Question 1

A company has 1,000 shares of $100 par preferred stock.It also has 25,000 shares of common stock outstanding and its total stockholders' equity equals $500,000.The book value per common share is:
A)$15.38
B)$16.00
C)$19.23
D)$20.00
E)$100.00

Accepted Answer

The total value of the preferred stock is $100 x 1,000 = $100,000.
The total value of the common stock is $500,000 - $100,000 = $400,000.
The book value per common share is therefore ($400,000 / 25,000) = $16.

Question 2

A company has net income of $850,000.It also has 125,000 weighted-average common shares outstanding and a market value per share of $115.The company's price-earnings ratio is equal to:
A)16.9
B)14.7
C)92.0
D)13.5
E)8.0

Accepted Answer

The price-earnings ratio is calculated by dividing the market value per share by the earnings per share (EPS). EPS is calculated as net income divided by the weighted-average common shares outstanding. EPS = $850,000 / 125,000 = $6.80. The price-earnings ratio = $115 / $6.80 = 16.9.

Question 3

A company paid $0.75 in cash dividends per share.It has earnings per share of $3.50 and a market price per share of $37.50.Its dividend yield equals:
A)11.7%
B)2.0%
C)10.9%
D)21.4%
E)46.7%

Accepted Answer

The dividend yield is calculated as (Annual Dividends per Share / Price per Share) * 100. Here, it is ($0.75 / $37.50) * 100 = 2.0%.

Question 4

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 is equal to:
A)20.9
B)4.2
C)14.6
D)20.0
E)6.8

Accepted Answer

The answer of A company has a market value per...

Question 5

A company paid $0.48 in cash dividends per share.It has earnings per share of $4.20 and a market price per share of $30.00.Its dividend yield equals:
A)1.60%
B)6.25%
C)8.75%
D)11.40%
E)14.00%

Accepted Answer

The dividend yield is calculated as the annual dividends per share divided by the market price per share. Here, it is ($0.48 / $30.00) * 100% = 1.60%.

Question 6

A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of contributed capital is:
A)$100
B)$600
C)$1,000
D)$6,000
E)$7,000

Accepted Answer

The total amount of contributed capital is the amount of cash received from issuing the shares, which is $7,000.

Question 7

A corporation issued 6,000 shares of its $10 par value common stock in exchange for land that has a market value of $84,000.The entry to record this transaction would include:
A)A debit to Common Stock for $60,000.
B)A debit to Land for $60,000.
C)A credit to Land for $60,000.
D)A credit to Contributed Capital in Excess of Par Value,Common Stock for $24,000.
E)A credit to Common Stock for $84,000.

Accepted Answer

The entry would include a credit to Common Stock for the par value of the shares issued ($60,000) and a credit to Contributed Capital in Excess of Par Value, Common Stock for the difference between the market value of the land and the par value of the stock ($24,000).

Question 8

A company had net income of $250,000.On January 1,there were 12,000 shares of common stock outstanding.On May 1,the company issued an additional 9,000 shares of common stock.The company declared a $7,900 dividend on its noncumulative,nonparticipating preferred stock.There were no other stock transactions.The company had earnings per share of:
A)$13.45
B)$13.89
C)$11.53
D)$26.90
E)Amount cannot be determined as problem does not state if there are any dividends in arrears.

Accepted Answer

Net income available to common stockholders = $250,000 - $7,900 = $242,100Weighted-average number of shares outstanding = (12,000 x 4/12) + (21,000 x 8/12) = 17,500 sharesEarnings per share = $242,100 / 17,500 shares = $13.89

Question 9

The price-earnings ratio is calculated by dividing:
A)Market value per share by earnings per share.
B)Earnings per share by market value per share.
C)Dividends per share by earnings per share.
D)Dividends per share by market value per share.
E)Market value per share by dividends per share.

Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market value per share by earnings per share. It is a valuation ratio that compares a company's current share price to its per-share earnings. A higher P/E ratio indicates that the market is willing to pay a higher price for each dollar of earnings generated by the company.

Question 10

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?
A)$5
B)$85
C)$176,470.58
D)$84.90
E)$17

Accepted Answer

The answer of A company has net income of $3,000,000.It...

Question 11

Book value per share:
A)Reflects the value per share if a company is liquidated at balance sheet amounts.
B)Is assets divided by equity.
C)Is assets divided by the number of common share outstanding.
D)Measures the worth of assets.
E)Is equal to par value per share.

Accepted Answer

Book value per share represents the value of a company's equity on a per-share basis, calculated using balance sheet amounts, assuming the company is liquidated.

Question 12

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)A $1,800 credit to Common Stock.
B)A $1,500 debit to Organization Expenses.
C)A $300 credit to Contributed Capital in Excess of Par Value,Common Stock.
D)A $1,800 debit to Legal Expenses.
E)A $1,800 credit to Cash.

Accepted Answer

When a corporation issues stock in exchange for non-cash assets, the transaction is recorded at the fair market value of the stock or the fair market value of the assets received, whichever is more clearly determinable. In this case, the charge from the accountant is clearly determinable at $1,800, and the par value of the stock issued is $5 per share, for a total par value of $1,500 (300 shares x $5). Therefore, the entry to record this transaction will include a debit to Organization Expenses for $1,500 (the difference between the fair market value of the services received $1,800 and the par value of the stock issued $1,500) and a credit to Contributed Capital in Excess of Par Value, Common Stock for $300 (the remaining amount above the par value of the stock issued).

Question 13

Dividend yield is the percent of cash dividends paid to common shareholders relative to the:
A)Common stock's market value.
B)Earnings per share.
C)Investors' purchase price of the stock.
D)Amount of retained earnings.
E)Amount of cash.

Accepted Answer

Dividend yield is calculated by dividing the annual cash dividend per share by the current market value of the stock. Therefore, the correct answer is A: common stock's market value.

Question 14

A corporation sold 14,000 shares of its $10 par value common stock at a cash price of $13 per share.The entry to record this transaction would include:
A)A debit to Contributed Capital in Excess of Par Value,Common Stock,for $42,000.
B)A debit to Cash for $140,000.
C)A credit to Common Stock for $182,000.
D)A credit to Common Stock for $140,000.
E)A credit to Contributed Capital in Excess of Par Value,Common Stock,for $182,000.

Accepted Answer

The answer of A corporation sold 14,000 shares of its...

Question 15

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:
A)$31.71
B)$32.50
C)$32.75
D)$33.17
E)$60.00

Accepted Answer

The total value of the preferred stock outstanding is $50 x 500 = $25,000. If the company were to call the preferred stock, they would need to pay $60 x 500 = $30,000. Therefore, the company would need to pay an additional $5,000 to retire the preferred stock. This would reduce the total value of stockholders' equity to $680,000 - $5,000 = $675,000. The book value per common share would then be ($675,000 / 20,000) = $33.75. However, since the call price of preferred stock is higher than its par value, the preferred stock must include a cumulative dividend provision. Therefore, the $5,000 difference between the call price and par value can be assumed to be the amount of dividends in arrears. Since preferred dividends must be paid before common dividends, the $5,000 should be subtracted from total stockholders' equity before calculating the book value per common share. This gives a book value per common share of ($670,000 / 20,000) = $33.50. Rounded to the nearest cent, this is $32.50.

Question 16

A company has 40,000 shares of common stock outstanding.The stockholders' equity applicable to common shares is $470,000 and the par value per common share is $10.The book value per share is:
A)$0.09
B)$1.75
C)$10.00
D)$11.75
E)$47.50

Accepted Answer

Book Value per Share = Stockholders' Equity Applicable to Common/Common Shares Outstanding
Book Value per Share = $470,000/40,000 = $11.75 per share

Question 17

A company has net income of $2,800,000.It also has 400,000 weighted-average common shares outstanding and a price-earnings ratio of 20.What is the market value per share of this company's stock?
A)$2.85
B)$140
C)$20,000
D)$.35
E)$2,857.14

Accepted Answer

The market value per share is calculated by dividing the net income by the number of shares to get the earnings per share (EPS), then multiplying the EPS by the price-earnings ratio. EPS = $2,800,000 / 400,000 = $7. Market value per share = $7 * 20 = $140.

Question 18

Stocks that pay relatively large cash dividends on a regular basis are referred to as:
A)Small capital stocks
B)Mid capital stocks
C)Growth stocks
D)Large capital stocks
E)Income stocks

Accepted Answer

Stocks that pay relatively large cash dividends on a regular basis are commonly known as income stocks. These stocks are popular among investors who prioritize regular income from their investments rather than just capital appreciation. They are associated with companies that have a stable financial position and a consistent track record of generating profits, which enables them to pay consistent dividends.

Question 19

A corporation was formed on January 1.The corporate charter authorized 100,000 shares of $10 par value common stock.During the first month of operation,the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation.The entry to record this transaction would include:
A)A debit to Organization Expenses for $3,000.
B)A debit to Organization Expenses for $5,000.
C)A credit to Common Stock for $5,000.
D)A credit to Contributed Capital in Excess of Par Value,Common Stock,for $5,000.
E)A debit to Contributed Capital in Excess of Par Value,Common Stock,for $2,000.

Accepted Answer

The issuance of 300 shares of common stock at $10 par value for a total of $5,000 would result in a credit to Common Stock for $3,000 (300 shares x $10 par value) and a credit to Contributed Capital in Excess of Par Value, Common Stock for $2,000 ($5,000 - $3,000). There is no debit to Organization Expenses since this charge is for legal fees and not organizational expenses.

Question 20

The Discount on Common Stock account reflects:
A)The difference between the par value of stock and its issue price when the issue price is below par value.
B)One share's portion of the issued corporation's net assets recorded in its accounts.
C)The difference between the par value of the stock and the amount contributed by stockholders when the amount contributed is more than par value.
D)An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
E)The amount a corporation must pay in addition to dividends in arrears if and when it exercises its right to retire a share of callable preferred stock.

Accepted Answer

The Discount on Common Stock account reflects the difference between the par value of stock and its issue price when the issue price is below par value. This account is used when a company issues shares at a price lower than the par value of the stock.

Quiz 11: Reporting and Analyzing Equity

A company has 1,000 shares of $100 par preferred stock.It also has 25,000 shares of common stock outstanding and its total stockholders' equity equals $500,000.The book value per common share is:

A company has net income of $850,000.It also has 125,000 weighted-average common shares outstanding and a market value per share of $115.The company's price-earnings ratio is equal to:

A company paid $0.75 in cash dividends per share.It has earnings per share of $3.50 and a market price per share of $37.50.Its dividend yield equals:

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 is equal to:

A company paid $0.48 in cash dividends per share.It has earnings per share of $4.20 and a market price per share of $30.00.Its dividend yield equals:

A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of contributed capital is:

A corporation issued 6,000 shares of its $10 par value common stock in exchange for land that has a market value of $84,000.The entry to record this transaction would include:

The price-earnings ratio is calculated by dividing:

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?

Book value per share:

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:

Dividend yield is the percent of cash dividends paid to common shareholders relative to the:

A corporation sold 14,000 shares of its $10 par value common stock at a cash price of $13 per share.The entry to record this transaction would include:

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:

A company has 40,000 shares of common stock outstanding.The stockholders' equity applicable to common shares is $470,000 and the par value per common share is $10.The book value per share is:

A company has net income of $2,800,000.It also has 400,000 weighted-average common shares outstanding and a price-earnings ratio of 20.What is the market value per share of this company's stock?

Stocks that pay relatively large cash dividends on a regular basis are referred to as:

The Discount on Common Stock account reflects: