Short questions on various fundamentals of accounting concepts.
1. The return on common stockholders' equity is computed by dividing
a. net income by ending common stockholders' equity.
b. net income by average common stockholders' equity.
c. net income minus preferred dividends by ending common stockholders' equity.
d. net income minus preferred dividends by average common stockholders' equity.
2. The journal entry to record the payroll for Marcus Garvey Company for the week ending January 8, would probably include a
a. credit to Office Salaries.
b. credit to Wages Expense.
c. debit to Federal Income Taxes Payable.
d. credit to FICA Taxes Payable.
3. Buffon Electronics Company issues an $800,000, 10%, 20-year mortgage note on January 1. The terms provide for semiannual installment payments, exclusive of real estate taxes and insurance, of $46,621. After the first installment payment, the principal balance is
a. $800,000.
b. $786,427.
c. $793,379.
d. $779,125.
4. Milner Corporation had 200,000 shares of common stock outstanding during the year. Milner declared and paid cash dividends of $200,000 on the common stock and $160,000 on the preferred stock. Net income for the year was $880,000. What is Milner's earnings per share?
a. $2.60
b. $3.40
c. $3.60
d. $4.40
5. Abbott Corporation splits its common stock 4 for 1, when the market value is $40 per share. Prior to the split, Abbott had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock
a. remains the same.
b. is reduced to $2 per share.
c. is reduced to $2.50 per share.
d. is reduced to $10 per share.
6. Jennifer Company reports the following amounts for 2008:
|
NET INCOME
|
125,000
|
|
AVERAGE STOCKHOLDERS EQUITY
|
500,000
|
|
PREFERRED DIVIDENDS
|
35,000
|
|
PAR VALUE PREFERRED STOCK
|
100,000
|
The 2008 rate of return on common stockholders' equity is
a. 18.0%.
b. 22.5%.
c. 25.0%.
d. 31.3%.
7. On January 2, 2005, Riley Corporation issued 20,000 shares of 6% cumulative preferred stock at $100 par value. On December 31, 2008, Riley Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stockholders?
a. $0
b. $120,000
c. $360,000
d. $480,000