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Guide Exam Questions And Answers
Additional paid-in capital. - correct answer ✅The excess over par value paid in by stockholders in return for the shares issued to them. Callable preferred stock. - correct answer ✅Preferred stock that grants the issuer the right to purchase the stock from stockholders at specified future dates and prices. Cash dividend. - correct answer ✅When a corporation distributes a dividend in cash to the stockholders. Common stock. - correct answer ✅The residual corporate interest that bears the ultimate risks of loss and receives the benefits of success. Contributed capital. - correct answer ✅Capital stock and additional paid-in capital (also called paid-in capital).
Guide Exam Questions And Answers
Convertible preferred stock. - correct answer ✅Preferred stock that provides for the exchange of preferred stock into common stock at a specified ratio. Cost method. - correct answer ✅The Treasury Stock account is debited for the cost of the shares acquired and is credited upon reissuance for this same cost. Cumulative feature. - correct answer ✅A feature of preferred stock entitling the stockholder to receive current and unpaid prior-year dividends before common stockholders receive dividends. Date of declaration. - correct answer ✅The date the board of directors meets and approves the declaration of a dividend. Date of payment. - correct answer ✅The date the board of directors has approved to pay a dividend.
Guide Exam Questions And Answers
Large stock dividend. - correct answer ✅A stock dividend of more than 20-25% of the number of shares previously outstanding. Liquidating dividend. - correct answer ✅A dividend not based on retained earnings; implying that stockholders are receiving a return of their investment, rather than profits. No-par stock. - correct answer ✅Shares issued with no per-share amount printed on the stock certificate. Paid-in capital. - correct answer ✅Capital stock and additional paid-in capital (also called contributed capital). Par value stock. - correct answer ✅Capital stock that has been assigned a value per share in the corporate charter; it establishes the maximum responsibility of a stockholder in the event of insolvency or other involuntary dissolution.
Guide Exam Questions And Answers
Participating dividends. - correct answer ✅A feature of preferred stock enabling the stockholder to share ratably with common stockholders in any dividends beyond the rate specified on the preferred stock. Preemptive right. - correct answer ✅A stockholder's right to share proportionately in any new issues of stock of the same class Preferred stock. - correct answer ✅Capital stock that has contractual preferences over common stock in certain areas. Property dividend. - correct answer ✅When a corporation distributes a dividend of an asset other than cash to the stockholders. Redeemable preferred stock - correct answer ✅Preferred stock that has a mandatory redemption period or a redemption feature that the issuer cannot control.
Guide Exam Questions And Answers
stockholders; for example, the terms may indicate a split of 2-for- which would indicate that for every one share of stock a shareholder owns, they will receive an additional share of stock. Stockholders' (owners') equity. - correct answer ✅The cumulative net contributions by stockholders (owners) plus recorded earnings that have been retained. Treasury stock. - correct answer ✅A corporation's own stock that has been issued, fully paid for, and reacquired by the corporation but not retired. Antidilutive securities. - correct answer ✅Securities which upon conversion or exercise increase earnings per share (or reduce the loss per share). Book value approach. - correct answer ✅A method used for determining the issue price of stock when bonds are converted into stock which records the stock issued using the book value of the bonds at the issue date.
Guide Exam Questions And Answers
Complex capital structure. - correct answer ✅When a corporation's capital structure includes securities that could have a dilutive effect on earnings per common share. Convertible bonds. - correct answer ✅A security that combines the benefits of a bond with the privilege of exchanging it for stock at the holder's option. Convertible preferred stock. - correct answer ✅Preferred stock which is convertible into common stock at the holder's option. Detachable stock warrants. - correct answer ✅Warrants that can be sold separately from their bonds. Diluted earnings per share. - correct answer ✅Earnings per share based on the number of common shares outstanding plus all contingent issuances of common stock that could reduce earnings per share.
Guide Exam Questions And Answers
conversion of its convertible debt to equity securities, the issuer may offer some form of additional consideration (such as cash or common stock) Measurement date. - correct answer ✅The first date on which are known both (1) the number of shares that an individual employee is entitled to receive and (2) the option or purchase price. Nondetachable stock warrants. - correct answer ✅Warrants that cannot be sold separately from their bonds. Restricted-stock plans - correct answer ✅Stock plans that transfer shares of stock to employees, subject to an agreement that the shares cannot be sold, transferred or pledged until vesting occurs. Service period. - correct answer ✅The period in which the employee performs the service for which he or she is being compensated
Guide Exam Questions And Answers
Simple capital structure. - correct answer ✅When a corporation's capital structure consists only of common stock or includes no potentially dilutive convertible securities, options, warrants, or other rights that upon conversion or exercise could in the aggregate dilute earnings per common share. *Stock appreciation rights (SARs). - correct answer ✅Similar to a stock option plan except executives do not have to purchase the stock but instead are given a right to receive the excess of the market price of the stock at the date of exercise over a pre-established price Stock option. - correct answer ✅A warrant which gives selected employees the option to purchase common stock at a given price over an extended period of time Stock option plans. - correct answer ✅Long-term compensation plans which attempt to develop in executives a strong loyalty toward the company by giving them an equity interest based on changes in longterm measures
Guide Exam Questions And Answers
Weighted average number of shares outstanding. - correct answer ✅The basis for the per share amounts reported which reflects shares issued or purchased during the period by calculating the number of shares outstanding by the fraction of the period they are outstanding primary forms of business organization— - correct answer ✅the proprietorship, the partnership, and the corporation characteristics of the corporate form that affect accounting include:
correct answer ✅1. Influence of state corporate law.
- Use of the capital stock or share system.
- Development of a variety of ownership interests. absence of restrictive provisions, each share carries the following rights: - correct answer ✅1. To share proportionately in profits and losses.
- To share proportionately in management (the right to vote for directors).
Guide Exam Questions And Answers
- To share proportionately in corporate assets upon liquidation.
- To share proportionately in any new issues of stock of the same class—called the preemptive right. preemptive right - correct answer ✅protects an existing stockholder from involuntary dilution of ownership interest Accumulated other comprehensive income - correct answer ✅reflects the aggregate amount of the other comprehensive income items Stockholders' equity - correct answer ✅is the difference between the assets and the liabilities of the company Cumulative preferred stock - correct answer ✅requires that if a corporation fails to pay a dividend in any year, it must make it up in a later year before paying any dividends to common stockholders
Guide Exam Questions And Answers
stock split - correct answer ✅increases the number of shares outstanding and decreases the par or stated value per share. stock dividend - correct answer ✅although it increases the number of shares outstanding, does not decrease the par value; thus, it increases the total par value of outstanding shares large stock dividend - correct answer ✅A stock dividend of more than 20-25 percent of the number of shares previously outstanding Return on common stockholders' equity - correct answer ✅(net income - preferred dividends) / average common stockholders' equity amount of common stock equity used in this ratio - correct answer ✅equals total stockholders' equity less the par value of preferred stock.
Guide Exam Questions And Answers
Payout Ratio - correct answer ✅Cash Dividends/Net Income book value per share - correct answer ✅(Common stockholders' equity) / (Outstanding shares) Measures the amount each share would receive if the company were liquidated at the amounts reported on the balance sheet Convertible bonds - correct answer ✅can be changed into other corporate securities during some specified period of time after issuance The book value method - correct answer ✅records the securities exchanged for the bond at the carrying amount (book value) of the bond.
Guide Exam Questions And Answers
Employee stock-purchase plans (ESPPs) - correct answer ✅generally permit all employees to purchase stock at a discounted price for a short period of time
