Question 1

The two main sources of stockholders' equity are investments contributed by stockholders and net income retained in the business.

Accepted Answer

A) True 
 B)False

Question 2

When common stock is issued in exchange for land,the land should be recorded in the accounts at the par amount of the stock issued.

Accepted Answer

A) True 
 B)False

Question 3

The excess of sales price of treasury stock over its cost should be credited to

Accepted Answer

A)  Treasury Stock Receivable
B)  Premium on Capital Stock
C)  Paid-In Capital from Sale of Treasury Stock
D)  Income from Sale of Treasury StockE) B) and C)
F) All of the above

Question 4

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9.Subsequently,the company declared a 2% stock dividend on a date when the market price was $10 a share.The effect of the declaration and issuance of the stock dividend is to

Accepted Answer

A)  decrease retained earnings,increase common stock,and increase paid-in capital
B)  increase retained earnings,decrease common stock,and decrease paid-in capital
C)  increase retained earnings,decrease common stock,and increase paid-in capital
D)  decrease retained earnings,increase common stock,and decrease paid-in capitalE) All of the above
F) C) and D)

Question 5

Characteristics of a corporation include

Accepted Answer

A)  shareholders who are mutual agents
B)  direct management by the shareholders (owners) 
C)  its inability to own property
D)  shareholders who have limited liabilityE) B) and D)
F) None of the above

Question 6

Which of the following is not a right possessed by common stockholders of a corporation?

Accepted Answer

A)  the right to vote in the election of the board of directors
B)  the right to receive a minimum amount of dividends
C)  the right to sell their stock to anyone they choose
D)  the right to share in assets upon liquidationE) A) and B)
F) B) and C)

Question 7

Those most responsible for the major policy decisions of a corporation are the

Accepted Answer

A)  management.
B)  board of directors.
C)  employees.
D)  stockholders.E) B) and C)
F) A) and C)

Question 8

When a corporation issues stock at a premium,it reports the premium as an other income item on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not classified as paid-in capital on the balance sheet?

Accepted Answer

A)  common stock
B)  common stock distributable
C)  donated capital
D)  treasury stockE) All of the above
F) B) and C)

Question 10

Which of the following is not characteristic of a corporation?

Accepted Answer

A)  The financial loss that a stockholder may suffer from owning stock in a public company is limited.
B)  Cash dividends paid by a corporation are deductible as expenses by the corporation.
C)  A corporation can own property in its name.
D)  Corporations are required to file federal income tax returns.E) A) and B)
F) B) and D)

Question 11

The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired.What is the amount of cash dividends to be paid if a $2 per share dividend is declared?

Accepted Answer

A)  $ 60,000
B)  $ 20,000
C)  $120,000
D)  $100,000E) A) and B)
F) A) and C)

Question 12

If the dividend amount of preferred stock,$50 par value,is quoted as 8%,then the dividends per share would be $4.

Accepted Answer

A) True 
 B)False

Question 13

Prepare entries to record the following:

Accepted Answer

(a)<br> <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> (b)<br>...

Question 14

Retained earnings

Accepted Answer

A)  is the same as contributed capital
B)  cannot have a debit balance
C)  changes are summarized in the retained earnings statement
D)  is equal to cash on handE) B) and C)
F) A) and B)

Question 15

A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

Accepted Answer

A) True 
 B)False

Question 16

A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150.If the corporation issues a 4-for-1 stock split,the market value of the stock will fall to approximately $50.

Accepted Answer

A) True 
 B)False

Question 17

If 50,000 shares are authorized,41,000 shares are issued,and 2,000 shares are reacquired,the number of outstanding shares is 43,000.

Accepted Answer

A) True 
 B)False

Question 18

The main source of paid-in-capital is from issuing stock.

Accepted Answer

A) True 
 B)False

Question 19

Significant changes in stockholders' equity are reported in

Accepted Answer

A)  income statement
B)  retained earnings statement
C)  statement of stockholders' equity
D)  statement of cash flowsE) C) and D)
F) None of the above

Question 20

A disadvantage of the corporate form of business entity is

Accepted Answer

A)  mutual agency for stockholders
B)  unlimited liability for stockholders
C)  corporations are subject to more governmental regulations
D)  the ease of transfer of ownershipE) None of the above
F) A) and B)

Exam 11: Corporations: Organization, stock Transactions, and Dividends

Which of the following is not characteristic of a corporation?

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A disadvantage of the corporate form of business entity is

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The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired.What is the amount of cash dividends to be paid if a $2 per share dividend is declared?

Correct AnswerverifiedShow Answer

The excess of sales price of treasury stock over its cost should be credited to

Correct AnswerverifiedShow Answer

A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150.If the corporation issues a 4-for-1 stock split,the market value of the stock will fall to approximately $50.

Correct AnswerverifiedShow Answer

If the dividend amount of preferred stock,$50 par value,is quoted as 8%,then the dividends per share would be $4.

Correct AnswerverifiedShow Answer

The two main sources of stockholders' equity are investments contributed by stockholders and net income retained in the business.

Correct AnswerverifiedShow Answer

When common stock is issued in exchange for land,the land should be recorded in the accounts at the par amount of the stock issued.

Correct AnswerverifiedShow Answer

Significant changes in stockholders' equity are reported in

Correct AnswerverifiedShow Answer

When a corporation issues stock at a premium,it reports the premium as an other income item on the income statement.

Correct AnswerverifiedShow Answer

Which of the following is not a right possessed by common stockholders of a corporation?

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The main source of paid-in-capital is from issuing stock.

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Characteristics of a corporation include

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Which of the following is not classified as paid-in capital on the balance sheet?

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A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

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Those most responsible for the major policy decisions of a corporation are the

Correct AnswerverifiedShow Answer

If 50,000 shares are authorized,41,000 shares are issued,and 2,000 shares are reacquired,the number of outstanding shares is 43,000.

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Retained earnings

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Prepare entries to record the following:

Correct Answerverified(a) (b)...View AnswerShow Answer

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9.Subsequently,the company declared a 2% stock dividend on a date when the market price was $10 a share.The effect of the declaration and issuance of the stock dividend is to

Correct AnswerverifiedShow Answer

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