1. Foster Corporation had a 2 for 1 stock split of its common stock which had a
ID: 2446908 • Letter: 1
Question
1. Foster Corporation had a 2 for 1 stock split of its common stock which had a par value of $10 before the split. At what amount should retained earnings be reduced for the additional shares issued? A. There should be no reduction of retained earnings. B. Par value. C. Market value on the declaration date. D. Market value on the payment date. E. None of these.
2.Which of the following transactions would cause a change in total stockholders' equity? A. A stock dividend. B. Paying a previously declared cash dividend. C. Reissuing treasury stock at its cost. D. A stock split. E. None of these.
3. The statement of stockholders' equity includes information about: A. Beginning equity account balances. B. Ending equity account balances. C. Dividends. D. All of the above. E. None of these.
4. Which formula "calculates" the return on assets ratio? A. (Net Income + Interest Expense)/Average Assets. B. (Net Income + Extraordinary Items)/Average Assets C. (Net Income + Discontinued Operations)/Average Assets D. (Net Income + Income Tax Expense)/Average Assets. E. None of these.
5.Chandler had 7,500 shares of common stock outstanding on January 1, and issued an additional 2,500 shares on June 1. There was no preferred stock, and net income was $124,700. How much is earnings per share (to the nearest cent) for the calendar year? A. $12.47 B. $13.92 C. $14.25 D. $16.62 E. None of these.
6.Which of the following is not a stated objective of financial reporting? A. To provide information useful in investment and credit decisions. B. To provide information useful in assessing cash flow prospects. C. To provide information useful in preparing tax returns reports. D. To provide information about enterprise resources. E. None of these.
7.Reliable information is said to include which of the following ingredients? A. Verifiable B. Timely C. Predictive power D. Feedback power E. None of these.
Explanation / Answer
(1) (A)
A stock split does not impact retained earnings or total shareholder equity.
(2) (B)
A dividend payment will reduce retained earnings and reduce equity.
(3) (D)
It has following format:
Ending retained earnings = beginning retained earnings + net income - dividend paid
(4) (A)
ROA = Earnings before interest & taxes / Average totala ssets = (Net income + Interest expense) / average total assets
(5) (B)
Weighted average number of shares = 7,500 + (2,500 x 7 / 12) = 7,500 + 1,458 = 8,958
EPS = Net income / Weighted average number of shares = $124,700 / 8,958 = $13.92
(6) (C)
Tax return reporting is not an objective of financial reporting.
(7) (B)
Timeliness of information is an important component of its reliability.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.