SOLUTION: Acct 2210 Zeigler - Attendance Quiz #6 - Chp 11 (15 pts)
____ 1. Which form of business organization is established as a legal entity, separate and distinct from its owners?
A. Sole-Proprietorship
B. Corporation
C. Partnership
D. All of the above represent separate legal entities.
____ 2. “Ease of transferability” of ownership is one of the important advantages of the corporate form of business organization.
A) True B) False
____ 3.A benefit of the corporate form of business entity is that they are free from “double taxation”.
A) True B) False
____ 4.The term "double taxation" refers to which of the following?
A. A sole proprietorship must pay income taxes on its net income and the owner is also required to pay income taxes on withdrawals.
B. In a partnership, both partners are required to claim their share of net income on their tax returns.
C. Corporations must pay income taxes on their net income and their stockholders must pay income taxes on their dividends.
D. A sole proprietorship must pay income taxes to both the state government and the federal government.
____ 5. On December 1st, Rui & Hankins Corporation declared a $10,000 cash dividend to
stockholders of record on December 20th. The cash dividend payment date will be
January 1st of the following year. How does the recording of this transaction affect
the accounting equation?
A. On December 20, assets decrease by $10,000, and equity decreases by $10,000.
B. On January 1, liabilities increase by $10,000, and equity increases by $10,000.
C. On December 1, liabilities increase by $10,000, and equity decreases by $10,000.
D. On December 1, assets decrease by $10,000, and equity decreases by $10,000.
____ 6. Cronin & Pease, Inc. issued 3,000 shares of common stock of $10 par value common
stock at $12 per share. When the company records this transaction, it will affect the accounting equation by:
A) increasing assets by $30,000, and increasing equity by $36,000.
B) increasing assets by $36,000, and increasing equity by $36,000.
C) increasing assets by $36,000, and increasing equity by $30,000.
D) increasing assets by $48,000, and increasing equity by $48,000.
____ 7. Falcon Corporation declared a 2-for-1 stock split on 12,000 shares of $5 par value
common stock. If the market price of the stock had been $20 a share before the split, the
par value, number of shares and approximate market value after the split would most likely be:
Par Value / No. of Shares / Market ValueA) / $2.50 / 24,000 / $10.00
B) / $2.50 / 24,000 / $ 8.00
C) / $2.70 / 12,000 / $10.00
D) / $5.00 / 24,000 / $20.00
____8. An investor holding common stock would desire that shares of preferred stock outstanding be:
A) Noncumulative and offering a low percentage dividend rate.
B) Noncumulative and offering a high percentage dividend rate.
C) Cumulative and offering a low percentage dividend rate.
D) Cumulative and offering a high percentage dividend rate.
____9. Graham & Novak, Inc. paid total dividends of $3,000; $6,000; and $10,000 during 2012, 2013 and 2014 respectively. The company had 500 shares of Cumulative Preferred stock outstanding that, for all 3 years, was to be paid a $10 per share dividend. As a result, the amount of dividends received by the common shareholders (after fully taking care of the preferred shareholders) during 2014 would be:
A) $4,000 2k in arrears for 2012, 1k still in arrears at end of 2013. 2014 to PREF S/H = $6k
B) $3,000
C) $2,000
D) $1,000
____ 10. With respect to the “Current Ratio” (pg 495), the declaration of a cash dividend to be paid next month:
A. will have no effect on the current ratio.
B. will increase the current ratio.
C. will decrease the current ratio.
(The declaration would increase a current liability (i.e. Dividends Payable). Therefore, C/R decreases
____ 11.Which of the following statements best describes the term "par value?"
A.An amount used in determining a corporation's legal capital.
B.The amount that must be paid to purchase a share of stock.
C.Determined by dividing total stockholder's equity by the number of shares of stock.
D.The number of shares currently in the hands of stockholders.
____ 12. Per pg 604, can a corporation recognize a gain or loss on the sale of its own Treasury Stock?
A) Yes B) No
____ 13. The Price-Earnings (P/E) ratio is a measure of:
A.The total of stockholder's equity divided by the number of shares.
B.The interest rate on borrowed money divided by the current prime rate.
C.The price of a company's products as compared to its net income.
D.The market price of a share of stock divided by earnings per share.
____ 14.Calkins & Hensley, Inc. reported net income of $65,000 in 2014. The company had 90,000 shares of common stock outstanding and a market price of $20 per share. Per page 611, the
company's “price earnings” (P/E) ratio would be:
A. 27.7 B. 18.9 C. 14.5 D. 8.5
($65k / 90,000 shs = .72 EPS), $20 mkt price / .72 earnings = 27.7 P/E
____ 15. Group Peer Evaluations (posted on our class website) are due tonight at 11pm. Further, our Acct
2210 Common final exam will be held Wednesday night, May 6th, from 6-8pm in BA 1007.
A) True B) True
Review for the Final Examination - See me, or our GA team, with any questions.