Which of the following statements is CORRECT?
Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation.
The preferred stock of a given firm is generally less risky to investors than the same firm’s common stock.
Corporations cannot buy the preferred stocks of other corporations.
Preferred dividends are not generally cumulative.
A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation.
Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
Price $25 $25
Expected dividend yield 5% 3%
Required return 12% 10%
Stock Y pays a higher dividend per share than Stock X.
Stock X pays a higher dividend per share than Stock Y.
One year from now, Stock X should have the higher price.
Stock Y has a lower expected growth rate than Stock X.
Stock Y has the higher expected capital gains yield.
Journalizing and Posting Transactions, and Preparing a Trial Balance and Adjustments D. Roulstone opened Roulstone Roofing Service on April 1. Transactions for April follow.
|Apr. 1||Roulstone contributed $11,500 cash to the business in exchange for common stock.|
|2||Paid $6,100 cash for the purchase of a used truck.|
|2||Purchased $3,100 of ladders and other equipment; the company paid $1,000 cash, with the balance due in 30 days.|
|3||Paid $2,880 cash for two-year (or 24-month) premium toward liability insurance.|
|5||Purchased $1,200 of supplies on credit.|
|5||Received an advance of $1,800 cash from a customer for roof repairs to be done during April and May.|
|12||Billed customers $5,500 for roofing services performed.|
|18||Collected $4,900 cash from customers toward their accounts billed on April 12.|
|29||Paid $675 cash for truck fuel used in April.|
|30||Paid $100 cash for April newspaper advertising.|
|30||Paid $2,500 cash for assistants’ wages earned.|
|30||Billed customers $4,000 for roofing services performed.|
Using the following accounts: Cash; Accounts Receivable; Supplies; Prepaid Insurance; Trucks; Accumulated Depreciation-Trucks; Equipment; Accumulated Depreciation-Equipment; Accounts Payable; Unearned Roofing Fees; Common Stock; Roofing Fees Earned; Fuel Expense; Advertising Expense; Wages Expense; Insurance Expense; Supplies Expense; Depreciation Expense-Trucks; and Depreciation Expense-Equipment. Record these transactions for April using journal entries.