1)
Which of the following is true of a corporation?
A)
A corporation can be organized publicly, but it cannot be organized privately.
B)
A corporation has a limited life.
C)
The stockholders of a corporation have unlimited liabilities for the corporation's debts.
D)
A corporation has to pay income taxes on its business earnings.
answer
D)
A corporation has to pay income taxes on its business earnings.
question
2)
Which of the following statements is true of a corporation?
A)
The liabilities of a corporation can be paid by the personal assets of the shareholders.
B)
Shareholders are authorized to sign contracts or make business commitments on behalf of the corporation.
C)
Corporate shares of stock cannot be readily bought and sold by investors on the open market.
D)
Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from sale of stock.
answer
D)
Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from sale of stock.
question
3)
Outstanding stock refers to the ________.
answer
B)
shares of stock that are held by the stockholders
question
4)
Which of the following characteristics is an advantage of the corporate form of business?
A)
low start-up costs
B)
limited liability of stockholders
C)
less degree of government regulation
D)
separation of ownership and management
answer
B)
limited liability of stockholders
question
5)
The par value of stock is ____.
answer
the amount assigned by a company to a share of its stock
question
6)
The two basic sources of stockholders' equity are ________.
answer
paid-in capital and retained earnings
question
7)
Preferred stock is a stock ________.
answer
C)
that gives its owners certain benefits over common stock
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8)
The retained earnings of a corporation is the ________.
answer
B)
internally generated capital that is raised from profitable operations
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9)
Preferred stockholders ________.
answer
B)
have the first claim on dividend funds
question
10)
Which of the following would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share cash?
answer
B)
Cash would be debited for $65,000
question
12)
Bradley Corporation issued 10,000 shares of common stock on January 1, 2015. The stock has a par value of $0.01 per share and was sold for cash at par. Which of the following is the correct journal entry to record this transaction?
answer
B)
Cash debited for $100 and Common Stock—$0.01 Par Value credited for $100
question
13)
Peterson Inc. issued 4,000 shares of preferred stock for $240,000. The stock has a par value of $60 per share. The journal entry to record this transaction would ________.
answer
A)
debit Cash $240,000 and credit Preferred Stock—$60 Par Value $240,000
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16)
Which of the following occurs when a previously declared dividend is paid?
answer
C)
liabilities decrease
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18)
Which of the following actions will decrease the balance in Retained Earnings?
answer
D)
stock dividend declared
question
19)
Treasury stock causes the number of ________.
answer
A)
outstanding shares to go down
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