Question 1

Mayan Company had net income of $132,000.The weighted-average common shares outstanding were 80,000.The company has no preferred stock.There were no other stock transactions.The company's earnings per share is:
A)$1.65.
B)$1.59.
C)$44.00.
D)$26.67.
E)$1.71.

Accepted Answer

Earnings per share (EPS) is calculated by dividing the net income by the weighted-average common shares outstanding. So, $132,000 / 80,000 = $1.65.

Question 2

Mayan Company had net income of $132,000.The weighted-average common shares outstanding were 80,000.The company declared a $27,000 dividend on its noncumulative,nonparticipating preferred stock.There were no other stock transactions.The company's earnings per share is:
A)$1.65.
B)$1.99.
C)$1.31.
D)$0.34.
E)$4.89.

Accepted Answer

To calculate earnings per share, we divide net income by weighted-average common shares outstanding. 
EPS = Net Income / Weighted-average common shares outstanding 
EPS = $132,000 / 80,000 = $1.65 per share 
However, we need to account for the preferred stock dividend. Preferred stock dividends are subtracted from net income to arrive at earnings available to common shareholders. 
Earnings available to common shareholders = Net income - Preferred dividends 
Earnings available to common shareholders = $132,000 - $27,000 = $105,000 
Now we can calculate EPS: 
EPS = Earnings available to common shareholders / Weighted-average common shares outstanding 
EPS = $105,000 / 80,000 = $1.31 per share.

Question 3

The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:
A)Dividend payout ratio.
B)Dividend yield.
C)Price-earnings ratio.
D)Current yield.
E)Earnings per share.

Accepted Answer

Dividend yield is the amount of dividends paid per share of stock, expressed as a percentage of the current market price per share. It represents the return on investment for a shareholder based on the dividend income received.

Question 4

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:
A)A debit to Organization Expenses for $4,000.
B)A debit to Organization Expenses for $5,000.
C)A credit to Common Stock for $5,000.
D)A credit to Paid-in Capital in Excess of Par Value,Common Stock for $5,000.
E)A debit to Paid-in Capital in Excess of Par Value,Common Stock for $2,000.

Accepted Answer

The entry to record the issuance of stock in payment of services rendered is a debit to Organization Expenses for the fair value of the services received ($5,000 in this case) and a credit to Common Stock for the par value of the shares issued ($4,000 in this case, calculated as 400 shares x $10 par value per share). The remaining $1,000 ($5,000 - $4,000) represents additional paid-in capital and is credited to Paid-in Capital in Excess of Par Value, Common Stock. However, the only option that includes the debit to Organization Expenses for $5,000 is option B.

Question 5

Wiggins 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:
A)$16.00.
B)$19.60.
C)$19.96.
D)$20.00.
E)$10.00.

Accepted Answer

The total amount of equity raised by the preferred stock is $10 x 1,000 = $10,000. This means that the remaining amount of equity is $500,000 - $10,000 = $490,000.

The book value per common share is calculated by dividing the remaining equity by the number of outstanding common shares:

Book value per common share = $490,000 / 25,000 = $19.60

Question 6

Book value per common share is computed by:
A)Multiplying the number of common shares outstanding times the market price per common share.
B)Dividing total assets by the number of shares outstanding.
C)Dividing stockholders' equity applicable to common shares by the number of common shares outstanding.
D)Multiplying the number of common shares outstanding by par value per share.
E)Dividing the number of common shares outstanding by stockholders' equity applicable to common shares.

Accepted Answer

Book value per common share is computed by dividing stockholders' equity applicable to common shares by the number of common shares outstanding. This formula shows the amount of equity that each common shareholder would receive if the company were liquidated.

Question 7

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:
A)2.0%.
B)2.4%.
C)9.9%.
D)21.4%.
E)24.2%.

Accepted Answer

Dividend yield = (Annual Dividend per Share / Market Price per Share) x 100%
Annual Dividend per Share = Dividend per share x Frequency of Dividend Payment
Since the company paid $0.85 in cash dividends per share, and we don't know the frequency of the dividend payment (whether it's annual, semi-annual, quarterly, etc.), we cannot calculate the annual dividend per share.

However, we can calculate the dividend yield using the data given:
Dividend yield = ($0.85 / $35.50) x 100% = 2.39%

Therefore, the best choice is B, 2.4%.

Question 8

Djarleen 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:
A)$16.67.
B)$16.00.
C)$40.00.
D)$15.60.
E)$10.00.

Accepted Answer

The answer of Djarleen Company has 10,000 shares of $10...

Question 9

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:
A)$4.75.
B)$14.70.
C)$10.00.
D)$29.40.
E)$47.50.

Accepted Answer

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

Question 10

Stocks that pay relatively large cash dividends on a regular basis are called:
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 called income stocks. They are preferred by investors who want to generate a steady stream of income from their investments rather than relying solely on capital appreciation. These stocks are typically issued by companies in mature industries with stable cash flows and a history of paying dividends.

Question 11

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:
A)1.15.
B)0.87.
C)19.2.
D)10.0.
E)11.46.

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

Market price per share = $110
Earnings per share = $9.60

Therefore, P/E ratio = $110 / $9.60 = 11.46

Hence, the answer is E, 11.46.

Question 12

The dividend yield is computed by dividing:
A)Annual cash dividends per share by earnings per share.
B)Earnings per share by cash dividends per share.
C)Annual cash dividends per share by the market value per share.
D)Market price per share by cash dividends per share.
E)Cash dividends per share by retained earnings.

Accepted Answer

The dividend yield is calculated by dividing the annual cash dividend per share by the market value per share. This is because the yield represents the return on investment from the cash dividends, relative to the price paid for the stock.

Question 13

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:
A)2.4%.
B)6.25%.
C)6.4%.
D)6.67%.
E)15.00%.

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 14

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:
A)9.0.
B)17.6.
C)12.5.
D)15.2.
E)16.9.

Accepted Answer

To find the price-earnings ratio, we need to divide the market price per share by the earnings per share (EPS).

EPS = Net Income / Weighted-average common shares outstanding = $90,000 / 18,000 = $5 per share

Therefore, the price-earnings ratio is:

P/E ratio = Market Price per share / EPS = $88 / $5 = 17.6

Therefore, the best choice is B.

Question 15

The Discount on Common Stock account reflects:
A)The difference between the par value of stock and its issue price when it is issued at a price 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 paid-in by stockholders when the amount paid-in 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 it is issued at a price below par value.

Question 16

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 17

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 the earnings per share. This ratio is used to determine the relative value of a company's stock and is often compared to other companies in the same industry.

Question 18

The amount of income earned per share of a company's outstanding common stock is known as:
A)Restricted retained earnings per share.
B)Earnings per share.
C)Continuing operations per share.
D)Dividends per share.
E)Book value per share.

Accepted Answer

Earnings per share (EPS) is the amount of income earned per share of a company's outstanding common stock. It is calculated by dividing the company's net income by the total number of outstanding shares of its common stock. EPS is a useful metric for investors to evaluate a company's profitability and potential for growth.

Question 19

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 shares outstanding.
D)Measures the worth of assets.
E)Is equal to par 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 shareholders' equity divided by the number of outstanding shares, not simply assets divided by equity or the number of shares. It does not measure the worth of assets in the market nor is it equal to the par value per share.

Question 20

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 price of the stock and expressing the result as a percentage. Therefore, dividend yield is relative to the common stock's market value.

Quiz 11: Reporting and Analyzing Equity

Mayan Company had net income of $132,000.The weighted-average common shares outstanding were 80,000.The company has no preferred stock.There were no other stock transactions.The company's earnings per share is:

Mayan Company had net income of $132,000.The weighted-average common shares outstanding were 80,000.The company declared a $27,000 dividend on its noncumulative,nonparticipating preferred stock.There were no other stock transactions.The company's earnings per share is:

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

Wiggins 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:

Book value per common share is computed by:

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:

Djarleen 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:

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:

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

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:

The dividend yield is computed by dividing:

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:

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:

The Discount on Common Stock account reflects:

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:

The price-earnings ratio is calculated by dividing:

The amount of income earned per share of a company's outstanding common stock is known as:

Book value per share:

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