Chapter 11 – November 30, 20091. What are two advantages of equity financing?2. What are two advantages of debt financing?3. Indicate whether each of the following relates to equity (E) or debt (D) financing, and whether it makes that form more or less favorablea. Interest is tax deductibleb. Dividends are optionalc. It must be repaidd. Additional stock issuances dilute existing stockholder’s control4. The __________ number of shares is the maximum number of shares of capital stock of a corporation that can be issued.5. ______________ represent the total number of shares of stock that have been sold.6. _______________ consists of issued shares that have been bought back by the company.7. _______________ consist of issued shares that are currently held by stockholders other than thecorporation itself.8. ________________ is an insignificant value per share of capital stock.9. _________________ is the amount paid for stock in excess of par.10. What is the journal entry if Sonic sells 100,000 shares of $ .20 par value stock at the market priceexisting at the time of issuance of $20 per share?11. What is treasury stock?12. Treasury stock is a contra-_________ account.13. What is the journal entry for Sonic to purchase 20,000 shares of its stock when it is selling for $20 per share in the market?14. What is the journal entry to re-issue 10,000 shares of the stock it purchases in question 13 at a market price of $21 per share?15. What is the journal entry for Aeropostale to issue 1,000 shares of common stock, par value $.01, for $21,900?16. What is the journal entry for Aeropostale to repurchase 500 of its common shares in the stock market when it was selling for $20 per share? 17. Which of the following is ordered from the largest number of shares to the smallest number of shares?a. Shares authorized, shares issued, shares outstandingb. Shares issued, shares outstanding, shares authorizedc. Shares outstanding, shares issued, shares authorizedd. Shares in treasury, shares outstanding, shares issued18. Which of the following statements about the relative advantages of equity and debt financing is false?a. An advantage of equity financing is that it does not have to be repaidb. Ad advantage of equity financing is that dividends are optionalc. Ad advantage of equity financing is that new stockholders get to vote and share in the earnings of the companyd. Ad advantage of debt financing is that interest is tax
View Full Document
![Exam 2 Review[1]](https://media.gradebuddy.com/documents/2445486/1afb3d70-20c5-4ad7-9768-1ba45309d45e.png)
Unlocking...