1. Retained Earnings represent:

A) The profits of the company.

B) The investments of the owners.

C) The profits of the company plus the investments of the owners.

D) The total earnings of the company, less the dividends distributed to the owners and less any losses.

2. The journal entry when a dividend is declared for $150,000 would be:

A) A Above.

B) B Above.

C) C Above.

D) D Above.

3. When a corporation declares a dividend:

A) Assets decrease, liabilities increase.

B) Retained earnings increase, liabilities increase.

C) Liabilities increase, retained earnings decrease.

D) Retained earnings decrease, assets increase.

4 .Book value per share of common stock is derived by which of the following

A) Stockholders equity divided by the number of shares authorized

B) Stockholders equity divided by the number of shares outstanding

C) Net income divided by the number of shares outstanding

D) Net income divided by the number of shares authorized

5. The net assets of a corporation is equal to:

A) Total assets total liabilities

B) Total assets retained earnings

C) Total assets + total liabilities

D) Total assets + retained earnings

6. Hasbrooke Corporation has 50,000 shares of $1 par value common stock and 20,000 shares of cumulative 8%, $100 par preferred stock outstanding. Hasbrooke has not paid a dividend for the prior year. If Hasbrooke declares a $1.50 per share dividend this year, what will be the total amount they must pay their shareholders?

A) $30,000

B) $320,000

C) $395,000

D) $75,000

7. Retained earnings represents:

A) Cash available for dividends.

B) The amount initially invested in the business by stockholders.

C) Cash available for expansion and growth.

D) Income that has been reinvested in the business rather than distributed as dividends to stockholders.

8. On January 1, 2006, Lane Corporation had 50,000 shares of $5 par value common stock outstanding. On March 31, 2006, Lane issued an additional 8,000 shares in exchange for a building. What number of shares will be used in the computation of basic EPS for the year 2006?

A) 50,000.

B) 58,000.

C) 56,000.

D) 52,000.

9. Mirage Corporation's financial statements for the current year include the following:

Income from continuing operations...............................................................	$620,000
Prior period adjustment (increase in prior year net income, net of taxes)......................................................................	190,000
Cash dividends paid to preferred stockholders............................................................	202,000
Gain on sale of discontinued operations (net of taxes)......................................................................	410,000
Operating loss on discontinued operations (net of taxes) net income, net of tax benefit)...................................................................	320,000
Extraordinary loss (net of tax benefit)...................................................................	95,000

On the basis of this information, net income for the current year is:

A) $1,007,000.

B) $ 620,000.

C) $1,445,000.

D) $ 615,000.

10. During the year 2007, Moonglow Corporation suffered a $600,000 loss when its factory was destroyed in a flood. Assuming the corporate income tax rate is 34%, what amount will Moonglow report as an extraordinary loss on its income statement for 2007? Assume floods are not common in this area.

A) $600,000

B) $396,000

C) $204,000.

D) Nothing, since this does not qualify as an extraordinary item.

11. Galaxy Corporation was organized on January 1 and issued 500,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $2,160,000. Net earnings per share amounted to:

A) $4.32.

B) $3.75.

C) $3.09.

D) $3.60.

12. To receive the next cash dividend, an investor must purchase the stock before the:

A) Dividend declaration date.

B) Ex-dividend date.

C) Date of record.

D) Payment date announced by the board of directors.

13. Dividends become a liability of a corporation:

A) On the date the board of directors declares the dividend.

B) On the date of record.

C) On the date payment is to be made.

D) When cumulative preferred stock dividends are in arrears.

14. A 2-for-1 stock split:

A) Is accounted for in the same way as a 100% stock dividend.

B) Increases the number of outstanding shares of common stock, but par value per share remains the same as before the split.

C) Is recorded by transferring the par value of additional shares from retained earnings to the common stock account.

D) Should logically cause the market price per share to drop by approximately 50%.

15. As a result of a 5% stock dividend:

A) Total stockholders' equity decreases by 5%.

B) The par value per share decreases by 5%.

C) The number of shares owned by each stockholder increases by 5%, but total stockholders' equity does not change.

D) Both the number of shares outstanding and the total stockholders' equity increase by 5%.

16. A $1,000 bond that sells for 102 has a cost of:

A) $1002

B) $1020

C) $1200

D) $1000

17. When a corporation has a right to redeem bonds in advance of the maturity date, it is known as:

A) Convertible.

B) Callable.

C) Junk bonds.

D) Debentures.

18. Kims Corporation plans to invest $100 million to earn about 20% before income taxes. The company is considering whether it should raise the $100 million by issuing 10% bonds payable or capital stock. If the company issues the bonds, it will probably report:

A) Lower net income and lower income taxes expense than if it issues capital stock.

B) Higher net income and higher income taxes expense than if it issues capital stock.

C) Lower net income and higher income taxes expense than if it issues capital stock.

D) Higher net income and lower income taxes expense than if it issues capital stock.

19. The amortization of a bond discount:

A) Decreases the carrying value of a bond and increases interest expense.

B) Decreases the carrying value of a bond and decreases interest expense.

C) Increases the carrying value of a bond and increases interest expense.

D) Increases the carrying value of a bond and decreases interest expense.