Test bank with answers for financial accounting 6e by libby chapter 11

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Chapter 011: Reporting and Interpreting Owner's Equity

True / False Questions
1. Outstanding shares of stock are those shares which a corporation has the ability to issue as
documented in its charter in the state where incorporated.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 1

2. A major advantage a corporation has over a proprietorship or partnership is that it allows
individuals to participate in ownership by purchasing small amounts of stock.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 1

3. The shares issued can be less than those outstanding when the corporation has repurchased
some of their shares which are called treasury shares.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 1

4. Kansas City Company has 2,000,000 shares issued and 100,000 treasury shares. They
report net income of $5,200,000 in 2009. Earnings per share equals $2.60.
FALSE

AACSB Tag: Analytic
Difficulty: Medium
L.O.: 2

11-1
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Chapter 011: Reporting and Interpreting Owner's Equity

5. Treasury stock is a corporation's own stock that was sold, issued, repurchased, and is still
held by the corporation.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 3

6. When a company repurchases some of its shares of stock (treasury stock), the number of
shares issued is reduced.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

7. To pay a cash dividend, a corporation needs adequate cash, authorization from the board of
directors, and adequate retained earnings.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 4

8. A company has 5,000,000 shares issued and 400,000 held in the treasury. If the board of
directors declares a $16 million cash dividend, then the dividends per share would be $3.20.
FALSE

AACSB Tag: Analytic
Difficulty: Medium
L.O.: 4

11-2
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Chapter 011: Reporting and Interpreting Owner's Equity

9. On the date of payment of a cash dividend, the company would debit retained earnings and
credit cash.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 4

10. The dividend yield ratio is a measure of the immediate return investors are receiving from
dividends stated as a percentage of market price.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 5

11. A company reported earnings per share of $3.50 and dividends per share of $1.00 when
the market price of the stock was $80.00. The dividend yield is 20%.
FALSE

AACSB Tag: Analytic
Difficulty: Medium
L.O.: 5

12. A stock split results in the reduction of the par or stated value per share and a
proportionate increase in the number of shares outstanding.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

11-3

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Chapter 011: Reporting and Interpreting Owner's Equity

13. The most common reason a company would declare a stock split is to reduce the market
price of its stock to increase the trading activity.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

14. Preferred stock often has a preference in the distribution of assets over common stock in
the event of dissolution of the corporation.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 7

15. When preferred stock is cumulative and the board of directors passes on a dividend, the
arrearage must be shown as a liability on the balance sheet and a reduction from retained
earnings on the statement of stockholders' equity and the balance sheet.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

16. Restrictions on retained earnings usually occur when a company borrows money and the
creditor wants to restrict the amount of dividends that can be distributed.
TRUE

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 7

11-4
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Chapter 011: Reporting and Interpreting Owner's Equity

17. When a company reissues treasury stock, it creates cash inflow from an investing activity
because treasury stock is an investment asset on the balance sheet.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 8

18. Payment of a cash dividend creates a cash outflow from an operating activity.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 8

19. Partnerships, sole proprietorships, and corporations are three basic forms of business
organizations.
TRUE

AACSB Tag: Relative Thinking

Difficulty: Easy
L.O.: Sup A

20. All businesses pay income taxes.
FALSE

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: Sup A

11-5
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Chapter 011: Reporting and Interpreting Owner's Equity

Multiple Choice Questions

21. Advantages of a corporation include all of the following except
A. ease of participating in ownership
B. stockholders are not liable for a corporation's debts.
C. the ownership rights of corporations are easily transferred.
D. stockholders have a mutual agency relationship.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 1

22. From an investor's viewpoint, in today's litigious environment, what would be considered
the most advantageous characteristic of the corporate form of organization?
A. Taxation.
B. Ease of capital assembly.
C. Continuity of life for the corporation.
D. Limited liability for stockholders.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 1

23. Which of the following statements about a corporation is false?
A. Corporations are the dominant form of business organization in terms of volume of
operations.
B. Their owners have limited liability.
C. Corporations allow even small investors to participate in ownership.
D. Corporations are separate legal entities from their owners.

AACSB Tag: Relative Thinking
Difficulty: Medium

L.O.: 1

11-6
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Chapter 011: Reporting and Interpreting Owner's Equity

24. Which of the following is true about the corporate form of business but is not true for a
proprietorship or partnership?
A. It is a separate economic entity from its owners.
B. Investment in a corporation's stock is less risky than investing in bonds.
C. It is easier for individuals to become owners in a corporation by buying small amounts of
stock than it is to own a proprietorship or partnership share.
D. A corporation is easier to form than a partnership.

AACSB Tag: Relative Thinking

Difficulty: Medium
L.O.: 1

25. Which of the following statements is false?
A. Most small shareholders do not attend the corporation's annual meeting so they cast their
vote by proxy card.
B. Corporations are created by application to a specific state not the federal government.
C. Most large corporations are chartered out of Delaware since it has very favorable laws of
incorporation.
D. Corporations have a limited life.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 1

26. Which of the following represents the maximum shares of stock issuable to the public?
A. Authorized shares
B. Issued shares
C. Outstanding shares
D. Unissued shares

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 1

11-7
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Chapter 011: Reporting and Interpreting Owner's Equity

27. Which of the following represents the shares currently in the hands of investors?
A. Authorized shares
B. Issued shares
C. Outstanding shares
D. Unissued shares

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 1

28. Which of the following represents the shares sold in either an initial public offering or
subsequent seasoned new issuances?
A. Authorized shares
B. Issued shares
C. Outstanding shares
D. Unissued shares

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 1

29. Which of the following about earnings per share is true?
A. It indicates the portion of earnings distributed to the owners as an immediate return on
their investment.
B. Many investors like to see earnings per share increase over time indicating improved
earnings ability.
C. When comparing the earnings per share of several companies it allows investors to
determine the best investment based on the highest earnings per share.
D. If earnings per share equals $5.00, then the maximum dividend payment would be $5.00.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 2

11-8
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Chapter 011: Reporting and Interpreting Owner's Equity

30. Which of the following statements about earnings per share is true?
A. Increased net income would cause earnings per share to decrease.
B. Issuance of more common shares would cause earnings per share to increase.
C. Repurchase of treasury shares would cause earnings per share to decrease.
D. None of the other answers is true.

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 2

31. The par value of common stock is the
A. average market price of the stock during the period in which it is sold.
B. ceiling (maximum) amount above which the stock may not be sold initially.
C. nominal value per share established in the corporate charter.
D. selling price of the stock at the date it was issued by the corporation.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

32. Depot Company has one class of capital stock issued. It is
A. common stock.
B. preferred stock, voting.

C. preferred stock, noncumulative.
D. common stock, nonvoting.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 3

11-9
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Chapter 011: Reporting and Interpreting Owner's Equity

33. If Hayes Corporation sells and issues 100 shares of its $1 par value common stock at $15
per share, the entry to record the sale will not include a
A. Debit to cash of $1,500.
B. Credit to capital in excess of par of $1,400.

C. Credit to common stock of $100.
D. Credit to retained earnings of $1,500.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

34. Choose the correct definition for par value from the following:
A. The amount that a corporation must pay when it exercises its right to convert shares of
stock.
B. The equity of one share of outstanding stock in the issuing corporation's net assets as
recorded in the corporation's accounts.
C. An arbitrary value placed on a share of stock at the time the stock is authorized in the
corporate charter.
D. The costs of bringing a corporation into existence, such as legal fees, promoter's fees, and
amounts paid to the state to secure a charter.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 3

35. Irish Corporation issued (sold) 10,000 shares of its no par common stock for $70 per
share. The bylaws established a stated value of $10 per share. The transaction would increase
common stock by
A. zero
B. $600,000
C. $100,000
D. $700,000

AACSB Tag: Relative Thinking

Difficulty: Medium
L.O.: 3

11-10
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Chapter 011: Reporting and Interpreting Owner's Equity

36. Which of the following statements about stock option plans is true?
A. Offering stock options to a company's managers reduces the likelihood they will not
always act in the best interest of the investors.
B. Stock option plans are often a major part of an executive's compensation plan.
C. Stock options usually have a grant price equal to the market price of the stock when the
options are first offered to the executives.
D. All of these are true.

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 3

37. Which of the following statements about treasury stock transactions is true?
A. The total number of shares issued increases when treasury stock is purchased.
B. The total number of shares authorized changes when treasury stock is purchased.
C. Gains and losses on treasury stock transactions are reported on the income statement.
D. A stockholders' equity account is debited when treasury stock is purchased.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

38. The balance sheet of Werther Company showed the following data about its common
stock, par $1: authorized shares, 10,000,000; outstanding shares, 4,300,000; and issued shares
4,700,000. Therefore, the number of treasury stock shares was
A. 0.
B. 4,700,000.
C. 4,300,000.
D. 400,000.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

11-11
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Chapter 011: Reporting and Interpreting Owner's Equity

39. Which of the following is a "contra" stockholders' equity account?
A. Retained earnings.
B. Preferred Stock.
C. Treasury stock.
D. Capital in excess of par value.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 3

40. During 2008, Thomas Corporation repurchased some shares of its own common stock. It
records treasury stock at cost. What effect did this transaction have on 2008 stockholders'
equity and earnings per share, respectively?

A.

B.
C.
D.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

11-12
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Chapter 011: Reporting and Interpreting Owner's Equity

41. McGuire Company had the following stockholders' equity section:

At what amount per share was the treasury stock purchased?

A. $17.00.
B. $10.00.
C. $12.75.
D. $15.00.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

11-13
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Chapter 011: Reporting and Interpreting Owner's Equity

42. Which of the following entries would be recorded when a company reissues 1,000 shares
of treasury stock for $50 per share when they were repurchased at a cost of $47 per share and

have a $1 par value?

A.

B.

C.

D.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

11-14
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Chapter 011: Reporting and Interpreting Owner's Equity

43. Which of the following entries would be recorded when a company reissues 1,000 shares
of treasury stock for $40 per share when they were repurchased at a cost of $44 per share and
have a $1 par value?

A.

B.

C.

D.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 3

44. In the case of a cash dividend, a dividend liability comes into existence on the
A. date of declaration.
B. date of record.
C. date of dividend payment.
D. last day of the month in which the dividend is declared.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 4

11-15

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Chapter 011: Reporting and Interpreting Owner's Equity

45. Shares of stock eligible for dividends are
A. the number of shares of authorized.
B. the number of shares issued.
C. the number of shares outstanding.
D. the number of treasury shares.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 4

46. Mosiman reported the following asset and liability balances at the end of 2009 and 2010

During 2010, cash dividends of $50,000 were declared and paid. Additional capital stock was
issued for $100,000. Therefore, the net income (or net loss) for 2010 was
A. $400,000
B. $480,000
C. $350,000
D. $300,000

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 4

47. Accounting entries associated with a cash dividend usually are made on the
A. record date and payment date.
B. payment date only.
C. declaration date and record date.
D. declaration date and payment date.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 4

11-16
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Chapter 011: Reporting and Interpreting Owner's Equity

48. On December 15, 2009, the board of directors of Cross Corporation declared a cash
dividend, payable on January 8, 2010 of $.80 per share on the 2,000,000 common shares
outstanding. The accounting period ends December 31. Because of this action, on December
15, 2009, Cross Corporation should
A. make no journal entry because the event had no effect on the corporation's financial
position until 2010.
B. decrease retained earnings $1.6 million and increase contributed capital $1.6 million.
C. decrease retained earnings $1.6 million and increase liabilities by $1.6 million.
D. decrease cash $1.6 million and decrease retained earnings $1.6 million.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 4

49. The declaration and payment of a cash dividend
A. reduces retained earnings and increases liabilities by the amount of the dividend.
B. reduces retained earnings and increases contributed capital by the same amount.
C. reduces assets and increases liabilities each by the amount of the dividend.
D. reduces assets and retained earnings each by the amount of the dividend.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 4

50. In 2008, Fast Franks had a dividend yield of .1% and Blazing Burgers was .2%. Which of
the following is false?
A. Dividend yield will usually drop when the market price per share drops.
B. They pay very little in dividends because they reinvest their earnings in expansion of
operations.
C. They provide very little immediate return to their investors.
D. Dividend yield will usually drop when the market price per share rises.

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 5

11-17
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Chapter 011: Reporting and Interpreting Owner's Equity

51. When a stock dividend (on par value stock) is declared and issued
A. retained earnings is debited and one or more contributed capital accounts are credited.
B. capital in excess of par value is debited and retained earnings is credited.
C. the number of shares outstanding increases while the par value of each share decreases.
D. .the number of shares outstanding decreases while the par value of each share increases.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

52. A stock dividend
A. results in a transfer of retained earnings to contributed capital.
B. increases the number of shares outstanding and involves a pro rata reduction in the par
value per share.
C. is accounted for in exactly the same manner as a stock split.
D. results in a transfer of retained earnings to contributed capital and also increases the
number of shares outstanding and involves a pro rata reduction in the par value per share.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

53. Chicago Clock Corporation issued a 3-for-2 stock split (i.e., three new shares in exchange
for each two old shares turned in) of its common stock which had a par value of $100 before
the split. What dollar amount of retained earnings should be transferred to the common stock

account?
A. Par value of $100 per share.
B. Market value per share on the issue date.
C. Half of the previous total amount in the common stock account(s).
D. None should be transferred.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

11-18
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Chapter 011: Reporting and Interpreting Owner's Equity

54. Which of the following statements is false?

A. Stock splits shuffle amounts between retained earnings and contributed capital accounts.
B. Both stock splits and stock dividends increase the common shares issued.
C. Both stock splits and stock dividends increase the common shares outstanding.
D. Both stock splits and stock dividends have the impact of reducing the market price of the
stock.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

55. A company has 4 million common shares authorized, 2.5 million shares issued and
100,000 treasury shares. Their par value is $1 per share and the market price is $30 when the
company declares a 4/1 stock split. Which of the following is true?
A. There will be a transfer of $2.4 million from retained earnings to contributed capital.
B. Only the shares outstanding will quadruple to 4.8 million and the par value will be reduced
to $.25 per share.
C. The shares authorized, issued, outstanding, and held in treasury will all quadruple while
the par value will be reduced to $.25 per share.
D. The company will be unable to declare a 4/1 split because they do not have enough
authorized shares to issue the needed 4.8 million shares.

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 6

11-19
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Chapter 011: Reporting and Interpreting Owner's Equity

56. A company declares a 40% stock dividend when there are 4.0 million common shares
outstanding with a $1 par value. Their current market price is $20 per share. Which of the
following will be the effect of the stock dividend?
A. Retained earnings will decrease by $1.6 million and contributed capital will increase by
$1.6 million.
B. Contributed capital will decrease by $1.6 million and retained earnings will increase by
$1.6 million.
C. Retained earnings will decrease by $32 million and contributed capital will increase by $32
million.
D. Contributed capital will decrease by $32 million and retained earnings will increase by $32
million.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 6

57. The following information is available for the Davidson Company. They have 10,000,000
common shares issued, 500,000 million shares held in treasury, par value of $2 per share, and
current market price of $25 per share. They declare a 15% stock dividend. Which of the
following is true?
A. Retained earnings will decrease and common stock will increase by $3 million.
B. Retained earnings will decrease and common stock will increase by $2.85 million.
C. Retained earnings will decrease and common stock will increase by $35.625 million
D. Retained earnings will decrease and common stock will increase by $36.0 million.

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 6

58. With respect to preferred stock, select the statement that is correct.
A. It must have a par value.
B. It cannot exist unless there also is common stock.
C. It is never issued without voting privileges.
D. It always provides for a fixed payment to be made to the stockholders even for years when
no dividends have been declared.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

11-20
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Chapter 011: Reporting and Interpreting Owner's Equity

59. The conversion feature on convertible preferred stock enables the stockholder to convert it
to
A. convertible bonds.
B. cash.
C. common stock.
D. products of the company.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 7

60. What is the correct entry for the sale of 1,000 shares of $10 par preferred stock for
$50,000?
A.

B.

C.

D.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

11-21
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Chapter 011: Reporting and Interpreting Owner's Equity

61. Which is false about preferred stock?
A. Preferred stock has a higher priority status relative to common stock.
B. The same capital accounts are used to record the issuance of preferred stock and common

stock.
C. It usually does not carry voting rights.
D. Preferred stockholders receive dividends in arrears only if the shares are cumulative.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 7

62. Which of the following statements is true?
A. Common stock has a dividend rate fixed by the stock contract.
B. Preferred stock has a volatile market value; therefore, it is a more risky investment than
common stock.
C. As a company's profits and cash flow increases, the board of directors may choose to
increase the dividends received by common stockholders.
D. All other answers are false.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

63. Assume the following shares outstanding:
Preferred stock, 6%, $50 par value, cumulative, 1,000 shares with dividends in arrears 3
years, for 2006, 2007, and 2008.
Common stock, $100 par value, 2,000 shares.
Total dividends declared in 2009 were $50,000. The total amount of dividends to which
common stockholders are entitled is
A. $62,000.
B. $50,000.
C. $45,000.
D. $38,000.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

11-22
©2009 McGraw-Hill Inc. Test Bank to accompany Libby Financial Accounting 6/e


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Chapter 011: Reporting and Interpreting Owner's Equity

64. Slickers, Inc. had the following shares outstanding during 2008:
Preferred stock, 7%, $50 par value, cumulative, 1,000 shares with dividends in arrears for
2006 and 2007.
Common stock, $100 par value, 2,000 shares.
The total dividends declared for the current year were $50,000. The total amount of dividends
to which the preferred stockholders are entitled is

A. $ 3,500.
B. $ 7,000.
C. $10,500.
D. $12,000.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

65. At January 1, 2009, Grabowski Corporation had outstanding capital stock as shown
below. On December 31, 2009, it declared and paid cash dividends of $48,000 to the preferred
stockholders.
Common stock—1,000,000 shares outstanding, $1 par value.
Preferred stock—2,000 shares outstanding, $75 par, 8%, cumulative. The stock was issued at
a price of $15 per share.
At December 31, 2009, how many years were the preferred dividends in arrears?
A. One year.
B. Two years.
C. Three years.
D. Four years.

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 7

11-23
©2009 McGraw-Hill Inc. Test Bank to accompany Libby Financial Accounting 6/e


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Chapter 011: Reporting and Interpreting Owner's Equity

66. What is the difference between cumulative and noncumulative preferred stock?
A. They both receive dividends in arrears.
B. Cumulative stock's undeclared dividends accumulate each year until paid, while
noncumulative stock's right to receive dividends is forfeited in any year that dividends are not
declared.
C. Cumulative does not receive dividends but noncumulative does.
D. Cumulative preferred stock's right to receive dividends is forfeited in any year that
dividends are not declared. However, noncumulative stock's undeclared dividends accumulate
each year until paid.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

67. Cornhusker Corporation plans to raise $10 million cash on January 1, 2009, by issuing
either bonds payable (8% interest rate) or cumulative preferred stock (8% dividend rate). The

accounting period ends December 31. How would the annual interest amount or annual
preferred dividend amount (if paid) affect the net income for the year ended December 31,
2009?
A. Net income would be reduced by the annual interest and by the preferred stock dividends.
B. Net income would be reduced by the interest but not by the preferred stock dividends.
C. Net income would not be reduced by the annual interest nor by the preferred stock
dividends.
D. Net income would be reduced by the preferred dividends but not by the interest

AACSB Tag: Relative Thinking
Difficulty: Hard
L.O.: 7

11-24
©2009 McGraw-Hill Inc. Test Bank to accompany Libby Financial Accounting 6/e


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Chapter 011: Reporting and Interpreting Owner's Equity

68. The Candle Barn has the following classes of stock:
Preferred stock, 8%, $100 par, 100,000 shares issued and outstanding, cumulative.
Common stock, par $5, 100,000 shares issued 50,000 shares outstanding.
It paid no dividends in its first year of existence. In 2010, its second year of existence, the
board of directors of The Candle Barn declared a total dividend of $1,800,000 that was paid to
the holders of preferred and common stock. What was the amount of the dividend paid in
2010 on each share of preferred stock?
A. $16.00
B. $ 8.00
C. $12.00
D. None of these is correct.

AACSB Tag: Relative Thinking
Difficulty: Medium
L.O.: 7

69. Retained earnings
A. is an asset.
B. has a debit balance for a successful corporation.
C. represents the future dividend liability of the company.
D. represents the income that has been earned by the company, less any dividends declared
since the first day of operations.

AACSB Tag: Relative Thinking
Difficulty: Easy
L.O.: 7

11-25

©2009 McGraw-Hill Inc. Test Bank to accompany Libby Financial Accounting 6/e