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Exam 11: Shareholders Equity

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Question 61

True/False

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A stock dividend,by itself,provides no economic value.

A) True
B) False

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Question 62

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The return on equity ratio is calculated as:

A) dividends paid divided by the average book value of shareholders' equity.
B) net income divided by the average number of outstanding common shares.
C) dividends divided by the average number of total shares.
D) net income divided by the average shareholders' equity.

E) A) and B)
F) A) and C)

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Question 63

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A stock split does not decrease retained earnings.

When a company uses excess cash to buy back some of its outstanding common shares,which of the following ratios will be affected directly in the manner described below?

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit of $24,500 in his drawing account and a credit of $126,800 in his capital account.If his capital account has a credit balance of $137,900 after the closing,what was his net income?

Outstanding shares include all shares issued by a corporation which would include treasury stocks held by the issuing corporation.

If you own 200,000 shares of stock in a company with 8 million shares outstanding and the company issues an additional 2 million shares to its employees through stock options,your ownership percentage:

Company X has 12 million shares of common shares authorized with a par value of $3 and a market price of $116.Seven million shares are outstanding.The company declares a 12' dividend.Prepare the journal entry and show the effect on assets,liabilities,and shareholders' equity at the time of declaration and at the time of payment.

Which of the following statements about stock dividends is $\bold{true}$ ?

A partnership is any business owned by two or more people.

A relatively low P/E ratio illustrates a correctly priced stock and typically indicates strong future performance.

Shareholders can vote on the appointment of external auditors.

Shareholders of a corporation directly elect:

Company Z has 8 million shares of common shares authorized with a par value of $1 and a market price of $72.There are 4 million outstanding shares.Prepare the journal entry and show the effect on assets,liabilities and shareholders' equity if the company declares and distributes a 10% stock dividend.

A corporate charter specifies that the company may sell up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.Of the 3 million bought back,the company cancels 2 million and holds 1 million.The current number of outstanding shares after these transactions have been accounted for is:

Contributed Capital reports the amount of capital the company received from investors' contributions,in exchange for the company's shares.

Stock splits do not require a journal entry.

In sole proprietorship the owner and the business are separate entities.

Holders of common shares receive certain benefits,such as a residual claim,which:

Which of the following affects total shareholders' equity?