Question : 21.Which one of the following ‘debt’ with the appearance of : 1241740

 

 

21.Which one of the following is ‘debt’ with the appearance of ‘equity’?

a.Long-term debt with a rate of interest that depends upon the current prime rate of interest

b.Long-term debt that can be converted into common stock

c.Notes payable in ten years

d.Convertible bonds

 

 

22.If preferred stock is cumulative, then

a. preferred dividends are a percentage of corporate profits.

b. dividends in arrears must be paid before common shareholders receive dividends.

c. dividends are a percentage of the market value of the preferred stock.

d. payment of dividends is legally guaranteed to shareholders each year.

 

 

 

23.If preferred stock is participating, then

a. preferred dividends are a percentage of corporate profits.

b. preferred shareholders vote in the election of the members of the board of directors.

c. preferred shareholders share in the remaining amount of dividend with common shareholders.

d. dividends in arrears must be paid before common shareholders receive dividends.

 

 

 

24.Which one of the following would most likely require a restriction of retained earnings?

a. The sale of a plant asset

b. A sale of treasury stock

c. A declaration of cash dividends

d. An appropriation declared by the Board of Directors

 

 

 

25.Simon Corp’s $1 par value, common stock was selling for $20 per share. Simon Corp’s owners’ equity accounts were as follows:

 

Common stock

$800,000

Additional paid-in capital

200,000

Retained earnings

400,000

 

How many shares of common stock are outstanding?

a. 30,000

b.600,000

c.800,000

d.Not enough information to determine.

 

 

26.Which one of the following events increases the debt/equity ratio?

a.Purchase of inventory on account

b.Sale of treasury stock for less than its cost

c.The payment of cash dividends that were previously recorded

d.Recognition of net income for the year

 

 

 

27.Treasury stock is

a. an asset representing a corporate investment in itself.

b. highly-valued stock owned by a corporation.

c. illegal for U.S. corporations.

d. a decrease of shareholders’ equity.

 

 

 

28.If preferred stock is specified as 8% preferred stock, then preferred

a. dividends are a percentage of the par value of the preferred stock.

b. shareholders vote in the election of the members of the board of directors.

c. dividends are a percentage of corporate profits.

d. dividends in arrears must be paid before common shareholders receive dividends.

 

 

 

29.Dividends in arrears

a.are preferred dividends that have been declared but not paid.

b.must be legally paid in the future.

c.are dividends that have not been declared on cumulative preferred stock.

d.are reported as a liability on the balance sheet until paid.

 

 

 

30.Preferred stock is preferred by investors as compared to common stock because

a. it pays higher dividends than common.

b.it has advantages of special rights to dividends and/or asset claims during liquidation.

c.preferred stock pays dividends and common stock pays interest.

d. dividends are expected to grow exponentially.