A Company with 100,000 Authorized Shares of $4 Par Common

question 71

Multiple Choice

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 a share. The effect of the declaration and issuance of the stock dividend is to

• A) decrease retained earnings, increase common stock, and increase paid-in capital
• B) increase retained earnings, decrease common stock, and decrease paid-in capital
• C) increase retained earnings, decrease common stock, and increase paid-in capital
• D) decrease retained earnings, increase common stock, and decrease paid-in capital

Compute average inventory, accounts receivable turnover ratio, and total asset turnover from given data.

Calculate and interpret dividend yield, profit margin, total asset turnover, and return on total assets.

Understand the concept and significance of days' sales uncollected and days' sales in inventory within business operations.

Apply formulae to determine various financial ratios such as current ratio, acid-test ratio, and debt to equity ratio from balance sheet data.

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Definitions:

Product Costs

The total costs incurred to create a product, including direct materials, direct labor, and manufacturing overhead.

Period Costs

Period costs are expenses that are not directly tied to production and are expensed in the period they are incurred, such as selling, general, and administrative expenses.

Financial Reporting

The process of disclosing financial results and related information to stakeholders and the public through financial statements and other declarations.

Indirect Manufacturing Cost

Costs related to production that are not directly traceable to a specific product, such as maintenance of equipment and factory supervision.