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ch11

Financial Accounting

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ch11 Student: ___________________________________________________________________________ 1. Outstanding shares of stock are those shares which a corporation has the ability to issue as documented in its charter in the state where incorporated. True False 2. There would be 100,000 shares of common stock outstanding when the number of shares authorized was 150,000, issued shares totaled 120,000, and 20,000 shares were being held in the treasury. True False 3. Earnings per share are calculated by dividing net income by the number of outstanding shares of common stock at year-end. True False 4. Treasury stock is a corporation's own stock that was issued and then repurchased, and is still held by the corporation. True False 5. Earnings per share increases when a company purchases treasury stock. True False 6. The issue of $5 par value common stock for $10 per share results in a $10 credit to the common stock account for each share issued. True False 7. The issue of $1 par value common stock for $10 per share results in a $9 credit to the capital in excess of par value account for each share issued. True False 8. Stockholders' equity decreases when a company purchases treasury stock. True False 9. Net income increases when treasury stock is sold for an amount in excess of its cost. True False 10. Total stockholders' equity increases when treasury stock is sold for an amount less than its cost. True False 11. Net income decreases when treasury stock is sold for an amount less than its cost. True False
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12. Total stockholders' equity of Grasse Company is not affected when a stockholder sells shares of Grasse Company stock to another stockholder. True False 13. Total assets remain the same when a company uses cash to purchase treasury stock. True False 14. Common stockholders have voting rights and can declare cash dividends. True False 15. Shares of stock held as treasury stock do not have voting rights or the right to receive dividends. True False 16. Most investors that are retired prefer to receive their return on investment in the form of stock price appreciation rather in dividends. True False 17. The dividend yield ratio is dividends per share divided by the number of shares outstanding. True False 18. The dividend yield ratio increases when the market price per share increases. True False 19. The dividend yield ratio increases when a cash dividend is paid. True False 20. A company's assets and stockholders' equity decrease when a cash dividend is declared by its board of directors. True False 21. A company's assets and liabilities decrease when they pay a previously declared cash dividend. True False 22. The declaration of a common stock dividend by a corporation's board of directors creates a liability on the declaration date. True False 23. The declaration and distribution of a common stock dividend results in a reduction of the issuing corporation's total stockholders' equity.
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