Question Details

Farmer Company reports the following amounts 



1.	Paiva Corporation splits its common stock 2 for 1, when the market value is $80 per share. Prior to the split, Paiva had 100,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock
a.	remains the same.
b.	is reduced to $2 per share.
c.	is reduced to $5 per share.
d.	is reduced to $20 per share.


2.	Which of the following statements about retained earnings restrictions is incorrect?
a.	Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased.
b.	Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan.
c.	The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes.
d.	Retained earnings restrictions are generally disclosed through a journal entry on the books of a company.

3.	Prior period adjustments
a.	may only increase retained earnings.
b.	may only decrease retained earnings.
c.	may either increase or decrease retained earnings.
d.	do not affect retained earnings.


4.	Farmer Company reports the following amounts for 2014:
Net income	$270,000
Average, stockholders' equity	1,000,000
Preferred dividends	70,000
Par value preferred stock	200,000
The 2014 rate of return on common stockholders' equity is
a.	25.0%.
b.	22.5%.
c.	27.0%.
d.	33.8%.

	5.	The return on common stockholders' equity is computed by dividing
a.	net income by ending common stockholders' equity.
b.	net income by average common stockholders' equity.
c.	net income minus preferred dividends by ending common stockholders' equity.
d.	net income minus preferred dividends by average common stockholders' equity.




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