Small capital stocks

2. Question : Stocks that pay relatively large cash dividends on a regular basis are called

 Student Answer:   Small capital stocks

    Mid capital stocks

    Growth stocks

    Large capital stocks

     Income stocks

3. Question : A corporation sold 14,000 shares of its $10 par value common stock at a cash price of $13 per share. The entry to record this transaction would include

 Student Answer:   A debit to Contributed Capital in Excess of Par Value, Common Stock for $42,000
    A debit to Cash for $140,000

    A credit to Common Stock for $182,000

     A credit to Common Stock for $140,000

    A credit to Contributed Capital in Excess of Par Value, Common Stock for $182,000

4. Question : A corporation’s distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a

 Student Answer:    Stock dividend

    Stock subscription

    Premium on stock

    Discount on stock

    Treasury stock

5. Question : Stockholders’ equity consists of

 Student Answer:   Long-term assets

     Contributed capital and retained earnings

    Contributed capital and par value

    Retained earnings and cash

    Premiums and discounts

6. Question : The statement of changes in stockholders’ equity

 Student Answer:   Is part of the statement of retained earnings

    Shows only the ending balances in stockholders’ equity

     Describes changes in contributed capital and retained earnings subcategories
    Does not include changes in treasury stock

    Is reported by very few companies

7. Question : A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital is

 Student Answer:   $100

    $600

    $1,000

    $6,000

     $7,000

8. Question : Book value per share

 Student Answer:    Reflects the value per share if a company is liquidated at balance sheet amounts
    Is assets divided by equity

    Is assets divided by the number of common shares outstanding

    Measures the worth of assets

    Is equal to par value per share

9. Question : A company has a market value per share of $73.00. Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000. The company’s price-earnings ratio equals

 Student Answer:   20.9

    4.2

     14.6

    20.0

    6.8

10. Question : A company’s board of directors votes to declare a total cash dividend of $25,000. The company has 2,500 shares of $1 par common stock and 400 shares of 4%, $200 par preferred stock outstanding. What is the total amount that will be paid to preferred shareholders?

 Student Answer:   $1,000

    $22,500

    $400

     $3,200

    $25,000

11. Question : A company paid $0.75 in cash dividends per share. Its earnings per share is $3.50 and its market price per share is $37.50. Its dividend yield equals

 Student Answer:   11.7%

     2.0%

    10.9%

    21.4%

    46.7%

12. Question : A premium on common stock

 Student Answer:    Is the amount paid in excess of par by purchasers of newly issued stock
    Is the difference between par value and issue price when the amount paid is below par
    Represents profit from issuing stock

    Represents capital gain on sale of stock

    Is prohibited in most states

13. Question : A corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include

 Student Answer:   A debit to Organization Expenses for $3,000

     A debit to Organization Expenses for $5,000

    A credit to Common Stock for $5,000

    A credit to Contributed Capital in Excess of Par Value, Common Stock for $5,000
    A debit to Contributed Capital in Excess of Par Value, Common Stock for $2,000

14. Question : Retained earnings

 Student Answer:    Generally consists of a company’s cumulative net income less any net losses and dividends declared since its inception
    Can only be appropriated by setting aside a cash fund

    Represent an amount of cash available to pay shareholders

    Are never adjusted for anything other than net income or dividends

    All of the above

 

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