Question 1

You form a partnership with your best friend.You have contributed 65% of the capital and can claim 65% of the net income.At the end of the first year,you discover that your partner has run up $40,000 in debt using the business' credit card.The maximum you could be liable for is:

Accepted Answer

A)  $0.
B)  $40,000.
C)  $20,000.
D)  $26,000.E) A) and D)
F) A) and C)

Question 2

Which one of the following statements about earnings per share (EPS) is correct?

Accepted Answer

A)  The EPS ratio is important because it signals the ability of the company to pay future dividends,which investors factor into the stock price.
B)  Earnings per share (EPS) is generally reported in the balance sheet under stockholders' equity.
C)  Earnings per share (EPS) is the best way to compare the performance of different companies.
D)  EPS,in its basic form,is calculated by dividing net income by the average number of preferred shares issued.E) All of the above
F) None of the above

Question 3

Match each term with the appropriate definition.Not all definitions will be used.
-Cumulative Dividend Preference

Accepted Answer

A)  A company that is like a partnership in nature except that it has limited liability.
B)  A company that has a separate legal identity from its owners.
C)  A company that issues stock on one of the major stock exchanges.
D)  When companies are obligated to pay preferred stockholders past dividends not yet distributed before paying dividends to owners of common stock.
E)  The nominal value per share of stock set by the company's charter.F) The current stock price.G) A stock that is currently selling for its original issue price.H) Stock of companies that tend to pay relatively high dividends compared to the stock price.I) Stock of companies that tend to reinvest earnings to provide for greater future sales and profits.J) When stockholders prefer to receive dividends at the end of the year rather than each quarter.K) An unincorporated business that is owned by a single individual.L) When preferred stockholders are paid dividends before other stockholders.M) An unincorporated business owned by two or more individuals.N) E) and G)
O) C) and D)

Question 4

Groucho,Harpo,and Chico form a partnership on January 1,2018.Groucho contributes $90,000,Harpo $70,000,and Chico $40,000 to a business called Marx Brothers' Partnership.On a monthly basis,each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided.Assume that Groucho receives $2,700 cash per month.
Required:
Part a.Prepare the journal entry for the initial investment.
Part b.Determine the monthly distribution amounts for each of the three partners.
Part c.Prepare the journal entry that would be made in one month for the monthly distribution.
Part d.Prepare the journal entry for the allocation of an annual net income of $84,000.For purposes of this journal entry,assume Sales Revenue totaled $116,000 and that all expenses,totaling $32,000,were recorded in a single account called Operating Expenses.
Part e.Prepare the journal entry to close the Drawings accounts at the end of the year.
Part f.Prepare a Statement of Partners' Equity (assume no additional investments made).

Accepted Answer

The answer of Groucho,Harpo,and Chico form a partnership on January...

Question 5

A corporation does not make a journal entry when:

Accepted Answer

A)  a shareholder exchanges the shares for cash with a different investor.
B)  shares are repurchased by the corporation at a price greater than their issue price.
C)  shares are repurchased by the corporation at a price less than their issue price.
D)  the corporation sells its treasury stock for cash to an investor.E) B) and C)
F) C) and D)

Question 6

A corporate charter specifies that the company may issue up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The current number of shares of treasury stock after these transactions have been accounted for is:

Accepted Answer

A)  3 million shares.
B)  8 million shares.
C)  9 million shares.
D)  17 million shares.E) B) and C)
F) A) and D)

Question 7

The laws governing corporations:

Accepted Answer

A)  require that a company be incorporated in the state in which it does most of its business.
B)  require that all companies in Delaware be incorporated.
C)  allow a company to be incorporated in a different state from the one in which it operates.
D)  require that all companies be incorporated in Delaware.E) B) and C)
F) All of the above

Question 8

The information below was extracted from the most recent financial statements of Milton Technologies (in millions,except for stock price) :  What is the P/E ratio for the company's stock for the current year?

Accepted Answer

A)  17.7
B)  15.3
C)  14.2
D)  13.9E) B) and D)
F) B) and C)

Question 9

Phelps,Inc.had assets of $67,646,liabilities of $15,466,and 10,718 shares of outstanding common stock at December 31,2017.Net income for 2017 was $7,829.The company had assets of $79,571,liabilities of $18,551,10,771 shares of outstanding common stock,and its stock was trading at a price of $10 per share at December 31,2018.Net income for 2018 was $9,993.
Required:
Part a.Calculate EPS for 2018.
Part b.Calculate ROE for 2018.
Part c.Calculate the Price/Earnings ratio for 2018

Accepted Answer

Part a
2018 EPS = (Net income - Preferre...

Question 10

If a company's earnings per share and return on equity both increase:

Accepted Answer

A)  it could mean that net income is rising or it could mean that the number of outstanding shares is falling.The first is sustainable;the second cannot be continued indefinitely.
B)  it means that the company is becoming more profitable and stockholders will see greater returns.
C)  it means that the company's tax liability will rise in the future and cause a decline in profitability.
D)  it could mean that net income is rising or it could mean that the number of outstanding shares is falling.In either case,stockholders can expect greater future returns indefinitely.E) None of the above
F) A) and D)

Question 11

When a company issues stock to the public for the first time,the issuance is called a(n) :

Accepted Answer

A)  initial public offering (IPO) .
B)  first time issue (FTI) .
C)  seasoned new issue (SNI) .
D)  initial stock offering (ISO) .E) All of the above
F) B) and C)

Question 12

The journal entry to record a large stock dividend includes a debit to Retained earnings and a credit to:

Accepted Answer

A)  Retained Earnings.
B)  Common Stock.
C)  Cash.
D)  Additional Paid-in Capital.E) A) and B)
F) B) and C)

Question 13

Match each term with the appropriate definition.Not all definitions will be used.
-Growth Investment

Accepted Answer

A)  A company that is like a partnership in nature except that it has limited liability.
B)  A company that has a separate legal identity from its owners.
C)  A company that issues stock on one of the major stock exchanges.
D)  When companies are obligated to pay preferred stockholders past dividends not yet distributed before paying dividends to owners of common stock.
E)  The nominal value per share of stock set by the company's charter.F) The current stock price.G) A stock that is currently selling for its original issue price.H) Stock of companies that tend to pay relatively high dividends compared to the stock price.I) Stock of companies that tend to reinvest earnings to provide for greater future sales and profits.J) When stockholders prefer to receive dividends at the end of the year rather than each quarter.K) An unincorporated business that is owned by a single individual.L) When preferred stockholders are paid dividends before other stockholders.M) An unincorporated business owned by two or more individuals.N) D) and J)
O) F) and G)

Question 14

The par value of stock indicates what the stock is worth.

Accepted Answer

A) True 
 B)False

Question 15

Choose the appropriate letter to match the description with the purpose and accounting effect of the type of stock transaction.Some letters will appear in more than one column and not all letters will necessarily be used.Some blanks will require more than one letter.
 $$\begin{array} { | l | l | c | c | } 
\hline & \text { Stock Split } & \begin{array} { c } 
\text { Large Stock } \
\text { Dividend }
\end{array} & \begin{array} { c } 
\text { Stock } \
\text { Repurchase }
\end{array} \
\hline \text { Purpose } & & & \
\hline \text { Accounting Effect } & & & \
\hline
\end{array}$$ 
A.	To obtain shares to reissue to employees as part of employee stock purchase plans.
B.	To increase the number of shares outstanding and decrease the per-share market price while managing a company that you expect will struggle financially in the future.
C.	To reduce the number of outstanding shares to increase per-share measures of earnings.
D.	To increase the number of shares outstanding and decrease the per-share market price while signaling to financial statement users that the company expects significant future earnings.
E.	To obtain shares that can be reissued as payment for purchases of other companies.
F.	To send a signal to investors that the company itself believes its own stock is worth acquiring.
G.	Reduces stockholders' equity.
H.	Changes par value per share.
I.	Changes Additional Paid-in Capital account balance.
J.	Reduces Retained Earnings.
K.	Does not affect any of the account balances that comprise stockholders equity

Accepted Answer

The answer of Choose the appropriate letter to match the...

Question 16

Dividends Payable is recorded as a credit on the:

Accepted Answer

A)  declaration date.
B)  date of record.
C)  date of payment.
D)  last day of the fiscal year.E) C) and D)
F) B) and C)

Question 17

Stock splits and large stock dividends have which of the following similarities or differences in their effects and requirements for a journal entry?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) None of the above
F) C) and D)

Question 18

All other things being equal,when a company repurchases its common stock:

Accepted Answer

A)  EPS decreases and ROE increases.
B)  EPS increases and ROE stays the same.
C)  EPS increases and ROE decreases.
D)  EPS and ROE both increase.E) A) and C)
F) All of the above

Question 19

If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

Accepted Answer

A)  Investors are willing to pay 12 times the current year's earnings per share of stock.
B)  Squid Roe's stockholders earned 12 times the owners' average investment.
C)  Squid Roe's average stockholders' equity is 12 times its earnings.
D)  Squid Roe's net income was 12 times its stockholders' equity.E) B) and C)
F) A) and D)

Question 20

If a company does not have any accumulated other comprehensive income (loss) ,stockholders' equity is the:

Accepted Answer

A)  amount the company received in exchange for all stock issued plus the amount of Retained Earnings minus the cost of treasury stock.
B)  amount the company received for all stock authorized plus the amount of Retained Earnings and treasury stock.
C)  par value the company received for all stock issued plus the amount of Retained Earnings minus treasury stock.
D)  amount the company received for all stock when issued minus the amount of Retained Earnings and treasury stock.E) A) and B)
F) A) and C)

Exam 11: Stockholders Equity

A corporate charter specifies that the company may issue up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The current number of shares of treasury stock after these transactions have been accounted for is:

Correct Answer
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Correct Answer
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You form a partnership with your best friend.You have contributed 65% of the capital and can claim 65% of the net income.At the end of the first year,you discover that your partner has run up $40,000 in debt using the business' credit card.The maximum you could be liable for is:

Correct Answer
verified

Match each term with the appropriate definition.Not all definitions will be used. -Cumulative Dividend Preference

Correct Answer
verified

Which one of the following statements about earnings per share (EPS) is correct?

Correct Answer
verified

Dividends Payable is recorded as a credit on the:

Correct Answer
verified

If a company does not have any accumulated other comprehensive income (loss) ,stockholders' equity is the:

Correct Answer
verified

All other things being equal,when a company repurchases its common stock:

Correct Answer
verified

The laws governing corporations:

Correct Answer
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The journal entry to record a large stock dividend includes a debit to Retained earnings and a credit to:

Correct Answer
verified

The par value of stock indicates what the stock is worth.

Correct Answer
verified

If a company's earnings per share and return on equity both increase:

Correct Answer
verified

The information below was extracted from the most recent financial statements of Milton Technologies (in millions,except for stock price) : What is the P/E ratio for the company's stock for the current year?

Correct Answer
verified

Stock splits and large stock dividends have which of the following similarities or differences in their effects and requirements for a journal entry?

Correct Answer
verified

Correct Answer
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Part a
2018 EPS = (Net income - Preferre...
View Answer

Match each term with the appropriate definition.Not all definitions will be used. -Growth Investment

Correct Answer
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If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

Correct Answer
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Correct Answer
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When a company issues stock to the public for the first time,the issuance is called a(n) :

Correct Answer
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A corporation does not make a journal entry when:

Correct Answer
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Exam 11: Stockholders Equity

A corporate charter specifies that the company may issue up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The current number of shares of treasury stock after these transactions have been accounted for is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You form a partnership with your best friend.You have contributed 65% of the capital and can claim 65% of the net income.At the end of the first year,you discover that your partner has run up $40,000 in debt using the business' credit card.The maximum you could be liable for is:

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Cumulative Dividend Preference

Correct AnswerverifiedShow Answer

Which one of the following statements about earnings per share (EPS) is correct?

Correct AnswerverifiedShow Answer

Dividends Payable is recorded as a credit on the:

Correct AnswerverifiedShow Answer

If a company does not have any accumulated other comprehensive income (loss) ,stockholders' equity is the:

Correct AnswerverifiedShow Answer

All other things being equal,when a company repurchases its common stock:

Correct AnswerverifiedShow Answer

The laws governing corporations:

Correct AnswerverifiedShow Answer

The journal entry to record a large stock dividend includes a debit to Retained earnings and a credit to:

Correct AnswerverifiedShow Answer

The par value of stock indicates what the stock is worth.

Correct AnswerverifiedShow Answer

If a company's earnings per share and return on equity both increase:

Correct AnswerverifiedShow Answer

The information below was extracted from the most recent financial statements of Milton Technologies (in millions,except for stock price) : What is the P/E ratio for the company's stock for the current year?

Correct AnswerverifiedShow Answer

Stock splits and large stock dividends have which of the following similarities or differences in their effects and requirements for a journal entry?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart a2018 EPS = (Net income - Preferre...View AnswerShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Growth Investment

Correct AnswerverifiedShow Answer

If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a company issues stock to the public for the first time,the issuance is called a(n) :

Correct AnswerverifiedShow Answer

A corporation does not make a journal entry when:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Part a
2018 EPS = (Net income - Preferre...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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