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Exam 10: Stockholders Equity

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Question 31

Multiple Choice

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Preferred stock:

A) is always recorded as a liability.
B) is always recorded as part of stockholders' equity.
C) can have features of both liabilities and stockholders' equity.
D) is not included in either liabilities or stockholders' equity.

E) B) and C)
F) None of the above

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Question 32

True/False

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Treasury stock is a contra-equity account since treasury stock increases total stockholders' equity. Treasury stock is a contra-equity account since treasury stock decreases total stockholders' equity.

A) True
B) False

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Question 33

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If a company has expenses that are more than revenues, the net loss decreases retained earnings.

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

Common stock is listed before preferred stock in the balance sheet. Preferred stock is listed before common stock in the balance sheet.

Which of the following financing alternatives has the highest preference of payment in a case where the company liquidates its assets?

Retained Earnings:

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance?

Outstanding common stock is:

On February 22, Brett Corporation reacquired 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 journal entry for reissuing their shares?

The amount of retained earnings equals net income minus dividends for the current year. The amount of retained earnings equals all net income, less all dividends, since the company began.

The financial statements of Trail Apparel include the following selected data (in millions):

The return on equity measures the ability of company management to generate earnings from the resources that owners provide.

Match the following terms with their definitions. Each letter is used only once.

The Retained Earnings balance reported on the balance sheet typically is not affected by:

Crossroads Mall had 100,000 outstanding shares of common stock. On June 16, 2012, Crossroads repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2012, Crossroads resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation?

Treasury Stock is normally reported as:

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

Cumulative preferred stock means that dividends accumulate interest during the year. Cumulative preferred stock means shares receive priority for future dividends, if dividends are not paid in a given year.

Prom Night Formal Wear has the following stockholders' equity accounts at December 31, 2012: Common Stock, $1 par value, 2,000,000 shares; Additional Paid-in Capital, $22 million; Retained Earnings, $15 million; and Treasury Stock, 50,000 shares, $1.25 million. Prepare the stockholders' equity section of the balance sheet.