Accounting Seminar – 6

Multiple-choice questions

21. 
    Stocks that pay relatively large cash dividends on a regular basis are called:
    
    1. 
       Small capital stocks
       
    2. 
       Mid capital stocks
       
    3. 
       Growth stocks
       
    4. 
       Large capital stocks
       
    5. 
       Income stocks
       
22. 
    The dividend yield is computed by dividing:
    
    1. 
       Cash dividends per share by earnings per share
       
    2. 
       Earnings per share by cash dividends per share
       
    3. 
       Cash dividends per share by the market price per share
       
    4. 
       Market price per share by cash dividends per share
       
    5. 
       Cash dividends per share by retained earnings
       

21. 
    A company paid $0.48 in cash dividends per share. Its earnings per share is $4.20 and its market price per share is $30.00. Its dividend yield equals:
    

1. 
   1.60%
   
2. 
   6.25%
   
3. 
   8.75%
   
4. 
   11.40%
   
5. 
   14.00%
   

8. 
   A company paid $0.75 in cash dividends per share. Its earnings per share is $3.50 and its market price per share is $37.50. Its dividend yield equals:
   

4. 
   11.7%
   
5. 
   2.0%
   
6. 
   10.9%
   
7. 
   21.4%
   
8. 
   46.7%
   
1. 
   Book value per share:
   
   4. 
      Reflects the value per share if a company is liquidated at balance sheet amounts
      
   5. 
      Is assets divided by equity
      
   6. 
      Is assets divided by the number of common share outstanding
      
   7. 
      Measures the worth of assets
      
   8. 
      Is equal to par value per share
      
2. 
   Book value per share is often used as a starting point for:
   
   4. 
      Stock valuation
      
   5. 
      Merger negotiations
      
   6. 
      Price setting for public utilities
      
   7. 
      Loan contracts
      
   8. 
      All of the above
      
3. 
   Book value per common share is computed by:
   
   4. 
      Multiplying the number of common shares outstanding times the market price per common share
      
   5. 
      Dividing total assets by the number of shares outstanding
      

4. 
   Dividing stockholders' equity applicable to common shares by the number of common shares outstanding
   

4. 
   Multiplying the number of common shares outstanding by par value per share
   

4. 
   Dividing the number of common shares outstanding by stockholders' equity applicable to common shares
   

12. 
    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:
    

4. 
   $0.09
   
5. 
   $1.75
   
6. 
   $10.00
   
7. 
   $11.75
   
8. 
   $47.50
   

13. 
    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:
    
    4. 
       $15.38
       
    5. 
       $16.00
       
    6. 
       $19.23
       
    7. 
       $20.00
       
    8. 
       $100.00
       

14. 
    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:
    
    4. 
       $31.71
       
    5. 
       $32.50
       
    6. 
       $32.75
       
    7. 
       $33.17
       
    8. 
       $60.00
       
15. 
    The Discount on Common Stock account reflects:
    

4. 
   The difference between the par value of stock and its issue price when it is issued at a price below par value
   

4. 
   One share's portion of the issued corporation's net assets recorded in its accounts
   

4. 
   The difference between the par value of the stock and the amount contributed by stockholders when the amount contributed is more than par value
   

2

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

24. 
    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:
    

1. 
   A debit to Organization Expenses for $3,000
   
2. 
   A debit to Organization Expenses for $5,000
   
3. 
   A credit to Common Stock for $5,000
   
4. 
   A credit to Contributed Capital in Excess of Par Value, Common Stock for $5,000
   
5. 
   A debit to Contributed Capital in Excess of Par Value, Common Stock for $2,000
   

24. 
    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:
    

1. 
   A debit to Contributed Capital in Excess of Par Value, Common Stock for $42,000
   
2. 
   A debit to Cash for $140,000
   
3. 
   A credit to Common Stock for $182,000
   
4. 
   A credit to Common Stock for $140,000
   
5. 
   A credit to Contributed Capital in Excess of Par Value, Common Stock for $182,000
   

24. 
    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:
    

1. 
   A debit to Common Stock for $60,000
   
2. 
   A debit to Land for $60,000
   
3. 
   A credit to Land for $60,000
   
4. 
   A credit to Contributed Capital in Excess of Par Value, Common Stock for $24,000
   
5. 
   A credit to Common Stock for $84,000
   

24. 
    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:
    

1. 
   A $1,800 credit to Common Stock
   
2. 
   A $1,500 debit to Organization Expenses
   
3. 
   A $300 credit to Contributed Capital in Excess of Par Value, Common Stock
   
4. 
   A $1,800 debit to Legal Expenses
   
5. 
   A $1,800 credit to Cash
   

24. 
    A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital is:
    

1. 
   $100
   
2. 
   $600
   
3. 
   $1,000
   
4. 
   $6,000
   
5. 
   $7,000
   

24. 
    A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital in excess of par is:
    

1. 
   $100
   
2. 
   $600
   
3. 
   $1,000
   
4. 
   $6,000
   
5. 
   $7,000
   

24. 
    A corporation issued 5,000 shares of $10 par value common stock in exchange for some land with a market value of $60,000. The entry to record this exchange is:
    

А. Land …………………………………………………………… 60,000

Common Stock ……………………………....................................... 50,000 Contributed Capital in Excess of Par Value, Common Stock ……… 10,000

B. Land ……………………………………………………………. 60,000

3

Common Stock ……………………………	....................................... 60,000
C. Land ……………………………………………………………. 50,000
Common Stock ……………………………	....................................... 50,000
D. Common Stock ……………………………................................	50,000
Contributed Capital in Excess of Par Value, Common Stock …. 10,000
Land ………………………………………………………………… 60,000
E. Common Stock ……………………………................................	60,000

Land ………………………………………………………………… 60,000

31. 
    A premium on common stock:
    
    1. 
       Is the amount paid in excess of par by purchasers of newly issued stock
       
    2. 
       Is the difference between par value and issue price when the amount paid is below par
       
    3. 
       Represents profit from issuing stock
       
    4. 
       Represents capital gain on sale of stock
       
    5. 
       Is prohibited in most states
       
32. 
    The date a board of directors votes to pay a dividend is called the:
    
    1. 
       Date of stockholders' meeting
       
    2. 
       Date of declaration
       
    3. 
       Date of record
       
    4. 
       Date of payment
       
    5. 
       Liquidating date
       

2. 
   .
   

35.