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Which of these can best help shareholders monitor the behavior and decisions of management?


A) the tabloid press
B) internet blogs
C) independent audits
D) frequent unannounced,random personal visits to the company

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Return on equity is a measure of how well a company produces income with the amount of investment the common shareholders have made in the company.

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Preferred stock offers shareholders the right to ________.


A) receive dividends after the common shareholders receive any dividends
B) receive,in the event of bankruptcy,a share of the assets before common shareholders
C) pre-emptive rights
D) voting rights

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The state charter of Vest Corporation allows the corporation to sell 500,000 shares.Vest has issued 425,000 shares of stock.There are 15,000 shares of treasury stock.The number of outstanding shares is ________ shares.


A) 15,000
B) 410,000
C) 425,000
D) 500,000

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During 2011,Stockton,Inc.reported net income of $4,000,declared and paid a cash dividend of $2,000,and issued common stock for $20,000.At December 31,2011,Stockton reported total shareholders' equity of $58,000.What was total shareholders' equity at the beginning of the year,on January 1,2011?


A) $36,000
B) $40,000
C) $58,000
D) $60,000

Correct Answer

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Trading Places,a multi-national corporation,had a very successful year.The board of directors declared and paid a cash dividend of $50,000.The prior year,Trading Places did not pay dividends on its 400 shares of noncumulative,8%,$100 par,preferred stock.How much of the cash dividend was paid to the COMMON shareholders?


A) $46,800
B) $0
C) $43,600
D) $50,000

Correct Answer

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Match each of the following items with the appropriate definition.Each item should be used only once.

Premises
Shares that have been issued and not held in the corporation's treasury
Type of corporate stock that has preference rights over common stock
An arbitrary amount printed on a share of stock assigned by the corporation
The excess over par value received by a corporation when it issued stock
Owners' contributions to a firm
Stock of a corporation that has been issued and has been repurchased by the issuing corporation
The total number of shares a corporation may sell to investors as permitted by the corporation's state charter
Shares that have been sold to investors by a corporation
Shares of ownership in a corporation
Responses
par value
additional paid-in capital
capital stock
preferred stock
contributed capital
authorized
outstanding
treasury stock
issued

Correct Answer

Shares that have been issued and not held in the corporation's treasury
Type of corporate stock that has preference rights over common stock
An arbitrary amount printed on a share of stock assigned by the corporation
The excess over par value received by a corporation when it issued stock
Owners' contributions to a firm
Stock of a corporation that has been issued and has been repurchased by the issuing corporation
The total number of shares a corporation may sell to investors as permitted by the corporation's state charter
Shares that have been sold to investors by a corporation
Shares of ownership in a corporation

Team Shirts reported total shareholders' equity of $80,000 on its October 31 balance sheet.During November,the business earned $270,000,and declared and paid a cash dividend of $20,000.What was total shareholders' equity on November 30?


A) $80,000
B) $350,000
C) $250,000
D) $330,000

Correct Answer

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Which stock offers shareholders preference in receiving dividends?


A) common stock
B) preferred stock
C) treasury stock
D) callable stock

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Noncumulative preferred stock means that ________.


A) the fixed dividend amount accumulates from year to year.The entire amount of all past unpaid dividends must be paid to the preferred shareholders before any dividends can be paid to common shareholders
B) the board of directors has the option to decide whether past unpaid dividends will be paid to preferred shareholders
C) preferred dividends accumulate as earnings accumulate
D) the balance in the Preferred stock account is increased by any additional shares that are sold during the year

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Team Shirts declared and paid cash dividends of $40,000.There were 1,000 shares of 6%,$10 par value,noncumulative preferred stock outstanding.How much of the cash dividends were paid to PREFERRED shareholders?


A) $40,000
B) $2,400
C) $600
D) $0

Correct Answer

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Which of the following is true about bonds and common stock?


A) Bonds and common stock are both shareholders' equity accounts.
B) The company that has issued bonds and common stock has a legal responsibility to pay back the principal when the bonds and stock mature.
C) The company has a legal responsibility to pay interest and dividends each year.
D) Bondholders do not have voting rights,while common shareholders do.

Correct Answer

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In 2011,Bijoux,Inc.sold 35,000 shares of the 1,500,000 shares of $1 par value common stock it is allowed to sell.The shares sold for $8 each.Bijoux bought back 4,000 shares of its stock at a cost of $6 each.Bijoux declared and paid a $0.20 per share dividend to its common shareholders.Bijoux has no preferred stock. In 2011,Bijoux,Inc.sold 35,000 shares of the 1,500,000 shares of $1 par value common stock it is allowed to sell.The shares sold for $8 each.Bijoux bought back 4,000 shares of its stock at a cost of $6 each.Bijoux declared and paid a $0.20 per share dividend to its common shareholders.Bijoux has no preferred stock.

Correct Answer

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1.1,500,000 shares
2.35,000 shares
3.35,...

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Which of the following will increase a company's earnings per share for the year?


A) issuing additional shares of stock during the year
B) buying additional shares of treasury stock during the year
C) issuing a stock dividend to shareholders
D) selling all the stock it held as treasury stock at the beginning of the year

Correct Answer

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Treasury stock is a contra-asset account.

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Treasury stock is a(n) _____ account.


A) asset
B) contra-asset
C) equity
D) contra-equity

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The number of shares outstanding equals the number of shares ________.


A) authorized minus the number of shares issued
B) issued minus the number of shares authorized
C) issued minus the number of shares of treasury stock
D) of treasury stock minus the number of shares issued

Correct Answer

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Distributions of a corporation's earnings to its shareholders are called ________.


A) dividends
B) paid-in capital
C) retained earnings
D) distribution expense

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Stock splits occur when a corporation increases the number of shares and proportionately decreases the par value.

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Match each of the appropriate definition with the correct item.

Premises
Preferred stock that is not entitled to receive past, unpaid dividends
Any dividends owed to the preferred shareholders from past years that were not declared and are currently unpaid
Owners’ contributions to a firm
Date when cash dividends are actually paid to shareholders of a corporation
The excess over par value received by a corporation when it issues stock
Type of corporate stock that has preference rights over common stock
Stock of a corporation that has been issued and has been repurchased by the issuing corporation
Shares of ownership in a corporation
Stock on which the fixed dividend amount accumulates from year to year; the entire amount of all past unpaid dividends must be paid to the preferred shareholders before any dividends can be paid to the common shareholders
Responses
payment date
treasury stock
contributed capital
dividends in arrears
additional paid-in capital
noncumulative preferred stock
cumulative preferred stock
preferred stock
capital stock

Correct Answer

Preferred stock that is not entitled to receive past, unpaid dividends
Any dividends owed to the preferred shareholders from past years that were not declared and are currently unpaid
Owners’ contributions to a firm
Date when cash dividends are actually paid to shareholders of a corporation
The excess over par value received by a corporation when it issues stock
Type of corporate stock that has preference rights over common stock
Stock of a corporation that has been issued and has been repurchased by the issuing corporation
Shares of ownership in a corporation
Stock on which the fixed dividend amount accumulates from year to year; the entire amount of all past unpaid dividends must be paid to the preferred shareholders before any dividends can be paid to the common shareholders

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