Alto company issued 7% preferred stock with a $100 par value. this means that:

Chapter 11 Quiz

Reporting and Analyzing Equity

25 pts

This quiz is all multiple choice problems. Please choose the best possible answer for each problem. Each problem is worth one point.

Problem 1: An amount of assets defined by state law that stockholders must invest and leave invested in a corporation is called the: A. Par value of preferred B. Minimum legal capital C. Premium capital D. Stated value E. Working capital

Answer:

Problem 2: The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is: A. Always equal to its par value B. Always equal to its stated value C. Referred to as contributed capital D. Referred to as retained earnings E. Always below its stated value

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Problem 3: Stated value of no-par stock is: A. Another name for redemption value B. An amount assigned to par value stock by the state of incorporation C. The market value of the stock on the date of issuance D. The difference between the par value of stock and the amount below or above par value contributed by the stockholder E. An amount assigned to no-par stock by the corporation's board of directors

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Problem 4: Stockholders' equity consists of: A. Long-term assets B. Contributed capital and retained earnings C. Contributed capital and par value D. Retained earnings and cash E. Premiums and discounts

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Problem 5: A class of stock that does not have a par value and can usually be issued at any price without creating a minimum legal capital deficiency is called: A. Convertible stock B. No-par stock C. Callable stock D. Noncumulative stock E. Discounted stock

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Problem 6: A corporation's minimum legal capital is often defined to be the total par value of the shares: A. Issued B. Authorized C. Subscribed D. Outstanding E. In treasury

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Problem 7: Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as: A. Participating preferred stock B. Callable preferred stock C. Cumulative preferred stock D. Convertible preferred stock E. Noncumulative preferred stock

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Problem 8: A dividend preference for preferred stock means that: A. Preferred stockholders receive their dividends before common shareholders B. Preferred shareholders are guaranteed dividends C. Dividends are paid quarterly D. Preferred stockholders prefer dividends more than common stockholders E. Dividends must be declared on preferred stock

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Problem 9: A company issued 7% preferred stock with a $100 par value. This means that: A. Preferred shareholders have a guaranteed dividend B. The amount of the potential dividend is $7 per year per preferred share C. Preferred shareholders are entitled to 7% of the annual income D. The market price per share will approximate $100 per share E. Only 7% of the total contributed capital can be preferred stock

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Problem 10: Prior period adjustments are reported in the: A. Income statement B. Balance sheet C. Statement of retained earnings D. Statement of cash flows E. Notes to the financial statements

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Problem 11: The statement of changes in stockholders' equity: A. Is part of the statement of retained earnings B. Shows only the ending balances in stockholders' equity C. Describes changes in contributed capital and retained earnings subcategories D. Does not include changes in treasury stock E. Is reported by very few companies

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Problem 12: When all of the authorized shares have the same rights and characteristics, the stock is referred to as: A. “Preferred Shares” under both IFRS and GAAP B. “Common Shares” under both IFRS and GAAP C. “Plain Shares” under IFRS and “Common Shares” under GAAP D. “Simple Shares” under IFRS and “Pure Shares” under GAAP E. “Ordinary Shares” under IFRS and “Common Shares” under GAAP

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Problem 13: A company has 2,000 shares of $1 par value common stock and 200 shares of 5%, $110 par, non-cumulative preferred stock outstanding. The balance in Retained Earnings at the beginning of the year was $500,000. Net income for the current year was $300,000. If the company paid a dividend of $2 per share on its common stock, what is the balance in Retained Earnings at the end of the year? A. $800,000 B. $805,100 C. $794,900 D. $494,900 E. $194,900

Answer:

Problem 14: Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company has an earnings per share of: A. $3.75 B. $3.00 C. $3.33 D. $15.00

E. $3.16

Answer:

Problem 15: A company has net income of $850,000. It also has 125,000 weighted-average common shares outstanding and a market value per share of $115. The company's price-earnings ratio is equal to: A. 16.9 B. 14.7 C. 92.0 D. 13.5 E. 8.0

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Problem 16: The annual amount of cash dividends distributed to common shareholders relative to the common stock's market value is the: A. Dividend payout ratio B. Dividend yield C. Price-earnings ratio D. Current yield E. Earnings per share

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Problem 17: Xtreme Sports has $100,000 of 8% noncumulative, nonparticipating, preferred stock outstanding. Xtreme Sports also has $500,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of $30,000. This dividend should be distributed as follows: A. $8,000 preferred; $22,000 common B. $16,000 preferred; $14,000 common C. $7,500 preferred; $22,500 common D. $15,000 preferred; $15,000 common E. $0 preferred; $30,000 common

Answer:

Problem 18: A company paid $0.48 in cash dividends per share. It has an earnings per share of $4.20 and a market price per share of $30.00. Its dividend yield equals: A. 1.60% B. 6.25% C. 8.75% D. 11.40% E. 14.00%

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Problem 19: A company has 1,000 shares of $100 par preferred stock. It also has 25,000 shares of common stock outstanding and its total stockholders' equity equals $500,000. The book value per common share is: A. $15.38 B. $16.00 C. $19.23 D. $20.00 E. $100.00

Answer:

Problem 20: A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital in excess of par is: A. $100 B. $600 C. $1,000 D. $6,000 E. $7,000

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Problem 21: A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $60,000. The entry to record this exchange is: A.

Land

60,000

Common Stock

50,000

Contributed Capital in Excess of Par Value,

Common Stock

10,000

B.

Land

60,000

Common Stock

60,000

C.

Land

50,000

Common Stock

50,000

D.

Common Stock

50,000

Contributed Capital in Excess of Par Value,

Common Stock

10,000

Land

60,000

E.

Common Stock

60,000

Land

60,000

Answer:

Problem 22: A company's board of directors’ votes to declare a cash dividend of $0.75 per share. The company has 15,000 shares authorized, 10,000 issued and 9,500 shares outstanding. The total amount of the cash dividend is: A. $375 B. $4,125 C. $7,125 D. $7,500 E. $11,250

Answer:

Problem 23: A company declared a $0.50 per share cash dividend. The company has 20,000 shares authorized, 9,000 shares issued and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is:

Retained Earnings

4,000

Common Dividends Payable

4,000

A.

Common Dividends Payable

4,000

Cash

4,000

B.

Retained Earnings

4,500

Common Dividends Payable

4,500

C.

Common Dividends Payable

4,500

Cash

4,500

D.

Retained Earnings

5,000

Common Dividends Payable

5,000

E.

Answer:

Problem 24: A stock dividend transfers: A. Contributed capital to retained earnings B. Retained earnings to contributed capital C. Retained earnings to assets D. Contributed capital to assets E. Assets to contributed capital

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Problem 25: A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is: A.

Retained Earnings

135,000

Common Stock Dividend Distributable

135,000

B.

Retained Earnings

135,000

Cash

135,000

C.

Retained Earnings

135,000

Common Stock Dividend Distributable

100,000

Contributed Capital in Excess of Par Value,

Common Stock

35,000

D.

Retained Earnings

100,000

Common Stock Dividend Distributable

100,000

E. No entry is made until the stock is issued

Answer: