accounting - FINAL Chapter 11

If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders' equity be reduced? $7,000 $12,000 $0 $5,000

$12,000

Cheyenne Corp. has 12000 shares of 12%, $100 par value, cumulative preferred stock and 60000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock? $144000 in total $0.12 per share $12000 in total $120 per share

$144000 in total

If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital? $0 $4,000 $3,000 $7,000

$3,000

Return on common stockholder's equity is often higher under bond financing rather than common stock financing. 14%. 9%. 12%. 8%.

12%.

Rynadune Inc. reported net income of $186,000 during 2014 and paid dividends of $26,000 on common stock. It also paid dividends on its 10,000 shares of 6%, $100 par value, noncumulative preferred stock. Common stockholders' equity was $1,200,000 on January 1, 2014, and $1,600,000 on December 31, 2014. How much is the company's return on common stockholders' equity for 2014? 7.1% 13.3% 9.0% 10.0%

9.0%

Which of the following does not affect retained earnings? Dividends Net loss Additional investment by stockholders Net income

Additional investment by stockholders

Which one of the following is a major disadvantage of a corporation? Limited liability of stockholders Additional taxes Transferable ownership rights Limited life

Additional taxes

Which of the following does not increase the return on common stockholders' equity? An increase in the return on assets ratio An increase in the use of debt financing An increase in the company's net income An increase in the company's stock price

An increase in the company's stock price

Which of the following represents the largest number of common shares? Treasury shares. Issued shares. Outstanding shares. Authorized shares.

Authorized shares.

Harrison, Inc. issued 600 shares of common stock at $10 per share. If the stock was no-par value stock, which of the following will be part of the journal entry to record the issuance? Debit to Paid-in Capital $6,000 Credit to Paid-in Capital in Excess of Par for $600 Credit to Common Stock for $6,000 Debit to Cash for $600

Credit to Common Stock for $6,000

On which date are entries for cash dividends required? Record date and the payment date Declaration date, record date, and payment date Declaration date and the record date Declaration date and the payment date

Declaration date and the payment date

Which of the following is a disadvantage of the corporate business form? Continuous life Government regulation No income taxes Easy acquisition of capital

Government regulation

Which one of the following decreases when a corporation purchases treasury stock? Treasury shares Outstanding shares Authorized shares Issued shares

Outstanding shares

Which one of the following is not a right of preferred stockholders? Priority voting rights Priority in relation to dividends Priority to the assets in the event of liquidation Priority to dividends and assets in liquidation.

Priority voting rights

Which of the following statements is true regarding corporate performance ratios? As a company grows larger, it is easy to sustain a high return on common stockholder's equity. Return on common stockholder's equity is often higher under bond financing rather than common stock financing. Low growth rates are characterized by low payout ratios. A high payout ratio may indicate that a company is retaining earnings for future growth investments.

Return on common stockholder's equity is often higher under bond financing rather than common stock financing.

If everything else is held constant, what will cause earnings per share to increase? The payment of a cash dividend to common stockholders The purchase of treasury stock The payment of a cash dividend to preferred stockholders The issuance of new shares common stock

The purchase of treasury stock

Which of the following is not a stockholder's right? The right to participate in management decisions. The preemptive right. The right to vote in the election for the board of directors. The right to share in dividends.

The right to participate in management decisions.

For what reason might a company acquire treasury stock? To increase profit To increase the number of shares of stock outstanding To reissue the shares to officers and employees under bonus and stock compensation plans To signal to the stock market that management believes the stock is overpriced

To reissue the shares to officers and employees under bonus and stock compensation plans

Which of the following is not a characteristic of a corporation? Easy transfer of ownership interests Ability to acquire capital easily Unlimited liability for stockholders Separate legal existence

Unlimited liability for stockholders

Bramble has invested $620000 in a privately held Splish Brothers Inc.. The corporation does not do well and must declare bankruptcy. What amount does Bramble stand to lose? Up to his total investment of $620000. Zero. The $620000 plus any personal assets the creditors demand. $540000.

Up to his total investment of $620000.

Treasury stock is corporate stock issued by the treasurer of a company. stock purchased by a corporation and held as an investment in its treasury. a corporation's own stock, which has been reacquired and held for future use. stock issued by the U.S. Treasury Department.

a corporation's own stock, which has been reacquired and held for future use.

A company would not acquire treasury stock: to have additional shares available to use in acquisitions of other companies. in order to reissue shares to officers. as an asset investment. in order to increase trading of the company's stock.

as an asset investment.

Two classifications appearing in the paid-in capital section of the balance sheet are paid-in capital and retained earnings. preferred stock and common stock. capital stock and additional paid-in capital. capital stock and treasury stock.

capital stock and additional paid-in capital.

The date on which a cash dividend becomes a binding legal obligation is on the declaration date. date of record. payment date. last day of the fiscal year end.

declaration date.

The acquisition of treasury stock by a corporation.. decreases its total assets and total stockholders' equity. has no effect on total assets and total stockholders' equity. requires that a gain or loss be recognized on the income statement. increases its total assets and total stockholders' equity.

decreases its total assets and total stockholders' equity.

Dividends in arrears on cumulative preferred stock never have to be paid, even if common dividends are paid. enable the preferred stockholders to share equally in corporate earnings with the common stockholders. should be recorded as a current liability until they are paid. must be paid before common stockholders can receive a dividend.

must be paid before common stockholders can receive a dividend.

On the dividend record date a dividend becomes a current obligation. Dividends Payable is debited. no entry is required. an entry may be required if it is a stock dividend.

no entry is required.

If the board of directors authorizes a $137000 restriction of retained earnings for a future plant expansion, the effect of this action is to reduce the amount of retained earnings available for dividend declarations. decrease total assets and total stockholders' equity. increase stockholders' equity and to decrease total liabilities. decrease total retained earnings and increase total liabilities.

reduce the amount of retained earnings available for dividend declarations.

All of the following statements regarding retained earnings are true except retained earnings represents a claim on cash. a debit balance in Retained Earnings indicates a deficit. some companies may restrict availability of retained earnings for dividends. retained earnings is net income that a company retains in a business.

retained earnings represents a claim on cash.

Information that is not generally reported for each class of stock on the balance sheet is the par value. shares issued. the market value. shares authorized.

the market value.

Ayayai Corp. issues 30000 shares of $50 par value preferred stock for cash at $75 per share. In the stockholders' equity section, the effects of the transaction above will be reported entirely within the capital stock section. entirely within the additional paid-in capital section. under both the capital stock and additional paid-in capital sections. entirely under the retained earnings section.

under both the capital stock and additional paid-in capital sections.