Question 1

The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

Accepted Answer

A) True 
 B)False

Question 2

Recording of a stock dividend results in a liability being recorded.

Accepted Answer

A) True 
 B)False

Question 3

The statement of changes in stockholders' equity:

Accepted Answer

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.

Question 4

The date of record is the date that directors vote to pay a cash dividend to shareholders.

Accepted Answer

A) True 
 B)False

Question 5

Shareholders in a corporation have the power to bind the corporation to contracts.

Accepted Answer

A) True 
 B)False

Question 6

Purchasing treasury stock reduces the corporation's assets and stockholders' equity by unequal amounts.

Accepted Answer

A) True 
 B)False

Question 7

Stock that was reacquired and is still held by the issuing corporation is called:

Accepted Answer

A)  Capital stock.
B)  Treasury stock.
C)  Redeemed stock.
D)  Preferred stock.
E)  Callable stock.

Question 8

A stock dividend decreases the market price of the company's stock.

Accepted Answer

A) True 
 B)False

Question 9

How is the retirement of stock recorded?

Accepted Answer

When a company's own stock is retired, a...

Question 10

When a corporation has only one class of stock, the stock is called:

Accepted Answer

A)  Preferred stock.
B)  Common stock.
C)  Par value stock.
D)  Stated value stock.
E)  No-par value stock.

Question 11

A company reported $960,000 in net income for the current year. Total weighted-average common shares outstanding are 150,000 shares, and the year-end market price is $67.20 per common share. Calculate the company's price earnings ratio.

Accepted Answer

Price-Earnings Ratio = Market ...

Question 12

Stock that is retired is the same as authorized and unissued stock.

Accepted Answer

A) True 
 B)False

Question 13

The board of directors of a corporation:

Accepted Answer

A)  Are elected by the corporate registrar.
B)  Are responsible for day-to-day operations of the business.
C)  Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
D)  May not also be executive officers of the corporation, due to the separate entity principle.
E)  Are responsible for and have final authority for managing corporate activities.

Question 14

Stock not assigned a value per share by the corporate charter, allowing it to be issued at any price without the possibility of a minimum legal capital deficiency, is called _________________.

Accepted Answer

The answer of Stock not assigned a value per share...

Question 15

Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

Accepted Answer

A) True 
 B)False

Question 16

The term restricted retained earnings refers to statutory but not contractual restrictions.

Accepted Answer

A) True 
 B)False

Question 17

A stock dividend is recorded with a transfer from:

Accepted Answer

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.

Question 18

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Accepted Answer

A) True 
 B)False

Question 19

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the payment of the cash dividend is:

Accepted Answer

A)  Debit Dividend Expense $12,000; credit Cash $12,000.
B)  Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C)  Debit Common Dividend Payable $12,000; credit Cash $12,000.
D)  Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E)  Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

Question 20

The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

Accepted Answer

A)  Dividend payout ratio.
B)  Dividend yield.
C)  Price-earnings ratio.
D)  Current yield.
E)  Earnings per share.

Exam 11: Corporate Reporting and Analysis

Stock that is retired is the same as authorized and unissued stock.

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The date of record is the date that directors vote to pay a cash dividend to shareholders.

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The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

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The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.

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Stock that was reacquired and is still held by the issuing corporation is called:

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Purchasing treasury stock reduces the corporation's assets and stockholders' equity by unequal amounts.

Correct AnswerverifiedShow Answer

Stock not assigned a value per share by the corporate charter, allowing it to be issued at any price without the possibility of a minimum legal capital deficiency, is called _________________.

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Shareholders in a corporation have the power to bind the corporation to contracts.

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Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders.

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When a corporation has only one class of stock, the stock is called:

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How is the retirement of stock recorded?

Correct AnswerverifiedWhen a company's own stock is retired, a...View AnswerShow Answer

Recording of a stock dividend results in a liability being recorded.

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The board of directors of a corporation:

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Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

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The statement of changes in stockholders' equity:

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A company reported $960,000 in net income for the current year. Total weighted-average common shares outstanding are 150,000 shares, and the year-end market price is $67.20 per common share. Calculate the company's price earnings ratio.

Correct AnswerverifiedPrice-Earnings Ratio = Market ...View AnswerShow Answer

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the payment of the cash dividend is:

Correct AnswerverifiedShow Answer

A stock dividend decreases the market price of the company's stock.

Correct AnswerverifiedShow Answer

A stock dividend is recorded with a transfer from:

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The term restricted retained earnings refers to statutory but not contractual restrictions.

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When a company's own stock is retired, a...
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Price-Earnings Ratio = Market ...
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