First Midterm Review-Winter 2005 - Problem 1 Multiple...

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Problem 1 – Multiple Choice First Midterm Winter 2005 1. Stockholders’ equity represents: a. The amount invested in the corporation by the stockholders. b. The amount earned by the company since incorporation. c. The amount owed the stockholders in a liquidation. d. The stockholders residual interest in the net assets of the corporation . 2. Common stock: 3. Preferred stock: 5. Cash received from the issuance of stock must be separated into par value and paid-in capital in excess of par because 6. Retained Earnings is a. Original investments by owners. b. Legal capital of the company c. Cash available for dividends. d. Accumulated net income of a firm less dividends or other distributions to owners . 7. A liability for a cash dividend exists at the: 8. On March 1, 2004, Linus Corp. was formed by issuing 100,000 shares of $1 par value common stock at $5 a share and 20,000 shares of $100 par value preferred stock at $101 per share. If Linus earned $35,000 in its first year of operations, the December 31, 2004 balance sheet would show the following balances: Common Stock Preferred Stock Paid-in Capital Excess of Par 1
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9. How would the declaration of a 5% stock dividend affect the following items: Retained Earnings Total Stockholders’ Equity 10. The primary reason for a stock split is to a. Increase the stock price b. Reduce the stock price c. Increase retained earnings. d. Decrease retained earnings
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