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Exam 11: Stockholders Equity

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Question 31

Multiple Choice

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Limited Liability Companies (LLCs) are like general partnerships in that:

A) income tax is not paid by the company itself.
B) the business has a separate legal identity.
C) liability is limited.
D) all of the above.

E) None of the above
F) All of the above

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Question 32

Multiple Choice

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The ROE ratio measures:

A) return shareholders receive in dividends for each dollar of their investment.
B) return shareholders receive in dividends and stock price growth for each dollar of their investment.
C) amount earned by the company on each dollar contributed by shareholders and generated and reinvested by the company.
D) amount earned by the company on each dollar obtained from equity and debt financing.

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

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Question 33

Multiple Choice

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One of the advantages of a partnership is:

Match the term and the definition.Not all definitions will be used. _____ Basic EPS _____ Issued shares _____ Seasoned new issues _____ Pro rata basis _____ Date of record _____ ROE _____ Stock options _____ Payment date A.The date on which a company authorizes a dividend payment. B.Net income divided by the average amount of shareholders' equity. C.Earnings per sales; a company's earnings divided by the units sold. D.When cash or stock dividends are paid according to the proportion of stock owned. E.Dividends that have not had income tax withheld from them. F.The date on which a company determines who receives a dividend. G.When employees of a company have the opportunity to buy a company's stock in the future at a fixed price. H.The accumulation of all the past dividends the company has not paid. I.When a company issues stock with the right to "call it back," i.e.,repurchase it at a given price in the future. J.The total number of shares the company has sold to private investors. K.When a company sells issues of stock after its IPO. L.The date on which a company debits dividends payable and credits cash. M.When cash or stock dividends are issued in an equal dollar or share amount per shareholder. N.Net income divided by average number of outstanding common shares. O.The total number of shares the company has sold,whether held by shareholders or by the company. P.When owners of the company contribute additional capital beyond what they paid for their shares.

When a company issues and sells shares at a price higher than the original issue price,the difference is considered contributed surplus. BT: Comprehension

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:

A corporate charter specifies that the company may sell up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.Of the 3 million bought back,the company cancels 2 million and holds 1 million.The current number of outstanding shares after these transactions have been accounted for is:

A company has 20,000 shares of preferred shares outstanding paying 0.30 cents dividend per share.It also has 110,000 shares of common stock outstanding.If the company decides to pay a total of $35,000 in dividends.The preferred stock is cumulative with two years' dividends in arrears.What is the amount of dividend common stockholders will receive?

Earnings per share (EPS)is generally reported in the balance sheet under shareholders' equity. BT: Knowledge

Which of the following affects total shareholders' equity?

Dividends in arrears do not appear on the balance sheet or require a journal entry. BT: Knowledge

A corporation has 3 million shares of outstanding stock issued at market price of $5.It also has $45 million of retained earnings on its balance sheet.It announces a 2 for 1 stock split on August 1.The market price of the stock on that day is $12 per share.Which of the following would be the implication of this stock split?

Centrador issues 200,000 no-par value shares for $150 per share in 2007.Three years later,it repurchases 30,000 of these shares for $80 per share.Centrator records the repurchase in which of the following ways?

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit of $24,500 in his drawing account and a credit of $126,800 in his capital account.If his capital account has a credit balance of $137,900 after the closing,what was his net income?

A company has outstanding 9 million shares of $2 par value common shares and 1 million shares of $4 par value preferred shares.The preferred shares have $0.32 dividend per share.The company declares $600,000 in total dividends for the year.Which of the following is true if dividends in arrears are $30,000?

The combined effect of the declaration and payment of a cash dividend on a company's financial statements is to:

Shareholders can vote on the appointment of external auditors. BT: Knowledge

The payment date for a dividend is the date on which the company:

Shareholders' equity does not include which of the following:

Stock splits and stock dividends have the following effects on retained earnings: