Shareholders are personally liable for debts of the corporation.

	True
	False

An example of equity financing is when a corporation borrows money from a bank.

	True
	False

A benefit of owning common stock is

Shareholders may receive dividends.

Shareholders have the right to vote.

Shareholders have residual claims to assets.

All of the above.

The journal entry to record the issuance of common stock above par value includes

	A credit to Cash.
	A debit to Common Stock.
	A credit to Additional Paid-in Capital.
	A debit to Common Stock and Cash.

Treasury stock

	Never results in a gain or loss.
	Is increased by a credit.
	Is reported on the income statement.
	Is added to total stockholders' equity.

On the date of declaration, the journal entry will

	Increase retained earnings.
	Increase liabilities.
	Decrease assets.
	Increase stockholders' equity.

The journal entry prepared on the date dividends are paid will

	Decrease retained earnings.
	Increase liabilities.
	Decrease assets.
	Decrease stockholders' equity.

Stock dividends

	Decrease total stockholders' equity.
	Increase total stockholders' equity.
	Decrease retained earnings.
	Increase retained earnings.

A stock split will

	Decrease total stockholders' equity.
	Increase total stockholders' equity.
	Decrease retained earnings.
	Increase retained earnings.
	Not affect total stockholders' equity.

When preferred stock is issued at par value

	Assets will decrease.
	Stockholders' equity will decrease.
	Liabilities will increase.
	Contributed capital will increase

A cumulative dividend preference guarantees dividends owed from prior years will be paid to preferred stockholders before dividends are paid to common stockholders.

	True
	False

Select each of the items that are used to compute earnings per share (EPS).

	Current Stock Price
	Average Common Stockholders' Equity
	Average Number of Common Shares Outstanding
	Net Income - Preferred Dividends
	Earnings Per Share

Select each of the items that are used to compute return on equity (ROE).

	Current Stock Price
	Average Common Stockholders' Equity
	Average Number of Common Shares Outstanding
	Net Income - Preferred Dividends
	Earnings Per Share

Select each of the items that are used to compute price/earnings (P/E).

	Current Stock Price
	Average Common Stockholders' Equity
	Average Number of Common Shares Outstanding
	Net Income - Preferred Dividends
	Earnings Per Share

A higher EPS from one year to the next means greater profitability.

True

False

The Jackson Co. was authorized to issue 1,000,000 shares of $1 par value common stock. On March 1, 2013, the Jackson Co. sold 100,000 shares of common stock for $8 a share. On September 1, 2013, the Jackson Co. repurchased 20,000 shares of common stock for $10 a share.

Issued Shares	(Click to select)100,000 shares1,000,000 shares20,000 shares80,000 shares
Outstanding Shares	(Click to select)100,000 shares1,000,000 shares20,000 shares80,000 shares
Authorized Shares	(Click to select)100,000 shares1,000,000 shares20,000 shares80,000 shares
Treasury Stock	(Click to select)100,000 shares1,000,000 shares20,000 shares80,000 shares