LO 14.1Issued stock is defined as stock that ________.
- is available for sale
- that is held by the corporation
- has been sold to investors
- has no voting rights
LO 14.1Par value of a stock refers to the ________.
- issue price of a stock
- value assigned by the incorporation documents
- maximum selling price of a stock
- dividend to be paid by the corporation
LO 14.1When a C corporation has only one class of stock it is referred to as ________.
- stated value stock
- par value stock
- common stock
- preferred stock
LO 14.2The total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares is ________.
- always equal to par value
- referred to as retained earnings
- always below its stated value
- referred to as paid-in capital
LO 14.3A company issued 40 shares of $1 par value common stock for $5,000. The journal entry to record the transaction would include which of the following?
- debit of $4,000 to common stock
- credit of $20,000 to common stock
- credit of $40 to common stock
- debit of $20,000 to common stock
LO 14.3A corporation issued 100 shares of $100 par value preferred stock for $150 per share. The resulting journal entry would include which of the following?
- a credit to common stock
- a credit to cash
- a debit to paid-in capital in excess of preferred stock
- a debit to cash
LO 14.3Which of the following is true of a stock dividend?
- It is a liability.
- The decision to issue a stock dividend resides with shareholders.
- It does not affect total equity but transfers amounts between equity components.
- It creates a cash reserve for shareholders.
LO 14.4Retained earnings is accurately described by all except which of the following statements?
- Retained earnings is the primary component of a company’s earned capital.
- Dividends declared are added to retained earnings.
- Net income is added to retained earnings.
- Net losses are accumulated in the retained earnings account.
LO 14.4Corrections of errors that occurred on a previous period’s financial statements are called ________.
- prior period adjustments
LO 14.4Owner’s equity represents which of the following?
- the amount of funding the company has from issuing bonds
- the sum of the retained earnings and accounts receivable account balances
- the total of retained earnings plus paid-in capital
- the business owner’s/owners’ share of the company, also known as net worth or net assets
LO 14.5Which of the following is a measurement of earnings that represents the profit before interest, taxes, depreciation and amortization are subtracted?
- net income
- retained earnings
LO 14.5The measurement of earnings concept that consists of a company’s profit from operations after taxed are subtracted is ________.
LO 14.5The correct formula for the calculation of earnings per share is ________.
- (Net income + Preferred dividends) / Weighted average common shares outstanding
- Net income / Weighted average common shares outstanding
- (Net income – Preferred dividends) / Weighted average common shares outstanding
- (Net income – Preferred dividends) / Treasury shares outstanding
LO 14.5Most analysts believe which of the following is true about EPS?
- Consistent improvement in EPS year after year is the indication of continuous improvement in the company’s earning power.
- Consistent improvement in EPS year after year is the indication of continuous decline in the company’s earning power.
- Consistent improvement in EPS year after year is the indication of fraud within the company.
- Consistent improvement in EPS year after year is the indication that the company will never suffer a year of net loss rather than net income.