Accounting Final (Ch. 11 & 13)

PDG Corporation had a return on equity of 18%. Beginning and ending shareholders' equity for the corporation were $570,000 and $560,000 respectively. There were 350,000 common shares and no preferred shares outstanding. What was net income for the year? A) $101,700 B) $63,000 C) $1,944,444.44 D) $3,138,888.89

A) $101,700 Return on equity = (net income - preferred dividends) / average equity No preffered shares = 0 18% = net income / average shareholders' equity 18% = net income / (570,000+560,000) / 2 18% = net income / 565,000 net income = 565,000 x 0.18 = $101,700

Angelique's Antiques declared and paid cash dividends of $25,000. There were 1,000 shares of 10%, $30 par value, noncumulative preferred stock outstanding. How much of the cash dividends were paid to COMMON shareholders? A) $22,000 B) $1,500 C) $0 D) $25,000

A) $22,000 Common Stock = Total Dividend Paid - Preferred Stock Paid = (0 + 25,000) - 3,000 = 25,000 - 3,000 = 22,000

Out of Africa, a multi-national corporation had a very successful year. The board of directors declared and paid a cash dividend of $50,000. The prior year, Out of Africa did not pay dividends on its 400 shares of cumulative, 8%, $100 par, preferred stock. How much of the cash dividend was paid to the COMMON shareholders? A) $43,600 B) $49,992 C) $50,000 D) $46,800

A) $43,600 Common Stock = Total Dividend - Preferred Stock = (0+ 50,000) - 6,400 = 43,600

The following information is from Acme's annual report for the years ended Dec. 31: Year: /// 2012 /// 2011 /// 2010 Cash 2,500 2,000 1,000 Accounts receivable 5,000 3,000 2,000 Inventory 9,000 5,000 3,000 Property, plant & equipment 30,000 16,000 10,000 Accounts payable 6,000 4,500 3,500 Long-term liabilities 10,000 3,000 2,000 Common stock 2,000 2,000 2,000 Retained earnings 28,500 16,500 8,500 Refer to the Acme annual report above. Calculate return on equity for 2011. A) 55.2% B) 43.2% C) 32.7% D) The answer cannot be determined from the information given.

A) 55.2% Return on Equity = Net Income / Average Equity Net Income = End Retained Earnings - Beg Retained Earnings Net Income = 16,500 - 8,500 = 8,000 Average Equity = (18,500 + 10,500) / 2 = 14,500 Return on Equity = 8,000 / 14,500 = 55.2%

Marie's Clothing Store had an accounts receivable balance of $420,000 at the beginning of the year and a year-end balance of $510,000. Net credit sales for the year totaled $2,100,000. The average collection period of the receivables was: A) 81 days. B) 41 days. C) 52 days. D) 91 days.

A) 81 days. Average Collection Period = (Average Accounts Receivable / Net Credit Sales) x 365 days ACP = (((420,000 + 510,000) / 2) / 2,100,000) x 365 days ACP = (465,000 / 2,100,000) x 365 days ACP = 0.22 x 365 days ACP = 81 days

Corporations split stock because ________. A) a stock split will decrease the market price per share of stock B) a stock split will decrease the number of shares outstanding C) a stock split will increase total assets D) a stock split increases shareholders' equity

A) a stock split will decrease the market price per share of stock

Paltrowski Company issued 1 million shares of $10 stated value common stock. The selling price was $40 per share. What journal entry is prepared? A) debit Cash $40 million, credit Common Stock $10 million and credit Paid-in Capital in Excess of Stated Value Common $30 million B) debit Cash $40 million, credit Common Stock $10 million and credit Paid-in Capital in Excess of Par Common $30 million C) debit Cash $40 million and credit Common Stock $40 million D) debit Cash $40 million and credit Retained Earnings $40 million

A) debit Cash $40 million, credit Common Stock $10 million and credit Paid-in Capital in Excess

A stock split ________ total shareholders' equity. A) has no effect on B) decreases C) increases both total assets and D) increases

A) has no effect on

When a company buys shares of its own stock and holds them as treasury stock, ________. A) its earnings per share will increase B) its earnings per share will decrease C) the market price of its stock will decrease D) its earnings per share are not affected

A) its earnings per share will increase

A ________ is created when a corporation increases the number of shares and proportionately decreases the par value. A) stock split B) stock dividend C) liquidating dividend D) cash dividend

A) stock split

Team Shirts issued a 10% stock dividend. The balance in retained earnings just before the dividend was $45,000. There were 15,000 shares outstanding on the day of the dividend. The $1 par value stock had a market price of $17.25 on the day of the dividend. Total shareholders' equity will increase (decrease) by ________. A) $1,500 B) $25,875 C) $0 D) $4,500

C) $0

Team Shirts had net income of $23,000. The balance sheet showed beginning and ending balances in shareholders' equity of $100,000 and $110,000, respectively. There were no preferred shares and 20,000 common shares outstanding throughout the year. Calculate earnings per share. A) $0.22 B) $5.25 C) $1.15 D) $4.56

C) $1.15 Total earnings = Net income - Preferred Dividends = 23,000 - 0 = 23,000 Earnings per share = Total earnings / Outstanding Shares EPS = 23,000 / 20,000 EPS = 1.15

On February 1, a corporation has 30,000 shares of $1 par value common stock issued and outstanding. The corporation also has Additional Paid-in Capital of $100,000 and Retained Earnings of $100,000. On February 1, the corporation declared a 2-for-1 stock split. After the split, what is the total par value of the common stock and the total stockholders' equity, respectively? A) $130,000; $260,000 B) $60,000; $260,000 C) $30,000; $230,000 D) 0; $230,000

C) $30,000; $230,000 Stock Split does not affect total par value and total stockholders' equity

Jem's Jewelers reported total shareholders' equity of $100,000 on its February 28 balance sheet. During March, the business earned $250,000 and declared and paid a cash dividend of $10,000. What was total shareholders' equity on March 31? A) $260,000 B) $360,000 C) $340,000 D) $350,000

C) $340,000 100,000 + 250,000 = 350,000 350,000 - 10,000 = 340,000

Refer to the Acme annual report above. Calculate the debt-to-equity ratio for 2011. A) 0.24 B) 3.75 C) 0.41 D) 2.25

C) 0.41 Debt- to- equity ratio = Total Liabilities / Shareholders' Equity Debt- to- equity ratio = 7,500 / (Total assets - Total liabilities) Debt- to- equity ratio = 7,500 / 18,500 Debt- to- equity ratio = 0.41

AZ Best, Inc.'s corporate charter allows it to issue 1,500,000 shares of common stock. In 2011, its first year of business, the company sold 200,000 shares of common stock. In 2011, the company bought back 5,000 shares to be held as treasury stock. At December 31, 2011, how many shares of common stock are authorized? A) 5,000 shares B) 1,300,000 shares C) 1,500,000 shares D) 200,000 shares

C) 1,500,000 shares

Refer to the Acme annual report above. Calculate the current ratio for 2012. A) 1.3 B) 2.9 C) 2.8 D) 1.0

C) 2.8 Current Ratio = Current Assets / Current Liabilities Current Ratio = 16,500 / 6,000 Current Ratio = 2.8

Kunze Corporation has $1 par value Common Stock with 100,000 shares authorized and 25,000 shares issued. The journal entry to record Kunze's purchase of 5,000 shares of common stock at $5 per share would be: A) debit Common Stock for $5,000, debit Paid-in Capital in Excess of ParCommon for $20,000 and credit Cash for $25,000. B) debit Common Stock for $25,000 and credit Cash for $25,000. C) debit Treasury Stock for $25,000 and credit Cash for $25,000. D) debit Cash for $25,000, credit Common Stock for $5,000 and credit Paid-in Capital in Excess of Par-Common for $20,000.

C) debit Treasury Stock for $25,000 and credit Cash for $25,000.

Team Shirts purchased $5,000 worth of its own stock in the stock market. The transaction would _________ cash by $5,000 and _________ shareholders' equity by $5,000. A) increase; decrease B) increase; increase C) decrease; decrease D) decrease; increase

C) decrease; decrease

Treasury stock accounts for the difference between the number of: A) authorized shares and outstanding shares. B) issued shares and authorized shares. C) outstanding shares and issued shares. D) issued shares and preferred shares.

C) outstanding shares and issued shares.

Which stock offers shareholders preference in receiving dividends? A) common stock B) treasury stock C) preferred stock D) callable stock

C) preferred stock

The debt-to-equity ratio is a ________ ratio. A) profitability B) liquidity C) solvency D) market indicator

C) solvency

Angelique's Antiques declared and paid cash dividends of $25,000. There were 1,000 shares of 10%, $30 par value, noncumulative preferred stock outstanding. How much of the cash dividends were paid to PREFERRED shareholders? A) $22,000 B) $25,000 C) $0 D) $3,000

D) $3,000 Preferred Dividend = Rate of Dividend x Value of Preferred Stock = 10% x (1,000 shares x $30 par value) = 0.1 x 30,000 = 3,000

Out of Africa, a multi-national corporation had a very successful year. The board of directors declared and paid a cash dividend of $50,000. The prior year, Out of Africa did not pay dividends on its 400 shares of cumulative, 8%, $100 par, preferred stock. How much of the cash dividend was paid to the PREFERRED shareholders? A) $4,000 B) $3,200 C) $8,000 D) $6,400

D) $6,400 Preferred Stock = Rate of Dividend x Value of Stock = 0.08 x (400 x 100) = 0.08 x 40,000 = 3,200 x 2 years (cumulative) = 6,400

AZ Best, Inc.'s corporate charter allows it to issue 1,500,000 shares of common stock. In 2011, its first year of business, the company sold 200,000 shares of common stock. In 2011, the company bought back 5,000 shares to be held as treasury stock. At December 31, 2011, how many shares of common stock are outstanding? A) 1,300,000 shares B) 5,000 shares C) 200,000 shares D) 195,000 shares

D) 195,000 shares

Team Shirts issued 20,000 shares of stock for $20 per share. The par value of the stock was $1 per share. Calculate the value of capital stock and additional paid-in capital. A) capital stock $380,000; additional paid-in capital $20,000 B) capital stock $0; additional paid-in capital $400,000 C) capital stock $400,000; additional paid-in capital $0 D) capital stock $20,000; additional paid-in capital $380,000

D) capital stock $20,000; additional paid-in capital $380,000 Value of capital stock=20000 shares x $1 per share = $20000 Value of additional Paid in capital= 20000 shares x $19 per share = $380000

The date on which the board of directors of a corporation decides that earnings are sufficient to pay a dividend is the ________. A) date of payment B) date of record C) dividend date D) declaration date

D) declaration date

The owners of common stock do NOT have the specific right to ________. A) acquire more shares when a corporation issues more stock B) vote for members of the board of directors C) share in the corporation's earning D) receive dividends automatically each year

D) receive dividends automatically each year

A corporation's distribution of new shares of stock to the corporation's current shareholders is called a ________. A) liquidating dividend B) stock split C) cash dividend D) stock dividend

D) stock dividend

On a common-size balance sheet, each line item is expressed as a percentage of: A) current assets. B) operating income. C) net income. D) total assets.

D) total assets.

Trading Places, a multi-national corporation, had a very successful year. The board of directors declared and paid a cash dividend of $50,000. The prior year, Trading Places did not pay dividends on its 400 shares of noncumulative, 8%, $100 par, preferred stock. How much of the cash dividend was paid to the COMMON shareholders? A) $50,000 B) $46,800 C) $0 D) $43,600

B) $46,800 Common Stock = Total Dividend - Preferred Stock = (0 + 50,000) - 3,200 = 46,800

Horizontal analysis is most closely related to: A) vertical analysis. B) trend analysis. C) economic value added analysis. D) benchmarking.

B) trend analysis.

Team Shirts issued a 2-for-1 stock split. Just before the split, Team Shirts had 100,000, $1 par value common shares outstanding. After the split, Team Shirts had ________ outstanding. A) 100,000 shares of preferred stock and 100,000 shares of common stock B) 100,000 common shares C) 200,000 common shares D) 50,000 common shares

C) 200,000 common share 100,000 common shares outstanding x 2 due to stock split

The following information is from Megabux, Inc.'s annual report for the years ended December 31: Year: /// 2012 /// 2011 /// 2010 Sales $120,000 $110,000 $100,000 Cost of goods sold 58,000 52,000 46,000 Operating expenses 48,000 44,000 42,000 Interest expense 12,000 9,000 6,000 Net income $ 2,000 $ 5,000 $ 6,000 Refer to the Megabux annual report above. Calculate the gross profit ratio for 2010. A) 46% B) 6% C) 54% D) 42%

C) 54% Gross Profit Ratio = (Revenue - Cost of Goods Sold) / Revenue Gross Profit Ratio = (100,000 - 46,000) / 100,000 Gross Profit Ratio = 54,000 / 100,000 = 0.54 x 100 = 54%

________ is the stock sold to the public. A) Authorized stock B) Outstanding stock C) Issued stock D) Treasury stock

C) Issued stock