46. On February 22, Brett Corporation reacquired 200 shares of its $5 par value common
stock for $25 each. On March 15, the company reissued 70 shares for $30 each. What is true
of the journal entry for reissuing their shares?
47. Retained Earnings represent a company’s:
48. The Retained Earnings balance reported on the balance sheet typically is not affected by:
49. The balance of Retained Earning at the end of the year represents:
50. Retained Earnings:
51. Journal entries to record cash dividends are made on the:
52. The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1
par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000
shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend
declaration?
53. The ending Retained Earnings balance of Lambert Inc. increased by $1.5 million from the
beginning of the year. The company’s net income earned during the year is $3.5 million. What
is the amount of dividends Lambert Inc. declared and paid?
54. Over the first four years of the company’s life, it earned the following net income (loss):
$6,000; $3,000; $6,000, and ($2,000). If the company’s ending retained earnings is $10,000
after year 4, what is the average amount of dividends paid per year?
55. Rugby Rocks, Inc. had a Retained Earnings balance of $12,000 at December 31, 2012.
The company had an average income of $7,500 over the next 3 years, and an ending Retained
Earnings balance of $15,000 at December 31, 2013. What was the total amount of dividends
paid over the last three years?
56. Both cash dividends and stock dividends:
57. The declaration and issuance of a stock dividend:
58. The issuer of a 100% common stock dividend (large stock dividend) to common
stockholders should debit stock dividends for an amount equal to the
59. The issuer of a 5% common stock dividend (small stock dividend) to common
stockholders should debit stock dividends for an amount equal to the
60. A feature common to both stock splits and stock dividends is
61. Large stock dividends and stock splits are issued primarily to:
62. The Common Stock account on a company’s balance sheet is measured as:
63. The statement of stockholders’ equity shows
64. How does the stockholders’ equity section in the balance sheet differ from the statement of
stockholders’ equity?
65. Panhandle Corporation was organized on January 3, 2012. The firm was authorized to
issue 100,000 shares of $5 par value common stock. During 2012, Panhandle had the
following transactions relating to shareholders’ equity:
Issued 30,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
What is total paid-in capital at the end of 2012?
66. Roberto Corporation was organized on January 1, 2012. The firm was authorized to issue
100,000 shares of $5 par value common stock. During 2012, Roberto had the following
transactions relating to stockholders’ equity:
Issued 10,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8).
What is total stockholders’ equity at the end of 2012?
67. Return on equity is calculated as:
68. Why doesn’t stockholders’ equity equal the market value of equity?
69. Earnings per share (EPS)
70. Which of the following statements is not true regarding earnings per share?
71. Financial information for Retro Designs includes the following selected data:
What is the company’s earnings per share?
72. Financial information for Retro Designs includes the following selected data:
What is the company’s price-earnings ratio?
73. The PE ratio:
74. Assets plus liabilities equal stockholders’ equity.
75. Paid-in Capital is the amount stockholders have invested in the company.
76. Retained Earnings is the amount stockholders have invested in the company.
77. Angel investors are investors that focus on companies at or near bankruptcy.
78. All publicly held corporations are regulated by the Securities and Exchange Commission.
79. Limited liability means that even in the event of bankruptcy, stockholders in a corporation
can lose no more than the amount they invested in the company.
80. Owners in a sole proprietorship or a partnership can be held personally liable for debts the
company has incurred, over and beyond the investment they have made.
81. A corporation has lower taxes and less paperwork relative to sole-proprietorships and
partnerships.
82. An S Corporation allows a company to enjoy limited liability as a corporation, but tax
treatment as a partnership.
83. Authorized stock is the number of shares that have been sold to investors.
84. Par value is the legal capital per share of stock that’s assigned when the corporation is first
established.
85. Par value has a direct relationship to the market value of the common stock.
86. A company credits Additional Paid-in Capital for the portion of the cash proceeds above
par value received for the issuance of stock.
87. The number of shares outstanding is equal to the number of shares issued minus the
number of shares bought back.
88. In the event a corporation is dissolved, common stockholders receive preference over
preferred stockholders in the distribution of assets.
89. Convertible preferred stock allows the stockholder to exchange shares of preferred stock
for common stock at a specified conversion ratio.
90. Cumulative preferred stock means that dividends accumulate interest during the year.
91. We usually record preferred stock as equity and report it in the stockholders’ equity
section of the balance sheet just above common stock.
92. Treasury stock is the repurchase of a company’s own issued stock.
93. If a company purchases shares of another company, it records this transaction as treasury
stock.
94. Stock repurchases reduce the number of shares outstanding, thereby increasing earnings
per share.
95. We record treasury stock at the cost of the shares reacquired.