Match the terms to the definitions
QUESTION 1
Match the terms to the definitions.
retired shares
paid-in capital in excess of par
cumulative dividend preference
conversion privilege
participating dividend preference
stock dividend
A. The preferred stock feature which provides for the sharing of dividends above the stated amount
B. Shares of stock that are distributed in a process known as capitalization of retained earnings
C. The preferred stock feature which provides for preferred stock to be exchanged for common stock
D. The portion of the stock’s issue price that exceeds par. y>
E. Shares of stock that are repurchased with the intention of no longer being traded
F. The preferred stock feature which provides the right to dividend in arrears
20 points
QUESTION 2
Which of the following is one of the elements of stockholders’ equity?
A) net income
B) dividends payable
C) retained earnings
D) loss on the sale of equipment
8 points
QUESTION 3
Which of the following statements is true with regard to equity capital?
A) The number of shares actually in the hands of stockholders are called outstanding shares
B) It is unusual for corporations to have more than one class of stock outstanding at any point in time.
C) Preferred stock represents the shares of stock that have been permanently retired.
D) Outstanding shares represent the maximum number of shares that can be issued by a corporation.
8 points
QUESTION 4
Authorized stock represents the:
A) number of previously issued shares that have been repurchased by the corporation.
B) number of shares that the corporation has sold.
C) number of shares that are currently held by stockholders
D) maximum number of shares that can be issued for each class of stock.
8 points
QUESTION 5
Issued shares represent the:
A) number of previously issued shares that have been repurchased by the corporation.
B) number of shares that the corporation has sold.
C) number of shares that are currently held by stockholders
D) maximum number of shares that can be sold by the corporation.
8 points
QUESTION 6
Total stockholders’ equity includes $50,000 of common stock with a stated value of $0.50, and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares are outstanding?
A) 95,000
B) 100,000
C) 105,000
D) 150,000
8 points
QUESTION 7
The stockholders’ equity section of a balance sheet at December 31, 2015 is provided below:
Common stock, $0.50 par value $10,000
Paid-in capital in excess of par–common stock 40,000
Total capital stock 50,000
Retained earnings 25,000
Less: Treasury stock (at cost, $20 per share) < 2,000>
Total Stockholders’ Equity $73,000
How many shares of stock are issued?
A) 18,000
B) 19,800
C) 20,000
D) 20,200
8 points
QUESTION 8
Which of the following statements is true with regard to 7% cumulative, participating preferred stock?
a) Stockholders who hold this type of stock are guaranteed a dividend each year.
b) The issue price of this stock is reported in the preferred stock account on the balance sheet
c) if the corporation pays a per share dividend in excess of 7% of the preferred stock’s par value and there are no dividends in arrears, the preferred shares will receive a share of the amounts available for distribution as dividends to other classes of stock.
d) If dividends are not declared, they accumulate and a liability must be reported on the balance sheet for any amount in arrears that is owed to the preferred stockholders
8 points
QUESTION 9
Which of the following types of information is not set forth within the corporate charter?
a) Name and purpose of the corporation
b) Names of those responsible for incorporating the business.
c) Dates of future dividend distributions
d) Provisions describing how stock may be issued.
8 points
QUESTION 10
Many stockholders choose to invest in preferred stock because:
A) preferred stock can always be converted into common stock at the stockholder’s option
B) the preferred dividend distributions are generally increased each year.
C) dividends are distributed to preferred stockholders before common stockholders.
D) preferred stock includes the right to participate in management decisions through voting privileges.
8 points
QUESTION 11
Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In addition to the increase in cash, what effect does this transaction have on the accounting equation?
a) Retained earnings increases $150,000.
b) Paid-in capital in excess of par increases $145,000.
c) Common stock increases $150,000.
d) Gain on stock issuance increases $145,000
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