is reported as a(n) a) current liability b) contra current asset c) deduction from common stock issued d) addition to capital stock

D

the conversion of preferred stock into common requires that any excess of par value of the common shares issued over the carrying amount of the preferred being converted should be a) reflected currently in income as an extraordinary item b) reflected currently in income NOT as an extraordinary item c) treated as a prior period adjustment d) treated as a direct reduction of retained earnings

D

the conversion of preferred stock is most commonly recorded by the a) incremental method b) par value method c) market value method d) book value method

D

treasury shares are shares A) issued and outstanding b) held as an investment of the corporation c) held as an investment by the treasurer of the corporation d) issued but not outstanding

D

which are requirements of the declaration of a cash dividend? a) sufficient cash b) sufficient retained earnings c) declaration by the Board d) all of the above

D

do stock dividends increase or decrease stockholder's equity?

NEITHER, it has a net effect because it decreases retained earnings but increased paid-in capital by the same amount.

unearned compensation and treasury stock are

contra equity accounts

the distribution of stock rights to existing common stockholders will increase paid-in capital at the

date of issuance of rights (NO) date of exercise of rights (YES)

why is it that restricted stock never becomes worthless?

it never expires, so even if market price is lower it doesn't lose its value bc you can wait for market to raise/fluctuate

the cumulative feature of preferred stock

requires that dividends not paid in any year must be paid in a later year before dividends are distributed to common shareholders

preferred stockholders generally have no rights: true or false

true

the recording of convertible bonds at the date of issuance is the same as recording of straight debt issues true or false

true