1) Which of the following describes a term bond?
A) A bond that repays principal in installments
B) A bond that gives the bondholder a claim for specific assets if the issuer fails to pay
C) A bond that matures at one specified time
D) A bond that is not backed by specific assets
2) Which of the following describes a secured bond?
A) A bond that repays principal in installments
B) A bond that gives the bondholder a claim for specific assets if the issuer fails to pay
C) A bond that matures at one specified time
D) A bond that is not backed by specific assets
3) Which of the following characteristics is an advantage of the corporate form of business?
A) Higher degree of government regulation
B) The potential to raise large amounts of capital
C) Separation of ownership and management
D) Double taxation
4) On December 2, 2014, Ewell Company purchases a piece of land from the original owner.In payment for the land, Ewell Company issues 8,000 shares of common stock with $1.00 par value.The land has been appraised at a market value of $400,000.The journal entry to record this transaction would include which of the following items?
A) Debit Common stock $8,000 and debit Paid-in capital $392,000.
B) Credit Common stock $8,000 and credit Paid-in capital $392,000.
C) Credit Common stock $400,000.
D) Debit Cash $400,000.
5) Please refer to the equity section of the balance sheet shown below:
| Preferred stock |
$100 par, 10,000 shares authorized, 1,000 shares issued |
$100,000 |
| Common stock |
$1 par, 500,000 shares authorized, 20,000 shares issued |
20,000 |
| Paid-in capital in excess of par |
|
350,000 |
| Retained earnings |
|
(74,000) |
| Total stockholders’ equity |
|
$396,000 |
The amount shown for Retained earnings would be called a(n):
A) net loss.
B) earnings shortfall.
C) retained earnings deficit.
D) loss on sale of stock.
6) Please refer to the equity section shown below:
| Preferred stock, $100 par, 4% non-cumulative |
$20,000 |
| 1,000 shares authorized, 200 shares outstanding |
|
| Common stock, $0.01 par |
400 |
| 1,000,000 shares authorized, 40,000 shares outstanding |
|
| Paid-in capital in excess of par |
359,600 |
| Retained earnings |
820,000 |
| Total stockholders’ equity |
$1,200,000 |
Assume the preferred shares have no stated liquidation value. The preferred shares are non-cumulative, so there are no dividends in arrears.
Please calculate the book value per share of common stock.
A) $30.00 per share
B) $8.99 per share
C) $9.00 per share
D) $29.50 per share
7) Which of the following is a reason why a company would do a stock split?
A) To defend against a hostile takeover
B) To generate additional sales revenues
C) To reduce the market price at which the stock is trading
D) To provide the shareholders with something of value, when the company cannot afford a cash dividend
8) Please refer to the following information for Peartree Company:
•Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
•Paid-in capital in excess of par: $2,150,000
•Retained earnings:$910,000
•Treasury stock: 5,000 shares purchased at $20 per share
If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, what journal entry will be required?
A) Debit Treasury stock $18,000 and credit Retained earnings $18,000.
B) Debit Treasury stock $20,000, credit Loss on sale $2,000 and credit Cash $18,000.
C) Debit Treasury stock $18,000 and credit Cash $18,000.
D) Debit Cash $18,000 and credit Treasury stock $18,000.
9) Which of the following would be a reason for a company to restrict its cash dividends or treasury stock purchases?
A) Because the company needs treasury stock to offer as performance incentives to upper management
B) In order to give shareholders stock dividends
C) Due to the desire of shareholders to retain the company’s earnings for future growth and capital expenditures
D) Due to requirements of lenders or creditors that companies maintain enough equity to meet their obligations
10) At January 1, 2014, Foxmore Company had 80,000 shares of common stock outstanding and no preferred stock. During the year, they issued 40,000 additional shares of common stock. At December 31, 2014, Foxmore had 120,000 shares of common stock outstanding, and no preferred stock. In addition, Foxmore reported the following results for the year 2014:
| Sales revenues from regular business operations |
$3,000,000 |
| Cost of goods sold |
900,000 |
| Operating expenses from their regular business operations |
600,000 |
| Gain on disposal of several items of property, plant & equipment |
15,000 |
| Income tax expense on continuing operations |
330,000 |
| Loss on the termination of a discontinued business segment, net of tax |
120,000 |
| Losses on damage caused by earthquake, net of tax |
280,000 |
At December 31, 2014, how much is the earnings per share for income (loss) from continuing operations?
(Please round all calculations to the nearest cent.)
A) $(1.20)
B) $7.85
C) $10.65
D) $11.85
