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| 1 | |
Which one of the following definitions is correct? |
| | A) | The stated value of a share of stock, as it would be shown on a stock certificate, is called the book value. |
| | B) | Both a shareholder and a stockholder are terms that apply to only non-employee owners of common stock. |
| | C) | The maximum number of shares that a firm can issue as of today is referred to as the number of shares outstanding. |
| | D) | The dedicated capital of a firm is the number of shares of stock issued multiplied by the par value per share. |
| | E) | The number of shares of common stock that are owned by investors are referred to as the number of authorized shares. |
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| 2 | |
The number of authorized shares is established in the: |
| | A) | corporate by-laws. |
| | B) | initial minutes of the board of directors' meeting. |
| | C) | articles of incorporation. |
| | D) | financial statements of the firm. |
| | E) | statutes of the state of incorporation. |
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| 3 | |
The maximum number of shares of common stock that can be authorized is: |
| | A) | limited to the number of shares that are initially issued. |
| | B) | limited to five times the number of shares that are initially issued. |
| | C) | limited to ten times the number of shares that are initially issued. |
| | D) | limited by the state statute in the state of incorporation. |
| | E) | unlimited. |
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| 4 | |
Bledsloe Industries has 150,000 shares of stock authorized of which 100,000 are issued. The board of directors has voted to sell as many additional shares as they can without seeking shareholder approval. What is the maximum number of additional shares than can be sold given this restriction? |
| | A) | 0 |
| | B) | 50,000 |
| | C) | 100,000 |
| | D) | 150,000 |
| | E) | unlimited |
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| 5 | |
Which of the following are concerns which tend to limit the number of authorized shares?
I. limited par value
II. state taxes
III. limited dedicated capital
IV. investor concerns |
| | A) | I only |
| | B) | II only |
| | C) | I and III only |
| | D) | II and IV only |
| | E) | III and IV only |
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| 6 | |
The River Café just issued 5,000 additional shares of $1 par value stock at a sales price of $11.60 per share. What is the total addition to capital surplus? |
| | A) | $1 |
| | B) | $10.60 |
| | C) | $5,000 |
| | D) | $53,000 |
| | E) | $58,000 |
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| 7 | |
Black Rock, Inc., has 125,000 authorized shares of $1 par value stock. The common stock account has a value of $87,500 and the capital surplus account has a value of $452,000. How many shares of stock are outstanding? |
| | A) | 37,500 shares |
| | B) | 62,500 shares |
| | C) | 87,500 shares |
| | D) | 125,000 shares |
| | E) | 452,000 shares |
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| 8 | |
The Bridge Tire Company has a common stock account value of $45,000, capital surplus of $179,000, and retained earnings of $211,000. The par value of the stock is $1 and the market value of $22 per share. Which one of the following statements is correct given this information? |
| | A) | The firm has a total market value of $435,000. |
| | B) | The firm has 179,000 shares of stock outstanding. |
| | C) | If the firm sells one more share of stock at the current market value, the common stock account will increase by $22. |
| | D) | The book value of equity is $224,000. |
| | E) | The firm has earned a total of $211,000 from its inception until today that it has not yet distributed to its shareholders. |
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| 9 | |
A firm has $1 par value common stock outstanding. The balance sheet shows a capital surplus amount of $74,000, a common stock balance of $61,000, and retained earnings of $58,000. What is the book value per share? |
| | A) | $2.61 |
| | B) | $3.16 |
| | C) | $5.77 |
| | D) | $16.69 |
| | E) | $19.30 |
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| 10 | |
Which of the following will increase the book value per share?
I. sale of newly issued shares at a market price which exceeds the book value of the previously issued shares
II. additional net income which is not being currently distributed to shareholders
III. a dividend payment
IV. a sale of newly issued shares at a time when the market value per share equals the book value per share |
| | A) | I and III only |
| | B) | II and IV only |
| | C) | I and II only |
| | D) | II and III only |
| | E) | I, II, and III only |
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