143) Dividend Yield is calculated as:
A) Dividends per share divided by the stock price.
B) Net income divided by average stockholders’ equity.
C) The stock price divided by dividends per share.
D) Dividends divided by stockholders’ equity.
144) Beach Boards reports dividends per share of $1.40 and net income for the year of $150,000.
The current stock price is $40.00. What is Beach Boards’ dividend yield?
A) 1.2%.
B) 26.7%.
C) 4.0%.
D) 3.5%.
145) Blaylock Industries reports dividends per share of $1.40 and net income for the year of
$150,000. Dividend yield is 3.5%. What is Blaylock ‘s current stock price?
A) $23.82.
B) $15.00.
C) $35.00.
D) $40.00
146) Financial information for Accessories Unlimited includes the following selected data:
Dividends (in millions)
$
75
Shares outstanding (in millions)
300
Stock price
$
20.00
What is the company’s dividend yield?
A) 1.25%.
B) 10.0%.
C) 5.0%.
D) 2.5%.
147) Financial information for Accessories Unlimited includes the following selected data:
Net income (in millions)
$
150
Shares outstanding (in millions)
300
Stock price
$
20.00
What is the company’s earnings per share?
A) $0.50.
B) $0.25.
C) $2.00.
D) $0.05.
148) Financial information for Accessories Unlimited includes the following selected data:
Net income (in millions)
$
150
Shares outstanding (in millions)
300
Stock price
$
20.00
What is the company’s price-earnings ratio?
A) 20.0.
B) 40.0.
C) 60.0.
D) 80.0.
149) Return on equity is calculated as:
A) Net income divided by average stockholders’ equity.
B) Net income divided by ending stockholders’ equity.
C) Net income divided by average market value of equity.
D) Net income divided by ending market value of equity.
150) Earnings per share (EPS):
A) Is useful in comparing earnings performance across companies.
B) Is useful in comparing earnings performance for the same company over time.
C) Is useful in both comparing earnings performance across companies and in comparing
earnings performance for the same company over time.
D) Is not useful in comparing earnings performance across companies or in comparing earnings
performance for the same company over time.
151) Which of the following statements is not true regarding earnings per share?
A) Earnings per share is useful in comparing earnings performance across companies at the same
point in time.
B) Earnings per share is useful in comparing earnings performance for the same company over
time.
C) Earnings per share is calculated as net income minus preferred stock dividends divided by the
average common shares outstanding during the period.
D) Earnings per share is forecasted by financial analysts.
152) Financial information for Retro Designs includes the following selected data:
Net income (in millions)
$
175
Preferred stock dividends (in millions)
$
25
Average common shares outstanding (in millions)
250
Stock price
$
10.00
What is the company’s earnings per share?
A) $0.60.
B) $0.70.
C) $0.50.
D) $0.05.
153) Financial information for Retro Designs includes the following selected data:
Net income (in millions)
$
175
Preferred stock dividends (in millions)
$
25
Average common shares outstanding (in millions)
250
Stock price
$
10.00
What is the company’s price-earnings ratio?
A) 14.3.
B) 16.7.
C) 5.7.
D) 15.0.
154) The PE ratio:
A) Tends to be higher for growth stocks.
B) Tends to be higher for value stocks.
C) Indicates how a stock is trading in relation to cumulative earnings over the life of the
company.
D) Typically is less than 1.
67
Match the following:
A) Publicly held corporation
B) Articles of Incorporation
C) Venture capital firms
D) Limited liability company
E) S Corporation
F) Limited liability
G) Double taxation
H) Angel investors
155) Provide additional financing, often in the millions, for a percentage ownership in the
company.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
156) Allows for legal treatment as a corporation, but tax treatment as a partnership.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
157) Like an S corporation, but there are no limitations on the number of owners as in an S
corporation.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
68
158) Wealthy individuals willing to risk investment funds on a promising business venture.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
159) Has stock traded on a stock exchange such as the New York Stock Exchange (NYSE).
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
160) Corporate earnings are taxed twice—at the corporate level and individual stockholder level.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
161) Describes (a) the nature of the firm’s business activities, (b) the shares to be issued, and (c)
the composition of the initial board of directors.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
162) Stockholders can lose no more than the amount they invest in the company.
Difficulty: 2 Medium
Topic: Characteristics of Corporations
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
69
Match the following:
A) Retained earnings
B) Cumulative
C) Paid-in capital
D) Outstanding stock
E) Limited liability
F) Issued stock
G) Redeemable
H) Treasury stock
I) Authorized stock
J) Angel investors
163) Wealthy individuals willing to risk investment funds on a promising business venture.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
164) The amount invested by stockholders.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
70
165) Shares actually sold.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
166) Shares available to sell.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
167) Shares can be returned to the corporation at a predetermined price.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
168) Shares receive priority for future dividends, if dividends are not paid in a given year.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
71
169) The earnings not paid out in dividends.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
170) Stockholders can lose no more than the amount they invested in the company.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
171) The corporation’s own stock that it acquired.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
72
172) Shares held by investors.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Accounting for Treasury Stock; Retained Earnings
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-04 Account for treasury stock.; 10-05 Describe retained
earnings and record cash dividends.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
73
Match the following:
A) Stock split
B) Preferred stock
C) Statement of stockholders’ equity
D) Additional paid-in capital
E) Retained earnings
F) Venture capital firms
G) Organization chart
H) Articles of incorporation
I) Stock dividends
J) Dividends
173) Provide additional financing, often in the millions, for a percentage ownership in the
company.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
174) A mixture of attributes somewhere between common stock and bonds payable.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
74
175) Summarizes the changes in the balance in each stockholders’ equity account over a period
of time.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
176) Traces the line of authority for a typical corporation.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
177) The portion of the cash proceeds above par value.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
75
178) A large stock dividend recorded as a reduction in the par or stated value per share.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
179) Represents all net income, less all dividends, since the company began.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
180) Distributions by a corporation to its stockholders.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
76
181) Additional shares of the companies’ own stock given to stockholders.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
182) Describes the nature of the firm’s business activities, the shares to be issued, and the
composition of the initial board of directors.
Difficulty: 2 Medium
Topic: Characteristics of Corporations; Accounting for Common Stock; Accounting for
Preferred Stock; Retained Earnings; Cash Dividends; Stock Dividends and Stock Splits;
Statement of Stockholders’ Equity
Learning Objective: 10-01 Identify the advantages and disadvantages of the corporate form of
ownership.; 10-02 Record the issuance of common stock.; 10-03 Understand unique features and
recording of preferred stock.; 10-05 Describe retained earnings and record cash dividends.; 10-06
Explain the effect of stock dividends and stock splits.; 10-07 Prepare and analyze the
stockholders’ equity section of a balance sheet and the statement of stockholders’ equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
77
Match the following:
A) Cumulative
B) Redeemable
C) Convertible
183) Shares can be exchanged for common stock.
Difficulty: 2 Medium
Topic: Accounting for Preferred Stock
Learning Objective: 10-03 Understand unique features and recording of preferred stock.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
184) Shares can be sold at a predetermined price.
Difficulty: 2 Medium
Topic: Accounting for Preferred Stock
Learning Objective: 10-03 Understand unique features and recording of preferred stock.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
185) Shares receive dividend priority, if dividend not paid.
Difficulty: 2 Medium
Topic: Accounting for Preferred Stock
Learning Objective: 10-03 Understand unique features and recording of preferred stock.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
78
Match the following:
A) 100% stock dividend
B) PE ratio
C) Growth stocks
D) Return on equity
E) Retained earnings
F) Statement of stockholders’ equity
G) Stockholders’ equity section of the balance sheet
H) Value stocks
I) Accumulated deficit
J) Treasury stock
186) Summarizes the changes in the balance in each stockholders’ equity account over a period
of time.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
187) The corporation’s own stock that it acquired.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
79
188) Priced low in relation to current earnings.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
189) The earnings not paid out in dividends.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
190) The stock price divided by earnings per share.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
80
191) Shows the balance in each equity account at a point in time.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
192) Measures the ability of company management to generate earnings from the resources that
owners provide.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
193) Priced high in relation to current earnings as investors expect future earnings to be higher.
Difficulty: 2 Medium
Topic: Accounting for Treasury Stock; Retained Earnings; Stock Dividends and Stock Splits;
Stockholders’ Equity in the Balance Sheet; Statement of Stockholders’ Equity; Analysis – Return
on Equity; Analysis – Price-Earnings Ratio
Learning Objective: 10-04 Account for treasury stock.; 10-05 Describe retained earnings and
record cash dividends.; 10-06 Explain the effect of stock dividends and stock splits.; 10-07
Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of
stockholders’ equity.; 10-08 Evaluate company performance using information on stockholders’
equity.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking