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Exam 10: Stockholders Equity

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Question 21

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Return on equity is calculated as:

A) Net income divided by average stockholders' equity.
B) Net income divided by ending stockholders' equity.
C) Net income divided by average market value of equity.
D) Net income divided by ending market value of equity.

E) C) and D)
F) B) and D)

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Question 22

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

A) Common Stock.
B) Preferred Stock.
C) Bonds.
D) They all have similar expected returns.

E) B) and D)
F) A) and D)

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Question 23

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Owners in a sole proprietorship or a partnership can be held personally liable for debts the company has incurred,over and beyond the investment they have made.

Authorized common stock refers to the total number of shares:

Outstanding common stock refers to the total number of shares:

Why doesn't stockholders' equity equal the market value of equity?

An S Corporation allows a company to enjoy limited liability as a corporation,but tax treatment as a partnership.

Tropical Rainwear issues 1,000 shares of its $20 par value preferred stock for cash at $22 per share.Record the issuance of the preferred shares.

Court Casuals has 100,000 shares of common stock outstanding as of the beginning of 2012 and has the following transactions affecting stockholders' equity in 2012. Record each of these transactions.

California Adventures issues 5,000 shares of 8%,$100 par value preferred stock at the beginning of 2011.All remaining shares are common stock.The company was not able to pay dividends in 2011,but plans to pay dividends of $100,000 in 2012.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 2012?

The par value of shares issued is normally recorded in the:

Roberto Corporation was organized on January 1,2012.The firm was authorized to issue 100,000 shares of $5 par value common stock.During 2012,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 2012?

The issuer of a 100% common stock dividend (large stock dividend) to common stockholders should debit stock dividends for an amount equal to the

We calculate earnings per share as net income divided by the average shares outstanding during the period.

Assets plus liabilities equal stockholders' equity.

In terms of total sales,assets,and earnings,the dominant form of business organization is the:

When treasury stock is purchased,what is the effect on assets and stockholders' equity?

A stock split has no effect on the total of any account in stockholders' equity.

Dividends are paid on all shares issued by the company including treasury stock.

In the event a corporation is dissolved,common stockholders receive preference over preferred stockholders in the distribution of assets.