29
16) HiTech Industries has 15,000 shares of treasury cost which it purchased for $63/share. It
later resold 3,300 of those shares for $82/share. The amount to be credited to Paid–in Capital–
Treasury Stock is:
A) $270,600.
B) $62,700.
C) $222,300.
D) $207,900.
Question Type: Application
17) HiTech Industries has a $13,000 credit balance in Paid-In Capital–Treasury Stock. It sells
1,000 shares of treasury stock, which the company reacquired at $59/share, for $56/share. After
the transaction, what will the balance be in the Paid-In Capital in Excess of Par–Treasury
account?
A) $10,000 credit
B) $3,000 debit
C) $16,000 credit
D) $13,000 credit
Question Type: Application
18) Sassycat, Inc. has a $9,000 credit balance in Paid-In Capital – Treasury Stock. It sells 4,500
shares of treasury stock, which the company reacquired at $35/share for $29/share. The journal
entry to record this sale is:
A) debit Cash $130,500, debit Paid-In Capital – Treasury Stock $27,000, credit Treasury Stock
$157,500.
B) debit Cash $157,500, credit Treasury Stock $157,500.
C) debit Cash $157,500, credit Paid-In Capital – Treasury Stock $27,000, credit Treasury Stock
$130,500.
D) debit Cash $130,500, debit Paid-In Capital – Treasury Stock $9,000, debit Retained Earnings
$18,000, credit Treasury Stock $157,500.
Question Type: Application
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Copyright © 2017 Pearson Education, Inc.
10.7 Report stockholders’ equity on the balance sheet
1) In addition to the regular financial statements, a company may issue a separate Statement of
Stockholders‘ Equity.
Question Type: Concept
2) Common Stock is most often listed after Additional Paid–in Capital in the Stockholders‘
Equity section of the Balance Sheet.
Question Type: Concept
3) The heading Paid-in Capital must appear on the balance sheet along with the heading
Retained Earnings.
Question Type: Concept
4) Which is NOT included in paid-in capital?
A) Preferred Stock
B) Common Stock
C) Cash
D) Additional Paid–in Capital
Question Type: Concept
5) The major parts of the Stockholders‘ Equity section of the Balance Sheet are:
A) Paid-In Capital and Retained Earnings.
B) Stock and Retained Earnings.
C) Stock, Paid-In Capital and Retained Earnings.
D) Authorized Stock and Preferred Stock.
Question Type: Concept
6) In the Stockholders‘ Equity section of a Balance Sheet:
A) common stock goes first.
B) preferred stock goes first.
C) Retained Earnings goes first.
D) assets are listed first.
Question Type: Concept
31
7) Dental Designs, Inc. Stockholders’ Equity section includes the following information:
Preferred Stock
$11,000
Paid-in Capital in Excess of Par—Preferred
18,000
Common Stock
19,000
Paid-in Capital in Excess of Par—Common
8,000
Retained Earnings
7,000
Total paid-in capital is:
A) $56,000.
B) $26,000.
C) $63,000.
D) $30,000.
Question Type: Application
8) Cellars, Inc. Stockholders‘ Equity section includes the following information:
Preferred Stock
$24,000
Paid-in Capital in Excess of Par—Preferred
3,000
Common Stock
52,000
Paid-in Capital in Excess of Par—Common
35,000
Retained Earnings
7,500
Total paid-in capital is:
A) $76,000.
B) $121,500.
C) $114,000.
D) $38,000.
Question Type: Application
32
9) The Wellington Winery’s Stockholders‘ Equity section includes the following information:
Preferred Stock
$15,000
Paid-in Capital in Excess of Par—Preferred
5,000
Common Stock
17,000
Paid-in Capital in Excess of Par—Common
7,000
Retained Earnings
9,000
What was the total selling price of the preferred stock?
A) $15,000
B) $20,000
C) $22,000
D) $24,000
Question Type: Application
10) The Wellington Winery’s Stockholders‘ Equity section includes the following information:
Preferred Stock
$16,000
Paid-in Capital in Excess of Par—Preferred
6,000
Common Stock
16,000
Paid-in Capital in Excess of Par—Common
8,000
Retained Earnings
9,000
What was the total selling price of the common stock?
A) $16,000
B) $22,000
C) $24,000
D) $33,000
Question Type: Application
33
11) Taylor Fish Farm’s Stockholders‘ Equity section includes the following information:
Preferred Stock
$13,000
Paid-in Capital in Excess of Par—Preferred
8,000
Common Stock
18,000
Paid-in Capital in Excess of Par—Common
2,100
Retained Earnings
9,100
What was the total selling price of the preferred stock?
A) $13,000
B) $15,100
C) $21,000
D) $20,100
Question Type: Application
12) Taylor Fish Farm’s Stockholders‘ Equity section includes the following information:
Preferred Stock
$13,000
Paid-in Capital in Excess of Par—Preferred
6,000
Common Stock
19,000
Paid-in Capital in Excess of Par—Common
4,500
Retained Earnings
9,100
What was the total selling price of the common stock?
A) $13,000
B) $19,000
C) $17,500
D) $23,500
Question Type: Application
34
10.8 Evaluate return on stockholders’ equity
1) Return on equity shows the relationship between net income and ending Stockholders‘ Equity.
Question Type: Concept
2) Return on equity is a measure of profitability.
Question Type: Concept
3) The formula for return on equity is net income divided by average Stockholders‘ Equity.
Question Type: Concept
4) The return on equity for a company that has sales of $50,000, net income of $25,000 and
average Stockholders‘ Equity of $125,000 is 20%.
Question Type: Application
5) The return on equity for a company that has sales of $43,000, net income of $13,000, and
average Stockholders‘ Equity of $88,000 would be 48.86%.
Question Type: Application
6) If a company’s return on equity is 25.21%, this means that the company earned its
stockholders net income of $25.21 per dollar invested.
Question Type: Concept
7) What is the return on equity if sales are $140,000, net income is $22,700 and average common
Stockholders‘ Equity is $86,000? (Round your final answer to one decimal place, X.X%.)
A) 16.2%
B) 26.4%
C) 61.4%
D) Cannot be determined from information given
Question Type: Application
35
8) What is the return on equity if sales are $290,000, net income is $49,000 and average common
Stockholders‘ Equity is $188,000? (Round your final answer to one decimal place, X.X%.)
A) 16.9%
B) 64.8%
C) 26.1%
D) 47.9%
Question Type: Application
9) For the current year, Company A had sales of $450,000, net income of $290,000 and average
common Stockholders‘ Equity of $940,000. During the same year, Company B had sales of
$200,000, net income of $160,000 and average common Stockholders’ Equity of $410,000.
Which of the following statements is TRUE regarding this situation?
A) Company A has a better return on equity, $290,000 compared to Company B’s $160,000.
B) Company B has a better return on equity, 39.02% compared to Company A’s 30.85%.
C) Company A has a better return on equity, $450,000 compared to Company B’s $200,000
D) Company B has a better return on equity, 80.00% compared to Company A’s 64.44%.
Question Type: Application
10) Based on the following information, in which year did the company have the best return on
equity?
Year 1
Year 2
Year 3
Sales
$3,000,000
$2,000,000
$1,100,000
Net Income
$500,000
$500,000
$500,000
$2,500,000
$2,380,952
$2,272,727
A) Year 1
B) Year 2
C) Year 3
D) The company had the same return on equity all three years. No year is better than another.
Question Type: Application
36
11) For the current year, Blue Co. had net income of $200,000, beginning Stockholders‘ Equity
$500,000 and ending Stockholders’ Equity $535,000. Greene Co. had net income of $100,000,
beginning Stockholders‘ Equity $900,000 and ending Stockholders’ Equity $950,000. Which of
the following statements is TRUE regarding this scenario?
A) Blue Co. has a lower return on equity at 10.8% than Greene Co. does at 38.6%.
B) Blue Co. is more profitable, because its net income is higher.
C) Blue Co. has a higher level of earnings relative to the amount of stockholders‘ equity.
D) Blue Co. is a less risky investment than Greene Co.
Question Type: Critical Thinking