Response to the following questions:
1. Increasing the return to common stockholders by issuing preferred stock is an example of
(a) Financial leverage.
(b) Cumulative earnings.
(c) Dividend in arrears.
2. A company issues 7,000 shares of its $10 par value common stock in exchange for equipment valued at $105,000. The entry to record this transaction includes a credit to
(a) Paid-In Capital in Excess of Par Value, Common Stock, for $35,000.
(b) Retained Earnings for $35,000.
(c) Common Stock, $10 Par Value, for $105,000.