31. Small stock dividends are recorded by debiting Retained Earnings for the par value per share.
32. No journal entry is made to record a stock split.
33. A stock split has no effect on the total of any account in stockholders’ equity.
34. Common stock is listed before preferred stock in the balance sheet.
35. The number of shares outstanding is equal to the number of shares issued minus the number of shares bought back.
36. We can estimate the average purchase cost of treasury stock per share by dividing the treasury stock balance by the number of shares repurchased.
37. The statement of stockholders’ equity shows how each equity account changed during the year.
38. The stockholders’ equity section of the balance sheet shows how each equity account changed during the year.
39. The return on equity measures the ability of company management to generate earnings from the resources that owners provide.
40. We compute the return on equity ratio by dividing net income by ending stockholders’ equity.
41. Earnings per share (EPS) measures the net income earned per share of common stock outstanding.
42. We calculate earnings per share as net income divided by the average shares outstanding during the period.
43. Earnings per share is useful in comparing earnings performance across companies.
44. We calculate the PE ratio as the stock price divided by earnings per share so that both stock price and earnings are expressed on a per share basis.