QUESTION 15

1. If a company issues 1,000 shares of common stock at a market price of $20 per share, which of the following is the correctbalance sheet effect?
2. A.Increase cash by $20,000 and increase contributed capital by $20,000
3. B.Increase cash by $20,000 and increase earned capital by $20,000
4. C.Increase stock revenues by $20,000
5. D.Stock issuances are not reported on the balance sheet
6. E.None of the above

3.3335 points

QUESTION 16

1. The 2008 financial statements of Alleghany Corporation report that the company paid dividends of $17,350,000 to its preferred shareholders before paying dividends to its common shareholders. This practice is called: (one answer)
2. A.Liquidation preference
3. B.Treasury preference
4. C.Dividend preference
5. D.Stock ownership preference
6. E.None of the above

3.3335 points

QUESTION 17

1. If the prevailing market interest rate was 4% and bonds of XYZ Company had a stated/coupon rate of 5% would they be issued at a:
2. A.Discount
3. B.Premium
4. C.Stated value
5. D.Par Value

3.3335 points

QUESTION 18

1. The difference between the stated or coupon interest rate of a bond and the market interest rate for similar investments:
2. A.Never changes
3. B.Changes daily
4. C.Changes monthly

3.3335 points

QUESTION 19

1. ABC company has two classes of stock: A preferred that has a market value of $125 per share and a par value of $100, with a 6%cumulativedividend, 10000 shares issued and outstanding. A common stock that was issued at $20 per share, no par value, 50000 shares issued and outstanding.
2. ABC paid cash dividends of $75000 in 2007, $50,000 in 2008, and $80,000 in 2009. For 2007 indicate how much of the dividend the Preferred shareholders and common shareholders received. In 2007
3. A.Preferred 60,000, Common 15,000
4. B.Preferred 75,000, Common 0
5. C.Preferred 10,000 Common 65,000
6. D.Preferred 50,000 Common 15,000