Multiple Choice Questions
31. Which of the following statements is false?
A. Stockholders have a residual claim on assets in the event of liquidation.
B. Shares of stock held in the treasury are deducted from the number of issued shares in the determination of the number of outstanding shares.
C. Common stockholders have voting rights at annual stockholder meetings.
D. Corporations are governed by their stockholders.
32. RKJ Company has provided the following:
? 100,000 shares of $5 par value common stock are authorized;
? 70,000 shares have been issued;
? 65,000 shares are outstanding.
Which of the following statements is correct?
A. RKJ has 35,000 shares of treasury stock.
B. RKJ has 30,000 shares of treasury stock.
C. RKJ can reissue an additional 35,000 shares of common stock.
D. RKJ can issue an additional 30,000 shares of common stock.
33. RKJ Company has provided the following:
? 100,000 shares of $5 par value common stock are authorized;
? 70,000 shares were issued for $9 per share;
? 65,000 shares are outstanding.
Which of the following statements is correct based only on the above facts?
A. Common stock is reported at $630,000 on the balance sheet.
B. Additional-paid in capital is reported at $260,000 on the balance sheet.
C. Common stock is reported at $350,000 on the balance sheet.
D. Treasury stock is reported at $45,000 on the balance sheet.
34. Which of the following represents the maximum number of shares of stock issuable to the public?
A. Authorized shares
B. Issued shares
C. Outstanding shares
D. Treasury shares
35. Which of the following statements regarding earnings per share (EPS) is correct?
A. It equals net income divided by the number of authorized common shares.
B. It equals net income divided by the number of outstanding common shares.
C. It equals net income divided by the number of issued common shares.
D. It equals net income divided by the number of treasury shares.
36. Which of the following statements regarding earnings per share (EPS) is false?
A. It increases when treasury stock is acquired.
B. It increases when net income increases.
C. It decreases when additional shares of common stock are issued.
D. It decreases when the number of shares of common stock authorized increases.
37. Which of the following statements regarding earnings per share (EPS) is correct?
A. EPS can’t be used to compare different size companies.
B. Investors expect a higher EPS for companies with higher stock prices.
C. It is calculated by dividing net income by the number of common shares issued.
D. It increases when the number of shares of common stock outstanding increases.
38. Which of the following represents the number of shares currently in the hands of investors?
A. Authorized shares
B. Issued shares
C. Outstanding shares
D. Treasury shares
39. Rye Company has provided the following information:
? Number of issued common shares, 225,000;
? Net income, $500,000;
? Number of authorized common shares, 400,000;
? Number of treasury shares, 25,000.
What is Rye’s earnings per share?
A. $2.50
B. $1.25
C. $2.22
D. $1.33
40. Kirova Company has provided the following information:
? Number of issued common shares, 900,000;
? Net income, $1,000,000;
? Number of authorized common shares, 1,000,000;
? Number of outstanding common shares, 800,000
? Number of treasury shares, 100,000.
What is Kirova’s earnings per share?
A. $1.43
B. $1.25
C. $1.11
D. $1.00
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