Question : 101. Firms occasionally issue stock options in order to A. compensate employees.B. compensate managers.C. motivate : 1230391

101. Firms occasionally issue stock options in order to 
A. compensate employees.
B. compensate managers.
C. motivate employees to take actions that will increase the market value of the firm’s common shares.
D. conserve cash.
E. all of the above

102. The Prime Corporation is a new company about to issue stock. The corporation sells 2,000 shares of common stock (par value $2) at $10 per share. The journal entry to record this transaction is: 
A. Cash                                   2,000
      Common Stock                            2,000
B. Cash                                 20,000           
  Common Stock                           4,000
       Additional Paid-in Capital        16,000
C. Cash                                 20,000
  Owners’ Liability                      16,000
       Common Stock                           4,000
D. Cash                                 20,000
       Accounts Payable                     20,000
E. Cash                                 20,000
       Notes Payable                           20,000

103. The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _____ and shows the swap of common shares for bonds or preferred stock at their _____. 
A. current market prices; carrying value
B. carrying value; current market prices
C. current market prices; par value
D. carrying value; par value
E. present value of future cash flows; current market prices

104. Which of the following is true regarding firms use of net assets (assets minus liabilities)?  
A. Firms use net assets to generate more net assets through the earnings
B. Firms typically retain some or all of the net assets generated by earnings, causing net assets to increase, along with retained earnings, which is the component of shareholders’ equity showing the cause of that increase in net assets.
C. The retention of net assets generated by earnings generally increases the market price of the firm’s common shares.
D. Some firms pay periodic dividends to the common shareholders out of net assets.
E. all of the above

105. Which of the following is not true regarding firms use of net assets (assets minus liabilities)?  
A. Firms use net assets to generate more net assets through the earnings
B. Firms typically retain some or all of the net assets generated by earnings, causing net assets to increase, along with retained earnings, which is the component of shareholders’ equity showing the cause of that increase in net assets.
C. The retention of net assets generated by earnings generally increases the market price of the firm’s common shares.
D. Some firms pay periodic dividends to the common shareholders out of net assets.
E. Regardless of whether a firm has more than one class of common stock and their dividend rights differ, each common shareholder always receives the same dividend per share as all other common shareholders.

106. Which of the following is not true regarding firms use of net assets (assets minus liabilities)?  
A. Firms may choose to use the net assets generated by earnings to repurchase common shares.
B. Firms may choose to use the net assets generated by earnings to repurchase common shares which result in cash outflows for a firm, similar to paying a cash dividend.
C. In the case of share repurchases, only those shareholders that choose to sell their shares to the firm receive cash.
D. Some firms pay periodic dividends to the common shareholders out of net assets.
E. Firms typically retain some or all of the net assets generated by earnings, causing net assets to decrease, along with retained earnings, which is the component of shareholders’ equity showing the cause of that decrease in net assets.

107. The _____ has the legal authority to declare dividends. When considering whether to declare dividends, they must conclude that declaring a dividend is both legal (under law and contract) and financially desirable.  
A. chief financial officer
B. chief operating officer
C. chief executive officer
D. board of directors
E. financial analysts

108. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Which of the following is/are true? 
A. The board may not declare dividends “out of capital,” that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
B. The board must declare them “out of earnings” by debiting them against the Retained Earnings account, which results from earnings transactions.
C. “Capital” may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
D. Some jurisdictions allow corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period.
E. all of the above

109. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Which of the following is/are not true? 
A. The board may declare dividends “out of capital,” that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
B. The board may declare dividends “out of earnings” by debiting them against the Retained Earnings account, which results from earnings transactions.
C. “Capital” may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
D. Some jurisdictions allow corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period
E. none of the above

110. Jurisdiction-specific corporate laws limit directors’ freedom to declare dividends. Which of the following is/are true? 
A. The board may declare dividends “out of capital,” that is, debited against the contributed capital accounts, which result from fund-raising transactions with owners.
B. The board may not declare dividends “out of earnings” by debiting them against the Retained Earnings account, which results from earnings transactions.
C. “Capital” may mean the par or stated value of outstanding common shares or the total amount paid in by shareholders.
D. No jurisdictions allows corporations to declare dividends out of the earnings of the current period even if the Retained Earnings account has a debit (negative) balance because of accumulated losses from previous period
E. none of the above