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Max's Tire Center Company Selected data from the financial statements of Max's Tire Center are provided below. 20122011 Total stockholders’ equity $350,000$278,000 Current liabilities 45,00042,000 Total liabilities & stockholders’ equity 500,000490,000 Cash flow from operations 350,000290,000 Net sales 370,000360,000 Capital expenditures 150,000130,000\begin{array}{lcc}&2012&2011\\\text { Total stockholders' equity } & \$ 350,000 & \$ 278,000 \\\text { Current liabilities } & 45,000 & 42,000 \\\text { Total liabilities \& stockholders' equity } & 500,000 & 490,000 \\\text { Cash flow from operations } & 350,000 & 290,000 \\\text { Net sales } & 370,000 & 360,000 \\\text { Capital expenditures } & 150,000 & 130,000\end{array} - Refer to the selected data provided for Max's Tire Center. Which of the following would result from a vertical analysis of Max's total stockholders' equity in 2012?


A) Total stockholders' equity increased $72,000 or 25.9% during 2012.
B) The total of liabilities & stockholders' equity is $500,000 in 2012.
C) Total stockholders' equity is 30% of total assets in 2012.
D) Total stockholders' equity is 70% of total liabilities & stockholders' equity in 2012.

E) B) and D)
F) None of the above

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Coral Cleaners, Inc. Coral Cleaners reported the following information in the stockholders' equity section of its December 31, 2011, balance sheet. Coral Cleaners, Inc. Coral Cleaners reported the following information in the stockholders' equity section of its December 31, 2011, balance sheet. - Refer to the information presented above for Coral Cleaners, Inc. If Coral repurchased 500 shares of its common stock for $20 per share, what is the amount of total stockholders' equity after this transaction? A) $1,510,000 B) $1,500,000 C) $1,494,000 D) $1,490,000 - Refer to the information presented above for Coral Cleaners, Inc. If Coral repurchased 500 shares of its common stock for $20 per share, what is the amount of total stockholders' equity after this transaction?


A) $1,510,000
B) $1,500,000
C) $1,494,000
D) $1,490,000

E) A) and D)
F) B) and C)

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Cash dividends paid on common stock would be reported in the statement of cash flows in:


A) the cash flows from financing activities section.
B) the cash flows from investing activities section.
C) a separate schedule.
D) the cash flows from operating activities section.

E) B) and D)
F) A) and D)

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The ____________________ is a preferred stock having a feature that provides for the current year dividends only to be paid to preferred stockholders before they are paid to common stockholders.

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noncumulat...

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When a corporation decides whether to pay a cash dividend, which of the following is an important consideration?


A) The balances in the corporation's cash account to determine cash available for dividends.
B) The number of authorized shares of the corporation's stock.
C) The book value of the treasury stock.
D) The balance of paid-in capital in excess of par on the corporation's stock accounts.

E) A) and B)
F) None of the above

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If a corporation declares a 2-for-1 stock split, which of the following is true?


A) The amount of stockholders' equity doubles as a result of the split.
B) The amount of capital stock doubles as a result of the split.
C) The price of each share will be doubled as a result of the split.
D) A stockholder who previously held 100 shares will have 200 shares after the split.

E) A) and B)
F) C) and D)

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On June 1, 2011, Donner Technologies declared a $50,000 cash dividend to be distributed to its common stockholders of record on June 15, 2011. The dividend will be paid on July 1, 2011. The required journal entry on June 1 includes a:


A) $50,000 debit to retained earnings.
B) $50,000 debit to dividends payable.
C) $50,000 credit to cash.
D) $50,000 credit to common stock.

E) A) and B)
F) A) and C)

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Denny's Deli, Inc. The stockholders' equity section of the December 31, 2011, balance sheet for Denny's Deli appeared as follows: Denny's Deli, Inc. The stockholders' equity section of the December 31, 2011, balance sheet for Denny's Deli appeared as follows: - Assume that all of the 40,000 shares of Denny's stock that was issued as of December 31, 2011, was issued for $35 per share. On March 1, 2012, Denny reacquired 5,000 shares of its common stock for $43 per share. Refer to the information presented above for Denny's Deli, Inc. Suppose that Denny reissued 1,500 shares of its treasury stock on June 1, 2012, for $50 each. Which of the following is true regarding the entry required to record this transaction? A) A debit to treasury stock is required for $64,500. B) A credit to treasury stock is required for $49,000. C) A debit to cash is required for $75,000. D) A debit to additional paid-in capital from treasury stock transactions is required for $10,500. - Assume that all of the 40,000 shares of Denny's stock that was issued as of December 31, 2011, was issued for $35 per share. On March 1, 2012, Denny reacquired 5,000 shares of its common stock for $43 per share. Refer to the information presented above for Denny's Deli, Inc. Suppose that Denny reissued 1,500 shares of its treasury stock on June 1, 2012, for $50 each. Which of the following is true regarding the entry required to record this transaction?


A) A debit to treasury stock is required for $64,500.
B) A credit to treasury stock is required for $49,000.
C) A debit to cash is required for $75,000.
D) A debit to additional paid-in capital from treasury stock transactions is required for $10,500.

E) A) and D)
F) B) and C)

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Authorized shares represent the:


A) number of previously issued shares that have been repurchased by the corporation.
B) number of shares that the corporation has sold.
C) number of shares that are currently held by stockholders.
D) maximum number of shares of stock that a company can legally issue.

E) A) and B)
F) A) and C)

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Consider the following information from the financial statements of Prosser-Phelps, Inc.: 20122011 Total stockholders equity $59,050$55,900 Net income 22,000 Market price per share 120 Dividends 611 Purchasess of treasury stock 9,000 Average shares outstanding 550 Dividends per share 1.11\begin{array}{lll}&2012&2011\\\text { Total stockholders equity } & \$ 59,050 & \$ 55,900 \\\text { Net income } & 22,000 \\\text { Market price per share } & 120 \\\text { Dividends } & 611 \\\text { Purchasess of treasury stock } & 9,000 \\\text { Average shares outstanding } & 550 \\\text { Dividends per share } & 1.11\end{array} Calculate Prosser-Phelps' dividend yield and dividend payout.

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Treasury shares represent the:


A) number of previously issued shares that have been repurchased by the corporation.
B) number of shares that the corporation has sold.
C) number of shares that are currently held by stockholders.
D) maximum number of shares that can be sold by the corporation.

E) A) and D)
F) B) and C)

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If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders?


A) They must forgo dividends for any periods when no dividends are declared.
B) They have the right to receive current-year dividends and all unpaid dividends from prior years.
C) They will receive a fixed dividend each year regardless of the amount of dividends declared.
D) They will have an option to convert their shares to common stock at a specified date.

E) A) and B)
F) A) and C)

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Brumfield, Inc. issued 7,000 shares of $1 par common stock for $20 per share. In addition to the increase in cash, what effect does this transaction have on Brumfield's accounting equation?


A) Common stock increases $7,000 and retained earnings increases $133,000.
B) Common stock increases $7,000 and additional paid-in capital in excess of par increases $133,000.
C) Common stock increases $140,000.
D) Retained earnings increases $7,000 and additional paid-in capital in excess of par increases $133,000.

E) A) and B)
F) None of the above

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To compute the return on equity ratio, the numerator includes ____________________ and the denominator is the average stockholders' equity.

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Murton Industries Murton Industries, Inc. reported the following information on its recent balance sheet. Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding - Refer to the information for Murton Industries. What is the effect of a 2-for-1 stock split if the market value of the common stock is $20 per share at the time the stock split is declared?


A) A stock split has no impact on any of the stockholders' equity account balances.
B) Total stockholders' equity increases $750,000.
C) Cash increases $750,000.
D) $1,500,000 of retained earnings is transferred to the capital stock accounts.

E) B) and C)
F) A) and D)

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Which of the following statements is true regarding a corporation's purchase of treasury stock?


A) The cost of treasury stock is a reduction in stockholders' equity.
B) Dividends must still be paid on treasury stock because it is still issued.
C) Treasury stock is reported as an asset because it is considered an investment in the corporation's own stock.
D) Treasury stock is no longer considered issued once it is back in the hands of the issuer.

E) A) and C)
F) A) and B)

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What is the primary reason for a stock split?


A) To distribute cash to the investor.
B) To decrease the market value of the stock.
C) To decrease the number of shares outstanding.
D) To increase the capital stock of the corporation.

E) B) and C)
F) All of the above

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____________________ shares are the maximum number of shares a corporation can legally issue.

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Gipper's Wholesale, Inc. reported the following information at December 31, 2012: Gipper's Wholesale, Inc. reported the following information at December 31, 2012: Answer the following questions for Gipper's Wholesale: Answer the following questions for Gipper's Wholesale: Gipper's Wholesale, Inc. reported the following information at December 31, 2012: Answer the following questions for Gipper's Wholesale:

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Denny's Deli, Inc. The stockholders' equity section of the December 31, 2011, balance sheet for Denny's Deli appeared as follows: Denny's Deli, Inc. The stockholders' equity section of the December 31, 2011, balance sheet for Denny's Deli appeared as follows: -Assume that all of the 40,000 shares of Denny's stock that was issued as of December 31, 2011, was issued for $35 per share. On March 1, 2012, Denny reacquired 5,000 shares of its common stock for $43 per share. Refer to the information presented above for Denny's Deli, Inc. How much should be reported on Denny's March 31, 2012, balance sheet for treasury stock? A) $42,000 B) $126,000 C) $162,000 D) $215,000 -Assume that all of the 40,000 shares of Denny's stock that was issued as of December 31, 2011, was issued for $35 per share. On March 1, 2012, Denny reacquired 5,000 shares of its common stock for $43 per share. Refer to the information presented above for Denny's Deli, Inc. How much should be reported on Denny's March 31, 2012, balance sheet for treasury stock?


A) $42,000
B) $126,000
C) $162,000
D) $215,000

E) All of the above
F) C) and D)

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