Which of the following is true about corporations?
A A stockholder is personally liable for the debts of the corporation.
B The corporation's life is stipulated in its charter.
C Stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.
D Stockholders wishing to sell their corporation shares must get the approval of other stockholders.
answer
B The corporation's life is stipulated in its charter.
question
In what way is a corporation different from a sole proprietorship or partnership?
A A corporation's temporary accounts are closed at the end of the accounting period.
B A corporation is an accounting economic entity.
C A corporation is organized for the purpose of making a profit.
D A corporation is subject to more federal and state government regulations.
answer
D A corporation is subject to more federal and state government regulations.
question
Most states DO/DO NOT permit the sale of common stock below par.
answer
do not
question
The issuance of common stock affects
This is correct answer :
A only the paid-in capital account
B both the paid-in capital account and the retained earnings account
C only the income statement
D only the retained earnings account
answer
A only the paid-in capital account
question
When a corporation purchases treasury stock, the acquisition
A requires that a gain or loss be recognized on the income statement
B increases the company's total assets and total stockholders' equity
C has no effect on total assets and total stockholders' equity
D decreases the company's total assets and total stockholders' equity
answer
Answer is D : decreases the company's total assets and total stockholders' equity
question
Which of the following are preferences that are granted only to owners of preferred stock? Select all that apply.
A the right to vote
B the right to receive dividends in arrears before common stockholders receive dividends
C first claim to dividends
D preference to corporate assets in case of liquidation
answer
B the right to receive dividends in arrears before common stockholders receive dividends
C first claim to dividends
D preference to corporate assets in case of liquidation
question
____ ____ ______ are preferred dividends that are not declared when preferred stock is cumulative.
answer
Dividends in arrears
question
Which of the following statements is true?
A
A stock split will increase the number of shares outstanding and will increase total stockholders' equity.
B
Both a stock split and a stock dividend will increase the number of shares outstanding but will have no effect on total stockholders' equity.
C
Both a stock split and a stock dividend will increase the number of shares outstanding and will both increase total stockholders' equity.
D
A stock split will increase the number of shares outstanding but will decrease total stockholders' equity.
answer
correct Answer is B : Both a stock split and a stock dividend will increase the number of shares outstanding but will have no effect on total stockholders' equity.
question
Which of the following statements about a cash dividend are true? Select all that apply.
A Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend.
B The legality of a dividend does not indicate a company's ability to pay a dividend.
C The legality of a cash dividend depends on state corporation laws.
D Dividends are not a liability until declared.
answer
B The legality of a dividend does not indicate a company's ability to pay a dividend.
D Dividends are not a liability until declared.
question
When a company offers a ________, this event does NOT require a formal journal entry on a corporation's books.
A
100% stock dividend
B
2 for 1 stock split
C
$1.00 per share cash dividend
D
2% stock dividend
answer
B
2 for 1 stock split
question
Restricting retained earnings for the cost of treasury stock purchased is a ________ restriction.
A
contractual
B
voluntary
C
stock
D
legal
answer
D : legal
question
Taft Industries had 250,000 shares of common stock outstanding before a stock split occurred and 500,000 shares outstanding after the stock split. The stock split was
A
1-for-5
B
2-for-5
C
2-for-1
D
5-for-1
answer
B
2-for-5
question
Which of the following statements about the retained earnings statement is true?
A
It will not reflect net losses.
B
It is the owners' equity statement for a corporation.
C
It will, in some cases, fail to reconcile the beginning and ending retained earnings balances.
D
The amount of retained earnings cannot be associated with the balance of any asset account.
answer
D
The amount of retained earnings cannot be associated with the balance of any asset account.
question
Paid-in capital would appear under ________ on a balance sheet.
A
capital stock
B
additional paid-in capital
C
stockholders' equity
D
contra to stockholders' equity
answer
C
stockholders' equity
question
________ is generally NOT reported for each class of stock on the balance sheet.
A
Number of shares authorized
B
Market value
C
Par value
D
Number of shares issued
answer
B
Market value
question
o find the return on common stockholders' equity, divide net income available to common stockholders by
A
average common stockholders' equity
B
ending total stockholders' equity
C
ending common stockholders' equity
D
average total stockholders' equity
answer
A
average common stockholders' equity
question
When companies set their dividend payout, they generally aim for a rate that is
A
low
B
sustainable
C
variable
D
high
answer
B
sustainable
question
When a company declares a stock dividend, the declaration will
A
change the total of stockholders' equity
B
increase total liabilities
C
increase total assets
D
increase paid-in capital
answer
D
increase paid-in capital
question
Which of the following statements about retained earnings restrictions is NOT true?
A
Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan.
B
The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes.
C
Companies will not disclose retained earnings restrictions unless specifically requested by the stockholder.
D
Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased.
answer
C
Companies will not disclose retained earnings restrictions unless specifically requested by the stockholder.
question
Which of the following are reasons that a company would acquire treasury stock? Select all that apply.
A to reissue shares to officers under compensation plans
B to have additional shares available to use in acquiring other companies
C as an asset investment
D to increase trading of the company's stock in the securities market
answer
A to reissue shares to officers under compensation plans
B to have additional shares available to use in acquiring other companies
D to increase trading of the company's stock in the securities market
question
A cash dividend becomes a binding legal obligation on the declaration date.
A
True
B
False
answer
A
True
question
The rights or preferences associated with preferred stock include which of the following? Select all that apply.
A : a priority claim to receive dividends in arrears before common stockholders receive dividend.
B : a priority claim to corporate assets in case of liquidation.
C : a priority claim to dividends.
D : the right to vote.
answer
A : a priority claim to receive dividends in arrears before common stockholders receive dividend.
B : a priority claim to corporate assets in case of liquidation.
C : a priority claim to dividends.
question
Which of the following statements is true?
A :
The number of shares of issued stock equals unissued shares minus authorized shares.
B :
The number of shares of issued stock equals outstanding shares plus treasury shares.
C :
The number of shares of issued stock equals authorized shares minus treasury shares.
D :
The number of shares of issued stock equals outstanding shares plus authorized shares.
answer
B :
The number of shares of issued stock equals outstanding shares plus treasury shares.
question
Purchasing treasury stock is sometimes done to eliminate a hostile shareholder buyout.
A :
True
B :
False
answer
A: True
question
Treasury stock should be reported in the financial statements of a corporation as a deduction from total paid-in capital and retained earnings.
A
True
B
False
answer
A
True
question
Declared dividends are necessary in order for a corporation to pay a cash dividend.
A :
True
B :
False
answer
A :
True
question
By dividing total cash dividends paid by net income, you can compute
A
return on preference stockholders' equity.
B
payout ratio.
C
capital ratio.
D
return on common stockholders' equity.
answer
B
payout ratio.
question
When stock is issued in exchange for a noncash asset, the value recorded for the shares issued is best determined by the par value of the shares.
A
True
B
False
answer
B
False
question
A corporation can enter into binding legal contracts in its' own name.
A :
True
B :
False
answer
A: True
question
Treasury stock is a corporation's own stock, which has been reacquired and held for future use.
A :
True
B :
False
answer
A: True
question
Dividends in arrears on cumulative preferred stock should be disclosed in the notes to the financial statements.
A :
True
B :
False
answer
A: True
question
Harrison Corporation issues 39,000 shares of $50 par value preferred stock for cash at $60 per share. The effects of the transaction above will be under both _______ ________ and additional paid-in capital sections.
answer
Capital Stock
question
In calculating total stockholders' equity, which of the following are added?
A
total paid-in capital and retained earnings
B
total paid-in capital and common stock
C
retained earnings and paid-in capital in excess of par value
D
treasury stock and common stock
answer
A
total paid-in capital and retained earnings
question
In published annual reports, the individual sources of additional paid-in capital
A :
are often combined.
B :
are added to current liabilities.
C :
are shown in detail.
D :
are included in the notes to financial statements.
answer
A :
are often combined.
question
A corporation purchases 8,000 shares of its own $5 par common stock for $8 per share, recording it at cost. What will be the effect on total stockholders' equity?
A :
increase of $64,000
B :
decrease of $40,000
C :
increase of $40,000
D :
decrease of $64,000
answer
D :
decrease of $64,000
question
The acquisition of treasury stock by a corporation decreases its total assets and total stockholders' equity.
A
True
B
False
answer
A
True
question
When a company acquires treasury stock by buying back stock from shareholders, it
_____________ the number of shares outstanding.
answer
decreases
question
Which of the following statements are true? Select all that apply.
A Capital stock and additional paid-in capital are two classifications of paid-in capital on the balance sheet.
B Restrictions on retained earnings appear in notes to the financial statement.
C Restrictions on retained earnings appear under stockholders' equity on a balance sheet.
D Paid-in capital appears under stockholders' equity on a balance sheet.
answer
A Capital stock and additional paid-in capital are two classifications of paid-in capital on the balance sheet.
B Restrictions on retained earnings appear in notes to the financial statement.
D Paid-in capital appears under stockholders' equity on a balance sheet.
question
The authorized stock of a corporation is indicated in its by-laws.
A
True
B
False
answer
B: False
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