Quick Quiz 25 Multiple Choice
Quick Quiz 25 Multiple Choice
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Chapter 11 Quiz
Reporting and Analyzing Equity
25 pts
This quiz is all multiple choice problems. Please choose the best possible answer for each problem. Each problem is worth one point.
Problem 1: An amount of assets defined by state law that stockholders must invest and leave invested in a corporation is called the:
A. Par value of preferred
B. Minimum legal capital
C. Premium capital
D. Stated value
E. Working capital
Answer:
Problem 2: The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is:
A. Always equal to its par value
B. Always equal to its stated value
C. Referred to as contributed capital
D. Referred to as retained earnings
E. Always below its stated value
Answer:
Problem 3: 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 contributed by the stockholder
E. An amount assigned to no-par stock by the corporation’s board of directors
Answer:
Problem 4: Stockholders’ equity consists of:
A. Long-term assets
B. Contributed capital and retained earnings
C. Contributed capital and par value
D. Retained earnings and cash
E. Premiums and discounts
Answer:
Problem 5: 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
Answer:
Problem 6: A corporation’s minimum legal capital is often defined to be the total par value of the shares:
A. Issued
B. Authorized
C. Subscribed
D. Outstanding
E. In treasury
Answer:
Problem 7: Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:
A. Participating preferred stock
B. Callable preferred stock
C. Cumulative preferred stock
D. Convertible preferred stock
E. Noncumulative preferred stock
Answer:
Problem 8: A dividend preference for preferred stock means that:
A. Preferred stockholders receive their dividends before common shareholders
B. Preferred shareholders are guaranteed dividends
C. Dividends are paid quarterly
D. Preferred stockholders prefer dividends more than common stockholders
E. Dividends must be declared on preferred stock
Answer:
Problem 9: A company issued 7% preferred stock with a $100 par value. This means that:
A. Preferred shareholders have a guaranteed dividend
B. The amount of the potential dividend is $7 per year per preferred share
C. Preferred shareholders are entitled to 7% of the annual income
D. The market price per share will approximate $100 per share
E. Only 7% of the total contributed capital can be preferred stock
Answer:
Problem 10: Prior period adjustments are reported in the:
A. Income statement
B. Balance sheet
C. Statement of retained earnings
D. Statement of cash flows
E. Notes to the financial statements
Answer:
Problem 11: 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 contributed capital and retained earnings subcategories
D. Does not include changes in treasury stock
E. Is reported by very few companies
Answer:
Problem 12: When all of the authorized shares have the same rights and characteristics, the stock is referred to as:
A. “Preferred Shares” under both IFRS and GAAP
B. “Common Shares” under both IFRS and GAAP
C. “Plain Shares” under IFRS and “Common Shares” under GAAP
D. “Simple Shares” under IFRS and “Pure Shares” under GAAP
E. “Ordinary Shares” under IFRS and “Common Shares” under GAAP
Answer:
Problem 13: A company has 2,000 shares of $1 par value common stock and 200 shares of 5%, $110 par, non-cumulative preferred stock outstanding. The balance in Retained Earnings at the beginning of the year was $500,000. Net income for the current year was $300,000. If the company paid a dividend of $2 per share on its common stock, what is the balance in Retained Earnings at the end of the year?
A. $800,000
B. $805,100
C. $794,900
D. $494,900
E. $194,900
Answer:
Problem 14: Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company has an earnings per share of:
A. $3.75
B. $3.00
C. $3.33
D. $15.00
- $3.16
Answer:
Problem 15: A company has net income of $850,000. It also has 125,000 weighted-average common shares outstanding and a market value per share of $115. The company’s price-earnings ratio is equal to:
A. 16.9
B. 14.7
C. 92.0
D. 13.5
E. 8.0
Answer:
Problem 16: 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
Answer:
Problem 17: Xtreme Sports has $100,000 of 8% noncumulative, nonparticipating, preferred stock outstanding. Xtreme Sports also has $500,000 of common stock outstanding. In the company’s first year of operation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of $30,000. This dividend should be distributed as follows:
A. $8,000 preferred; $22,000 common
B. $16,000 preferred; $14,000 common
C. $7,500 preferred; $22,500 common
D. $15,000 preferred; $15,000 common
E. $0 preferred; $30,000 common
Answer:
Problem 18: A company paid $0.48 in cash dividends per share. It has an earnings per share of $4.20 and a market price per share of $30.00. Its dividend yield equals:
A. 1.60%
B. 6.25%
C. 8.75%
D. 11.40%
E. 14.00%
Answer:
Problem 19: 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. $19.23
D. $20.00
E. $100.00
Answer:
Problem 20: A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital in excess of par is:
A. $100
B. $600
C. $1,000
D. $6,000
E. $7,000
Answer:
Problem 21: 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.
| Land | 60,000 | |
| Common Stock | 50,000 | |
| Contributed Capital in Excess of Par Value,
Common Stock |
10,000 |
| Land | 60,000 | |
| Common Stock | 60,000 |
| Land | 50,000 | |
| Common Stock | 50,000 |
| Common Stock | 50,000 | |
| Contributed Capital in Excess of Par Value,
Common Stock |
10,000 | |
| Land | 60,000 |
| Common Stock | 60,000 | |
| Land | 60,000 |
Answer:
Problem 22: A company’s board of directors’ votes to declare a cash dividend of $0.75 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. $375
B. $4,125
C. $7,125
D. $7,500
E. $11,250
Answer:
Problem 23: A company declared a $0.50 per share cash dividend. The company has 20,000 shares authorized, 9,000 shares issued and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is:
| Retained Earnings | 4,000 | |
| Common Dividends Payable | 4,000 |
A.
| Common Dividends Payable | 4,000 | |
| Cash | 4,000 |
B.
| Retained Earnings | 4,500 | |
| Common Dividends Payable | 4,500 |
| Common Dividends Payable | 4,500 | |
| Cash | 4,500 |
D.
| Retained Earnings | 5,000 | |
| Common Dividends Payable | 5,000 |
E.
Answer:
Problem 24: A stock dividend transfers:
A. Contributed capital to retained earnings
B. Retained earnings to contributed capital
C. Retained earnings to assets
D. Contributed capital to assets
E. Assets to contributed capital
Answer:
Problem 25: A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:
A.
| Retained Earnings | 135,000 | |
| Common Stock Dividend Distributable | 135,000 |
| Retained Earnings | 135,000 | |
| Cash | 135,000 |
| Retained Earnings | 135,000 | |
| Common Stock Dividend Distributable | 100,000 | |
| Contributed Capital in Excess of Par Value,
Common Stock |
35,000 |
| Retained Earnings | 100,000 | |
| Common Stock Dividend Distributable | 100,000 |
- No entry is made until the stock is issued
Answer:
