Quiz 8

Which one of the following would not be considered an advantage of the corporate form of

organization?

• Limited liability of owners

• Separate legal existence

• Continuous life

• Government regulation

Which of the following statements is not considered a disadvantage of the corporate form

of organization?

• Additional taxes

• Government regulations

• Limited liability of stockholders

• Separation of ownership and management

New Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When

the transaction is recorded, credits are made to

• Common Stock $10,000 and Paid-in Capital in Excess of Stated Value $4,000.

• Common Stock $14,000.

• Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000.

• Common Stock $10,000 and Retained Earnings $4,000.

Foley Manufacturing Corporation purchased 3,000 shares of its own previously issued

$10 par common stock for $69,000. As a result of this event,

• Foley’s Common Stock account decreased $30,000.

• Foley’s total stockholders’ equity decreased $69,000

• Foley’s Paid-in Capital in Excess of Par Value account decreased $39,000.

• All of the above.

Beckham Company has 1,000 shares of 4%, $100 par cumulative preferred stock

outstanding at December 31, 2008. No dividends have been paid on this stock for 2007 or

2008. Dividends in arrears at December 31, 2008 total

• $0.

• $400.

• $4,000.

• $8,000.

Rancho Corporation sold 100 shares of treasury stock for $40 per share. The cost for the

shares was $30. The entry to record the sale will include a

• credit to Gain on Sale of Treasury Stock for $3,000.

• credit to Paid-in Capital from Treasury Stock for $1,000.

• debit to Paid-in Capital in Excess of Par Value for $1,000

• credit to Treasury Stock for $4,000.

Dividends Payable is classified as a

• long-term liability.

• contra stockholders' equity account to Retained Earnings.

• current liability.

• stockholders' equity account.

Jennifer Company reports the following amounts for 2008:

Net income $125,000

Average stockholders' equity 500,000

Preferred dividends 35,000

Par value preferred stock 100,000

The 2008 rate of return on common stockholders' equity is

• 18.0%.

• 22.5%.

• 25.0%

• 31.3%

Abbott Corporation splits its common stock 4 for 1, when the market value is $40 per

share. Prior to the split, Abbott had 50,000 shares of $10 par value common stock issued

and outstanding. After the split, the par value of the stock

• remains the same.

• is reduced to $2 per share.

• is reduced to $2.50 per share.

• is reduced to $10 per share.

Turquoise and Topaz Sisters had retained earnings of $10,000 on the balance sheet but

disclosed in the footnotes that $2,000 of retained earnings was restricted for plant

expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set

aside for the plant expansion. How much of retained earnings is available for dividends?

• $7,000

• $8,000

• $10,000

• $5,000