72. Par value of a stock refers to the:
A. Issue price of the stock.
B. Value assigned per share of stock by the corporate charter.
C. Market value of the stock on the date of the financial statements.
D. Maximum selling price of the stock.
E. Dividend value of the stock.
73. When all of the authorized shares have the same rights and characteristics, the stock is
called
A. Preferred stock.
B. Common stock.
C. Par value stock.
D. Stated value stock.
E. No-par value stock.
74. In many states, the minimum amount that stockholders must contribute to the corporation,
and which is intended to protect the creditors of the corporation, is called the:
A. Par value of preferred.
B. Minimum legal capital.
C. Premium capital.
D. Stated value.
E. Working capital.
75. The total amount of cash and other assets received by a corporation from its stockholders
in exchange for its stock is:
A. Always equal to its par value.
B. Always equal to its stated value.
C. Referred to as paid-in capital.
D. Referred to as retained earnings.
E. Always below its stated value.
76. 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
paid-in by the stockholder.
E. An amount assigned to no-par stock by the corporation’s board of directors.
77. Stockholders’ equity consists of:
A. Long-term assets.
B. Paid-in capital and retained earnings.
C. Paid-in capital and par value.
D. Retained earnings and cash.
E. Premiums and discounts.
78. 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.
79. A corporation’s minimum legal capital is established by recording the par or stated value
of the number of shares:
A. Issued.
B. Authorized.
C. Subscribed.
D. Outstanding.
E. In treasury.
80. Retained earnings:
A. Generally consists of a company’s cumulative net income less any net losses and dividends
declared since its inception.
B. Can only be appropriated by setting aside a cash fund.
C. Represent an amount of cash available to pay shareholders.
D. Are never adjusted for anything other than net income or dividends.
E. All of the choices are correct.
81. Prior period adjustments to financial statements can result from:
A. Changes in accounting estimates.
B. Unacceptable accounting practices.
C. Discontinued operations.
D. Changes in tax law.
E. Extraordinary items.
82. Prior period adjustments are reported in the:
A. Multiple-step income statement.
B. Balance sheet.
C. Statement of retained earnings.
D. Statement of cash flows.
E. Single-step income statement.
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83. Changes in accounting estimates are:
A. Considered accounting errors.
B. Reported as prior period adjustments.
C. Accounted for with a cumulative “catch-up” adjustment.
D. Extraordinary items.
E. Accounted for in current and future periods.
84. A company had a beginning balance in retained earnings of $43,000. It had net income of
$6,000 and paid out cash dividends of $5,625 in the current period. The ending balance in
retained earnings equals:
A. $54,625.
B. $42,625.
C. $11,625.
D. $43,375.
E. $49,000.
85. Rights to purchase common stock at a fixed price over a specified period are:
A. Preferred stocks.
B. Class B stocks.
C. Stock options.
D. Stock restrictions.
E. Preemptive rights.
86. Companies report the cost of stock options in the:
A. Statement of cash flows.
B. Balance sheet.
C. Statement of retained earnings.
D. Income statement.
E. No disclosure is required.
87. Changes in retained earnings may be reported in the:
A. Statement of cash flows.
B. Balance sheet.
C. Statement of stockholders’ equity.
D. Multiple-step income statement.
E. Single-step income statement.
88. A company made an error in calculating and reporting depreciation expense in 2013. The
error was discovered in 2014. The item should be reported as a prior period adjustment:
A. on the 2013 statement of retained earnings.
B. on the 2013 income statement.
C. on the 2014 statement of retained earnings.
D. on the 2014 income statement.
E. accounted for with a cumulative “catch-up” adjustment.
89. 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 paid-in capital and retained earnings subcategories.
D. Does not include changes in treasury stock.
E. Is reported by very few companies.
90. The amount of income earned per share of a company’s outstanding common stock is
known as:
A. Restricted retained earnings per share.
B. Earnings per share.
C. Continuing operations per share.
D. Dividends per share.
E. Book value per share.
91. Shamrock Company had net income of $30,000. The weighted-average common shares
outstanding were 8,000. The company sold 3,000 shares before the end of the year. There
were no other stock transactions. The company’s earnings per share is:
A. $3.75.
B. $3.00.
C. $3.33.
D. $10.00.
E. $3.16.
92. Shamrock Company had net income of $30,000. The weighted-average common shares
outstanding were 8,000. The company declared a $2,700 dividend on its noncumulative,
nonparticipating preferred stock. There were no other stock transactions. The company’s
earnings per share is:
A. $2.87.
B. $2.73.
C. $3.41.
D. $3.16.
E. $3.75.
93. The price-earnings ratio is calculated by dividing:
A. Market value per share by earnings per share.
B. Earnings per share by market value per share.
C. Dividends per share by earnings per share.
D. Dividends per share by market value per share.
E. Market value per share by dividends per share.
94. A company has earnings per share net income of $900,000; its weighted-average common
shares outstanding are 180,000. Its dividend per share is $0.45, its market price per share is
$88, and its book value per share is $76. Its price-earnings ratio equals:
A. 9.0.
B. 17.6
C. 12.5.
D. 15.2.
E. 16.9.
95. A company has earnings per share of $9.60. Its dividend per share is $0.50, its market
price per share is $120, and its book value per share is $96. Its price-earnings ratio equals:
A. 9.6.
B. 19.2.
C. 12.5.
D. 10.0.
E. 8.5.
96. 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.
97. The dividend yield is computed by dividing:
A. Annual cash dividends per share by earnings per share.
B. Earnings per share by cash dividends per share.
C. Annual cash dividends per share by the market value per share.
D. Market price per share by cash dividends per share.
E. Cash dividends per share by retained earnings.
98. Stocks that pay relatively large cash dividends on a regular basis are called:
A. Small capital stocks.
B. Mid capital stocks.
C. Growth stocks.
D. Large capital stocks.
E. Income stocks.
99. Dividend yield is the percent of cash dividends paid to common shareholders relative to
the:
A. Common stock’s market value.
B. Earnings per share.
C. Investors’ purchase price of the stock.
D. Amount of retained earnings.
E. Amount of cash.
100. A company paid $0.48 in cash dividends per share. Its earnings per share is $4.20 and its
market price per share is $30.00. Its dividend yield equals:
A. 1.60%.
B. 6.25%.
C. 8.75%.
D. 11.43%.
E. 14.00%.
101. 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:
A. 4.7%.
B. 2.0%.
C. 9.3%.
D. 21.4%.
E. 46.7%.
102. Book value per share:
A. Reflects the value per share if a company is liquidated at balance sheet amounts.
B. Is assets divided by equity.
C. Is assets divided by the number of common shares outstanding.
D. Measures the worth of assets.
E. Is equal to par value per share.
103. Book value per common share is computed by:
A. Multiplying the number of common shares outstanding times the market price per common
share.
B. Dividing total assets by the number of shares outstanding.
C. Dividing stockholders’ equity applicable to common shares by the number of common
shares outstanding.
D. Multiplying the number of common shares outstanding by par value per share.
E. Dividing the number of common shares outstanding by stockholders’ equity applicable to
common shares.
104. A company has 40,000 shares of common stock outstanding. The stockholders’ equity
applicable to common shares is $470,000, and the par value per common share is $10. The
book value per share is:
A. $ 0.09.
B. $ 1.75.
C. $10.00.
D. $11.75.
E. $47.50.
105. 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. $ 19.96.
D. $ 20.00.
E. $100.00.
106. A company has 500 shares of $50 par value preferred stock outstanding, and the call
price of its preferred stock is $60 per share. It also has 20,000 shares of common stock
outstanding, and the total value of its stockholders’ equity is $680,000. The company’s book
value per common share equals:
107. The Discount on Common Stock account reflects:
A. The difference between the par value of stock and its issue price when it is issued at a price
below par value.
B. One share’s portion of the issued corporation’s net assets recorded in its accounts.
C. The difference between the par value of the stock and the amount paid-in by stockholders
when the amount paid-in is more than par value.
D. An amount of assets defined by state law that stockholders must invest and leave invested
in a corporation.
E. The amount a corporation must pay in addition to dividends in arrears if and when it
exercises its right to retire a share of callable preferred stock.
108. 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:
A. A debit to Organization Expenses for $3,000.
B. A debit to Organization Expenses for $5,000.
C. A credit to Common Stock for $5,000.
D. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000.
E. A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.
109. 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:
A. A debit to Paid-in Capital in Excess of Par Value, Common Stock for $42,000.
B. A debit to Cash for $140,000.
C. A credit to Common Stock for $182,000.
D. A credit to Common Stock for $140,000.
E. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $182,000.
110. A corporation issued 6,000 shares of its $10 par value common stock in exchange for
land that has a market value of $84,000. The entry to record this transaction would include:
A. A debit to Common Stock for $60,000.
B. A debit to Land for $60,000.
C. A credit to Land for $60,000.
D. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $24,000.
E. A credit to Common Stock for $84,000.
111. A corporation issued 300 shares of its $5 par value common stock in payment of a
$1,800 charge from its accountant for assistance in filing its charter with the state. The entry
to record this transaction will include:
A. A $1,800 credit to Common Stock.
B. A $1,500 debit to Organization Expenses.
C. A $300 credit to Paid-in Capital in Excess of Par Value, Common Stock.
D. A $1,800 debit to Legal Expenses.
E. A $1,800 credit to Cash.
112. A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount
of paid-in capital is:
A. $ 100.
B. $ 600.
C. $1,000.
D. $6,000.
E. $7,000.
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113. A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount
of paid-in capital in excess of par is:
A. $ 100.
B. $ 600.
C. $1,000.
D. $6,000.
E. $7,000.
114. 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. Debit Land $60,000; credit Common Stock $50,000; credit Paid-In Capital in Excess of
Par Value, Common Stock $10,000.
B. Debit Land $60,000; credit Common Stock $60,000.
C. Debit Land $50,000; credit Common Stock $50,000.
D. Debit Common Stock $50,000; debit Paid-In Capital in Excess of Par Value, Common
Stock $10,000; credit Land $60,000.
E. Debit Common Stock $60,000; credit Land $60,000.
115. A premium on common stock:
A. Is the amount paid in excess of par by purchasers of newly issued stock.
B. Is the difference between par value and issue price when the amount paid is below par.
C. Represents profit from issuing stock.
D. Represents capital gain on sale of stock.
E. Is prohibited in most states.
116. The date the directors vote to pay a dividend is called the:
A. Date of stockholders’ meeting.
B. Date of declaration.
C. Date of record.
D. Date of payment.
E. Liquidating date.
117. A liquidating dividend is:
A. Only declared when a corporation closes down.
B. A return of a portion of the capital contributed by stockholders.
C. Not allowed under federal law.
D. Only paid in assets other than cash.
E. Only paid in shares of stock.
118. A liability for dividends exists:
A. When cumulative preferred stock is sold.
B. On the date of declaration.
C. On the date of record.
D. On the date of payment.
E. For dividends in arrears on cumulative preferred stock.
119. A company’s board of directors votes to declare a cash dividend of $.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. $10,250.
B. $14,625.
C. $ 7,125.
D. $ 7,500.
E. $11,250.