Question 1

The tax laws can be a significant disadvantage of the corporate form of business.

Accepted Answer

A) True 
 B)False

Question 2

A debit balance in the Retained Earnings account is identified as a deficit.

Accepted Answer

A) True 
 B)False

Question 3

Kaplan Manufacturing Corporation purchased 2,500 shares of its own previously issued $10 par common stock for $62,500.As a result of this event,

Accepted Answer

A)  Kaplan's Common Stock account decreased $25,000.
B)  Kaplan's total stockholders' equity decreased $62,500.
C)  Kaplan's Paid-in Capital in Excess of Par Value account decreased $37,500.
D)  All of these answer choices are correct.E) All of the above
F) C) and D)

Question 4

Which of the following is not true of a corporation?

Accepted Answer

A)  It may buy, own, and sell property.
B)  It may sue and be sued.
C)  The acts of its owners bind the corporation.
D)  It may enter into binding legal contracts in its own name.E) A) and B)
F) None of the above

Question 5

Corporations generally issue stock dividends in order to

Accepted Answer

A)  increase the market price per share.
B)  exceed stockholders' dividend expectations.
C)  increase the marketability of the stock.
D)  decrease the amount of capital in the corporation.E) B) and C)
F) A) and B)

Question 6

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Accepted Answer

A)  decrease total liabilities and stockholders' equity.
B)  increase total expenses and total liabilities.
C)  increase total assets and stockholders' equity.
D)  decrease total assets and stockholders' equity.E) A) and D)
F) A) and B)

Question 7

Which of the following statements is true regarding corporate performance ratios?

Accepted Answer

A)  A high payout ratio may indicate that a company is retaining earnings for future growth investments.
B)  As a company grows larger, it is easy to sustain a high return on common stockholder's equity.
C)  Return on common stockholder's equity is often higher under bond financing rather than common stock financing.
D)  Low growth rates are characterized by low payout ratios.E) B) and C)
F) A) and D)

Question 8

A corporation purchases 30,000 shares of its own $10 par common stock for $25 per share, recording it at cost.What will be the effect on total stockholders' equity?

Accepted Answer

A)  Increase by $300,000.
B)  Decrease by $750,000.
C)  Increase by $750,000.
D)  Decrease by $300,000.E) B) and C)
F) All of the above

Question 9

Green, Inc.had 200,000 shares of common stock outstanding before a stock split occurred and 600,000 shares outstanding after the stock split.The stock split was

Accepted Answer

A)  2-for-6.
B)  6-for-1.
C)  1-for-6.
D)  3-for-1.E) A) and D)
F) None of the above

Question 10

Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

Accepted Answer

A) True 
 B)False

Question 11

The amount of stock that may be issued according to the corporation's charter is referred to as the

Accepted Answer

A)  authorized stock.
B)  issued stock.
C)  unissued stock.
D)  outstanding stock.E) A) and D)
F) None of the above

Question 12

A stockholder has the right to vote in the election of the board of directors.

Accepted Answer

A) True 
 B)False

Question 13

The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

Accepted Answer

A) True 
 B)False

Question 14

If Lantz Company issues 10,000 shares of $5 par value common stock for $210,000, the account

Accepted Answer

A)  Common Stock will be credited for $50,000.
B)  Paid-in Capital in Excess of Par Value will be credited for $50,000.
C)  Paid-in Capital in Excess of Par Value will be credited for $210,000.
D)  Cash will be debited for $160,000.E) B) and C)
F) All of the above

Question 15

Which of the following is not a right or preference associated with preferred stock?

Accepted Answer

A)  The right to vote.
B)  First claim to dividends.
C)  Preference to corporate assets in case of liquidation.
D)  To receive dividends in arrears before common stockholders receive dividends.E) A) and D)
F) B) and C)

Question 16

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is not an ownership right of a stockholder in a corporation?

Accepted Answer

A)  To vote in the election of directors.
B)  To declare dividends on the common stock.
C)  To share in assets upon liquidation.
D)  To share in corporate earnings.E) A) and B)
F) A) and C)

Question 18

A stock dividend does not affect the total amount of stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 19

A stock split results in a transfer at market value from retained earnings to paid-in capital.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following is not necessary in order for a corporation to pay a cash dividend?

Accepted Answer

A)  Adequate cash.
B)  Approval of stockholders.
C)  Declared dividends.
D)  Retained earnings.E) B) and C)
F) B) and D)

Exam 11: Reporting and Analyzing Stockholders Equity

A stock dividend does not affect the total amount of stockholders' equity.

Correct AnswerverifiedShow Answer

Which one of the following is not necessary in order for a corporation to pay a cash dividend?

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding corporate performance ratios?

Correct AnswerverifiedShow Answer

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Correct AnswerverifiedShow Answer

Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

Correct AnswerverifiedShow Answer

A corporation purchases 30,000 shares of its own $10 par common stock for $25 per share, recording it at cost.What will be the effect on total stockholders' equity?

Correct AnswerverifiedShow Answer

Which of the following is not true of a corporation?

Correct AnswerverifiedShow Answer

If Lantz Company issues 10,000 shares of $5 par value common stock for $210,000, the account

Correct AnswerverifiedShow Answer

Green, Inc.had 200,000 shares of common stock outstanding before a stock split occurred and 600,000 shares outstanding after the stock split.The stock split was

Correct AnswerverifiedShow Answer

A stock split results in a transfer at market value from retained earnings to paid-in capital.

Correct AnswerverifiedShow Answer

The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

Correct AnswerverifiedShow Answer

A 3-for-1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock.

Correct AnswerverifiedShow Answer

Kaplan Manufacturing Corporation purchased 2,500 shares of its own previously issued $10 par common stock for $62,500.As a result of this event,

Correct AnswerverifiedShow Answer

The amount of stock that may be issued according to the corporation's charter is referred to as the

Correct AnswerverifiedShow Answer

Corporations generally issue stock dividends in order to

Correct AnswerverifiedShow Answer

A stockholder has the right to vote in the election of the board of directors.

Correct AnswerverifiedShow Answer

The tax laws can be a significant disadvantage of the corporate form of business.

Correct AnswerverifiedShow Answer

A debit balance in the Retained Earnings account is identified as a deficit.

Correct AnswerverifiedShow Answer

Which of the following is not a right or preference associated with preferred stock?

Correct AnswerverifiedShow Answer

Which one of the following is not an ownership right of a stockholder in a corporation?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified