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11 retained earnings represents a cash that is available for dividends b the total n 4294754

11.Retained earnings represents: 
 

A. cash that is available for dividends.

B. the total net income of the firm since its beginning.

C. cumulative net income of the firm since its beginning that has not been distributed to its stockholders in the form of dividends.

D. net income plus gains (or minus losses) on treasury stock transactions.

12.Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because: 
 

A. the preferred stock dividend requirement is a fixed claim against income, but interest on long-term debt is not a fixed amount.

B. preferred stock has a fixed liquidation or redemption value, but long-term debt does not have a fixed maturity value.

C. preferred stock may be convertible to common stock, but long-term debt cannot be convertible.

D. for income tax purposes, dividends paid on preferred stock are not deductible, but interest on long-term debt is deductible.

13.The annual per share dividend requirement of a 6%, $80 par value preferred stock that was issued for $85 is: 
 

A. $4.80.

B. $5.10.

C. $6.00.

D. $8.00.

14.The number of shares of a class of stock that are outstanding is: 
 

A. the number of shares authorized minus the number of shares issued.

B. the number of shares authorized minus the number of shares held as treasury stock.

C. the number of shares issued minus the number of shares held as treasury stock.

D. the number of shares issued minus the number of shares owned by directors.

15.A stock dividend is similar to a cash dividend in that: 
 

A. the stockholder's equity in the firm's net assets is reduced by each.

B. the stockholder's cash is increased by each.

C. the stockholder's equity in the firm's net assets is increased by each.

D. retained earnings and the amount of potential future dividends is reduced by each.

16.Factors that usually affect retained earnings directly include: 
 

A. net income or loss, and dividends.

B. extraordinary items and losses from discontinued operations.

C. stock dividends and gains or losses from the sale of treasury stock.

D. net income or loss, and the issuance of stock at an amount in excess of par value.

17.In comparison to the stockholders' equity section of a corporation's balance sheet, owners' equity of a proprietorship or partnership: 
 

A. normally does not make a distinction between invested capital and retained earnings.

B. normally uses “Capital” accounts for each individual owner, rather than a “Retained Earnings” account for all of the stockholders.

C. normally uses a “Drawings” account for each individual owner, rather than a “Dividends” account for all of the stockholders.

D. all of these.

18.The declaration of a cash dividend by the directors results in: 
 

A. a decrease in cash and a decrease in retained earnings.

B. a decrease in retained earnings and an increase in current liabilities.

C. a decrease in net income and a decrease in cash.

D. a decrease in net income and an increase in current liabilities.

19.In most states, par value of issued shares represents: 
 

A. legal capital.

B. no par capital.

C. noncontrolling capital.

D. corporate capital.

20.The term preemptive right pertains to which of the following? 
 

A. The Board of Directors rights in liquidation.

B. Present shareholders' right to purchase shares from any additional share issuances.

C. Present shareholders' right to purchase treasury shares when reissued.

D. Preferred stockholders' right to dividends.

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