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Exam 10: Stockholders Equity

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Question 41

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Roberto Designers was organized on January 1,2018.The firm was authorized to issue 100,000 shares of $5 par value common stock.During 2018,Roberto had the following transactions relating to stockholders' equity: Issued 10,000 shares of common stock at $7 per share.Issued 20,000 shares of common stock at $8 per share.Reported a net income of $100,000.Paid dividends of $50,000.Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8) .What is total stockholders' equity at the end of 2018?

A) $270,000.
B) $300,000.
C) $250,000.

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

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Question 42

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Retained Earnings:

A) Has a normal debit balance.
B) Decreases stockholders' equity.
C) Is equal to the balance in cash.
D) Increases stockholders' equity.

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

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Question 43

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The disadvantages of the corporate form of business include:

Outstanding common stock refers to the total number of shares:

Clothing Emporium was organized on January 1,2018.The firm was authorized to issue 100,000 shares of $5 par value common stock.During 2018,Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share.Issued 20,000 shares of common stock at $8 per share.Reported a net income of $100,000.Paid dividends of $50,000.What is the ending balance in the Retained Earnings account at the end of 2018?

We calculate the PE ratio as the stock price divided by earnings per share so that both stock price and earnings are expressed on a per share basis.

Limited liability means that even in the event of bankruptcy,stockholders in a corporation can lose no more than the amount they invested in the company.

If a company issues 1,000 shares of $1 par value common stock for $20 per share,which of the following accounts would be credited?

Financial information for Accessories Unlimited includes the following selected data: What is the company's price-earnings ratio? $\begin{array} { | l r | } \hline \text { Net income (in millions) } & \$ 150 \\\hline \text { Shares outstanding (in millions) } & 300 \\\text { Stock price } & \$ 20.00 \\\hline\end{array}$

Convertible preferred stock allows the stockholder to convert shares of preferred stock into common stock at a specified conversion ratio.

The Retained Earnings balance reported on the balance sheet typically is affected by:

Which of the following has the highest expected return to the investor?

California Adventures issues 5,000 shares of 8%,$100 par value preferred stock at the beginning of 2017.All remaining shares are common stock.The company was not able to pay dividends in 2017,but plans to pay dividends of $100,000 in 2018.Assuming the preferred stock is cumulative,how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018?

Dividend Yield is calculated as:

On February 22,Brett Corporation acquired 200 shares of its $5 par value common stock for $25 each.On March 15,the company reissued 70 shares for $30 each.What is true of the entry for reissuing the shares?

We record treasury stock at the cost of the shares acquired.

The entry to record a large stock dividend would include a:

Clothing Emporium was organized on January 1,2018.The firm was authorized to issue 100,000 shares of $5 par value common stock.During 2018,Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share.Issued 20,000 shares of common stock at $8 per share.Reported a net income of $100,000.Paid dividends of $50,000.What is total paid-in capital at the end of 2018?

Fashion,Inc.had a Retained Earnings balance of $12,000 at December 31,2018.The company had an average income of $7,500 over the next 3 years,and an ending Retained Earnings balance of $15,000 at December 31,2019.What was the total amount of dividends paid over the last three years?

Financial information for Retro Designs includes the following selected data: What is the company's price-earnings ratio? $\begin{array} { | l r | } \hline \text { Net income (in millions) } & \$ 175 \\\hline \text { Preferred stock dividends (in millions) } & \$ 25 \\\hline \text { Common shares outstanding (in millions) } & 250 \\\hline \text { Stock price } & \$ 10.00 \\\hline\end{array}$