St. Leo ACC 202 Principles of Accounting II Accounting Test 3

1.Question :A company has 200,000 shares of $1 par value common stock and 20,000 shares of 7%, $100 par, cumulative preferred stock outstanding. The balance in Retained Earnings at the beginning of the year was $1,500,000 and one year's dividends were in arrears. Net income for the current year was $2,000,000. If the company paid a dividend of $3 per share on its common stock, what is the balance in Retained Earnings at the end

of the year?

Student Answer: $3,500,000 

$2,900,000 

$2,760,000 

$2,620,000 

$620,000 

Points Received:0 of 1 

Comments:

2.Question :A corporation declared and issued a 15% stock dividend on November 1. The following up-to-date data were available immediately prior to the dividend:

The amount that total stockholders' equity will increase (decrease) as a result of recording this stock dividend is:

Student Answer: $45,000 

$135,000 

$(90,000) 

$(135,000) 

$0 

Points Received:0 of 1 

Comments:

3.Question :A corporation issued 300 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state. The entry to record this transaction will include:

A $1,800 credit to Common Stock 

A $1,500 debit to Organization Expenses 

A $300 credit to Contributed Capital in Excess of Par Value, Common Stock 

A $1,800 debit to Legal Expenses 

A $1,800 credit to Cash 

Points Received:0 of 1 

Comments:

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

Student Answer: Dividend payout ratio 

Dividend yield 

Price-earnings ratio 

Current yield 

Earnings per share 

Points Received:1 of 1 

Comments:

5.Question :A company's board of directors votes to declare a cash dividend of 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:

Student Answer: $375 

$4,125 

$7,125 

$7,500 

$11,250 

Points Received:1 of 1 

Comments:

6.Question :A company has net income of $3,000,000. It has 600,000 weighted-average common shares outstanding and a price-earnings ratio of 17. What is the market value per share of this company's stock?

Student Answer: $5 

$85 

$176,470.58 

$84.90 

$17 

Points Received:0 of 1 

Comments:

7.Question :A company has 500 shares of $50 par value preferred stock outstanding and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

Student Answer: $31.71 

$32.50 

$32.75 

$33.17 

$60.00 

Points Received:0 of 1 

Comments:

8.Question :Retained earnings:

Student Answer: Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception 

Can only be appropriated by setting aside a cash fund 

Represent an amount of cash available to pay shareholders 

Are never adjusted for anything other than net income or dividends 

All of the above 

Points Received:1 of 1 

Comments:

9.Question :The dividend yield is computed by dividing:

Student Answer: Cash dividends per share by earnings per share 

Earnings per share by cash dividends per share 

Cash dividends per share by the market price per share 

Market price per share by cash dividends per share 

Cash dividends per share by retained earnings 

Points Received:1 of 1 

Comments:

10.Question :The date a board of directors votes to pay a dividend is called the:

Student Answer: Date of stockholders' meeting 

Date of declaration 

Date of record 

Date of payment 

Liquidating date 

Points Received:1 of 1 

Comments:

11.Question :A corporation had 20,000 shares of $10 par value common stock outstanding on Jan 10. Later that day the board of directors declared a 30% stock dividend when the market value of each share was $40. The entry to record this dividend is:

Student Answer:  

No entry is made until the stock is issued 

Points Received:0 of 1 

Comments:

12.Question :Prior period adjustments are reported in the:

Student Answer: Income statement 

Balance sheet 

Statement of retained earnings 

Statement of cash flows 

Notes to the financial statements 

Points Received:0 of 1 

Comments:

13.Question :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:

Student Answer:  

Points Received:1 of 1 

Comments:

14.Question :Companies can use stock dividends:

Student Answer: To keep the market price of the stock affordable 

To provide evidence of management's confidence that the company is doing well 

To increase total equity 

Both A and B 

Items A, B and C are all reasons companies use stock dividends 

Points Received:1 of 1 

Comments:

15.Question :A company has a market value per share of $73.00. Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000. The company's price-earnings ratio equals:

Student Answer: 20.9 

4.2 

14.6 

20.0 

6.8