Q: Which formula correctly calculates Earnings Per Share (EPS)?

$$\text{EPS} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Weighted Average Common Shares Outstanding}}$$

Question 1

Which of the following best describes the two main categories of stockholders' equity on a corporation's balance sheet?

Accepted Answer

Retained earnings and paid-in capital

Question 2

A corporation issues 2,000 shares of $$2 par value common stock for 12$$,000 cash. What is the correct journal entry for the Common Stock account?

Accepted Answer

Credit Common Stock for $4,000

Question 3

Which of the following is NOT an advantage of the corporate form of business?

Accepted Answer

Double taxation

Question 4

A company purchases 1,000 shares of its own $$1 par value common stock for 25$$,000. What is the effect on stockholders' equity?

Accepted Answer

Stockholders' equity decreases by $25,000

Question 5

Which of the following is least likely to be a characteristic of preferred stock?

Accepted Answer

Preference as to voting

Question 6

A corporation declares a cash dividend. What is the immediate effect on the accounting equation?

Accepted Answer

Increase in liabilities and decrease in stockholders' equity

Question 7

Which of the following is true regarding the date of record for a cash dividend?

Accepted Answer

No journal entry is required

Question 8

Which of the following best describes a stock split?

Accepted Answer

Has no effect on total stockholders' equity

Question 9

A company issues 500 shares of no-par common stock for $8,000 cash. How should this transaction be recorded?

Accepted Answer

Credit Common Stock for $8,000

Question 10

Which of the following represents the largest number of shares in a corporation?

Accepted Answer

Authorized shares

Question 11

A company sells equipment with a cost of $$30,000 and accumulated depreciation of 12$$,000 for $22,000 cash. What is the gain or loss on sale, and what amount is reported as proceeds from sale of plant assets on the statement of cash flows?

Accepted Answer

Gain of $$4,000; 22$$,000 proceeds

Question 12

Which of the following is classified as a financing activity on the statement of cash flows?

Accepted Answer

Borrowing cash by signing a long-term note

Question 13

Which formula correctly calculates Earnings Per Share (EPS)?

Accepted Answer

$$	ext{EPS} = \frac{	ext{Net Income} - 	ext{Preferred Dividends}}{	ext{Weighted Average Common Shares Outstanding}}$$

Question 14

On the statement of cash flows, increases and decreases in long-term assets resulting from cash transactions are reported as:

Accepted Answer

Investing activities

Question 15

A company repurchased its own stock for $$40,000 and issued bonds payable for 120$$,000 during the year. What is the net cash provided by financing activities?

Accepted Answer

$80,000

Question 16

On the indirect method statement of cash flows, an increase in accounts payable is:

Accepted Answer

Added to net income in the operating activities section

Question 17

If the indirect method is used to calculate net cash provided by operating activities, a decrease in accounts receivable is:

Accepted Answer

Added to net income

Question 18

Which of the following transactions does NOT affect cash during a period?

Accepted Answer

A write-off of an uncollectible account

Question 19

On an indirect method statement of cash flows, a gain on the sale of plant assets is:

Accepted Answer

Deducted from net income in the operating activities section

Question 20

A company sold land for $$50,000 cash, purchased equipment for 20$$,000 cash, and issued common stock for $70,000 cash. What is the net cash provided by investing activities?

Accepted Answer

$30,000

Financial Accounting Exam 4 Review – Step-by-Step Guidance

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