Question 1

James Company has 1,000 shares of $10 par preferred stock,which were issued at par.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:

Accepted Answer

The book value per common share is calculated by subtracting the preferred stock's equity from the total stockholders' equity and then dividing by the number of common shares outstanding. The preferred stock's equity is 1,000 shares * $10 = $10,000. Thus, the equity available to common shareholders is $500,000 - $10,000 = $490,000. Dividing this by the 25,000 common shares outstanding gives a book value per common share of $19.60.

Question 2

A company has 500 shares of $60 par value preferred stock outstanding.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:

Accepted Answer

To find the book value per common share, first calculate the total value of preferred stock: 500 shares * $60 = $30,000. Subtract this from the total stockholders' equity: $680,000 - $30,000 = $650,000. Then divide by the number of common shares: $650,000 / 20,000 = $32.50.

Question 3

Percy 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 400 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:

Accepted Answer

The entry to record the issuance of stock in payment of services rendered would include a debit to Organization Expenses for the fair value of the services received, which is $5,000 in this case. There would also be a credit to Common Stock for the par value of the stock issued, which is $4,000 (400 shares x $10 par value). The remaining $1,000 would be credited to Paid-in Capital in Excess of Par Value, Common Stock. However, this option is not given as a choice, so the closest option is B, which includes the correct debit to Organization Expenses.

Question 4

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

Accepted Answer

Dividend yield is calculated by dividing the annual cash dividends per share by the current market value per share of the stock. So, the correct answer is option A.

Question 5

The Discount on Common Stock account reflects:

Accepted Answer

The Discount on Common Stock account reflects the difference between the par value of stock and its issue price when it is issued at a price below par value.

Question 6

A company paid $0.48 in cash dividends per share.Its earnings per share is $3.20 and its market price per share is $20.00.Its dividend yield equals:

Accepted Answer

The dividend yield is calculated as (Annual Dividends per Share / Price per Share) * 100. So, ($0.48 / $20.00) * 100 = 2.4%.

Question 7

The dividend yield is computed by dividing:

Accepted Answer

The dividend yield is computed by dividing the annual cash dividends per share by the market value per share. This gives an indication of the percentage return an investor can expect from a stock based solely on the dividend payments.

Question 8

Comfort Mattresses,Inc.sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share.The entry to record this transaction would be:

Accepted Answer

The sale of 26,000 shares of common stock at a cash price of $12 per share results in a total cash inflow of $312,000. The par value of the stock is $1 per share, which means the total par value of the shares sold is $26,000 (26,000 shares x $1 per share). The difference between the cash received and the par value of the shares sold is $286,000 ($312,000 - $26,000). This amount is recorded as an increase in the Paid-in Capital in Excess of Par Value, Common Stock account. Therefore, the entry should be: Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value, Common Stock $286,000.

Question 9

MBP Company has 10,000 shares of $10 par preferred stock,which were issued at par.It also has 250,000 shares of common stock outstanding,and its total stockholders' equity equals $4,000,000.The book value per common share is:

Accepted Answer

The book value per common share is calculated by subtracting the preferred stock's value from the total stockholders' equity and then dividing by the number of common shares outstanding. The value of the preferred stock is 10,000 shares * $10 = $100,000. Therefore, the equity available to common shareholders is $4,000,000 - $100,000 = $3,900,000. Dividing this by the 250,000 common shares outstanding gives a book value per common share of $15.60.

Question 10

A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13 per share.The entry to record this transaction would include:

Accepted Answer

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

Question 11

Book value per common share is computed by:

Accepted Answer

Book value per common share is calculated by dividing the stockholders' equity applicable to common shares by the number of common shares outstanding. This calculation gives investors an idea of the value of their investment in the company if all assets were sold and liabilities were paid back.

Question 12

A company paid $0.85 in cash dividends per share.Its earnings per share is $3.50,and its market price per share is $35.50.Its dividend yield equals:

Accepted Answer

Dividend Yield = (Dividends per share / Market price per share) x 100%
= ($0.85 / $35.50) x 100%
= 0.024 x 100%
= 2.4%
Therefore, the correct answer is B.

Question 13

Book value per share:

Accepted Answer

Book value per share reflects the amount shareholders would theoretically receive if a company were liquidated at its balance sheet amounts. It is calculated as equity divided by the number of outstanding shares, not assets divided by equity or the number of shares. It does not measure current market value or equate to par value per share.

Question 14

A corporation issued 100 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:

Accepted Answer

The issuance of stock in exchange for non-cash services is considered a noncash transaction. The stock will be recorded at its par value ($5 x 100 shares =$500), and any amount received in excess of par value will be recorded as Paid-in Capital in Excess of Par Value, Common Stock. The remaining amount paid to the accountant ($1,800 - $500 = $1,300) will be credited to Paid-in Capital in Excess of Par Value, Common Stock.

Question 15

A company has earnings per share of $9.60.Its dividend per share is $0.50,its market price per share is $110,and its book value per share is $96.Its price-earnings ratio equals:

Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market price per share by the earnings per share:

P/E ratio = Market price per share / Earnings per share

P/E ratio = 110 / 9.60 = 11.46

Therefore, the answer is E).

Question 16

A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000.The entry to record this transaction would include:

Accepted Answer

The answer of A corporation issued 6,000 shares of its...

Question 17

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

Accepted Answer

The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the dividend yield. The dividend payout ratio is the percentage of earnings paid out as dividends, the price-earnings ratio is the ratio of a company's stock price to its earnings per share, the current yield is the annual interest rate earned on a bond or other fixed-income security, and earnings per share is the portion of a company's profit allocated to each outstanding share of common stock.

Question 18

A company has 50,000 shares of common stock outstanding.The stockholders' equity applicable to common shares is $1,470,000,and the par value per common share is $5.The book value per share is:

Accepted Answer

The answer of A company has 50,000 shares of common...

Question 19

A company has net income of $90,000; its weighted-average common shares outstanding are 18,000.Its dividend per share is $0.45,its market price per share is $88,and its book value per share is $76.Its price-earnings ratio equals:

Accepted Answer

First, we need to calculate the earnings per share (EPS) by dividing the net income by the weighted-average common shares:
EPS = Net Income / Weighted-Average Common Shares
EPS = $90,000 / 18,000
EPS = $5
Next, we can calculate the price-earnings ratio (P/E Ratio) by dividing the market price per share by the EPS:
P/E Ratio = Market Price per Share / EPS
P/E Ratio = $88 / $5
P/E Ratio = 17.6
Therefore, the answer is B, with a P/E Ratio of 17.6.

Question 20

Stocks that pay large cash dividends on a regular basis are called:

Accepted Answer

Stocks that pay large cash dividends on a regular basis are also referred to as income stocks, as they provide investors with a steady stream of income. Small capital, mid capital, growth, and large capital stocks do not necessarily pay high dividends and are not specifically known for their income-generating capabilities.

Quiz 11: Corporate Reporting and Analysis