The net assets of a corporation are equal to:

Total assets-total liabilities.

Total assets-retained earnings.

Total assets + total liabilities.

Total assets + retained earnings.

The market price of a preferred stock will be affected by:

The dividend rate, the chance that the company will not operate profitably, and the level of interest rates.

The chance that the company will not operate profitably.

Which of the following is not a characteristic of the corporate form of organization?

Stockholders have authority to decide by majority vote the amount of dividends to be paid.

The owners of a corporation cannot lose more than the amount of their investment.

Shares of stock in a corporation are more readily transferable than is an interest in a partnership.

The corporation is a very efficient vehicle for obtaining large amounts of capital required for large-scale production.

Most preferred stocks have the following characteristics, except:

To receive dividends on a preferred basis.

Callable at the option of the corporation.

Which of the following is not an addition to total paid-in-capital?

Both retained earnings and treasury stock.

Neither retained earnings nor treasury stock.

A primary disadvantage of the corporate form of organization is:

Corporate earnings are subject to double taxation.

Unlimited personal liability for business debts.

Ownership is difficult to transfer.

Management is separated from ownership.

Public corporations are required by law or regulation to perform all of the following except:

Make regularly scheduled dividend payments to all stockholders.

Submit much of their financial information to the SEC for review.

Have their annual financial statements audited by an independent CPA.

Disclose their financial information to the public.

Which of the following is not a right of stockholders?

To select the Chief Executive Officer.

To vote for directors and on key issues.

To participate in dividends declared.

To share in the distribution of assets if the corporation is liquidated.

The rights of a common stockholder do not include the right

To withdraw a share of corporate net assets proportionate to the person's stockholdings.

To receive a proportionate share of corporate assets upon liquidation, after creditors have been paid.

To share in profits when the board of directors declares a dividend.

The directors of a corporation:

Are responsible for formulating corporate policy and for hiring corporate officers.

Are hired by the officers to run the business on a day-to-day basis.

May not own stock in the same corporation or be officers of the same corporation.

Are elected by the shareholders to run day-to-day operations.

Which of the following individuals has the most power to influence corporate policy on a long-term basis?

A shareholder owning 60% of the outstanding common stock.

A shareholder owning 80% of the outstanding preferred stock.

The treasurer of the corporation

The controller of the corporation.

The term paid-in capital means:

Total stockholders' equity minus retained earnings.

All assets other than retained earnings.

Legal capital plus retained earnings.

Legal capital minus retained earnings.

Which of the following best describes retained earnings?

Income that has been reinvested in the business rather than distributed as dividends to stockholders.

The amount initially invested in the business by stockholders.

Cash available for expansion and growth.

A deficit appears in a corporation's financial statements:

As a deduction from total paid-in capital.

Which of the following would usually be the greatest amount?

They must all be the same amount.

Which of the following best describes the relationship between revenue and retained earnings?

Revenue increases net income, which in turn increases retained earnings.

Revenue represents a cash receipt; retained earnings is an element of stockholders' equity.

Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends.

Retained earnings is equal to assets minus expenses.

If a corporation has only common stock outstanding, which of the following constitutes legal capital at a particular date?

The amount in the Common Stock account.

The sum of the Common Stock account and any additional paid-in capital.

The total amount of stockholders' equity.

The sum of the Common Stock account and retained earnings.

The par value of the common stock of a large listed corporation:

Represents legal capital and is not related to the market price of the stock.

Tends to establish a ceiling for the market price of the stock.

Tends to establish a floor for the market price of the stock.

Is increased by net income and decreased by dividends.

A 2-for-1 stock split will:

Not change the total par value of the stock and increase the number of shares outstanding.

Increase the total par value of the stock and increase the number of shares outstanding.

Decrease the total par value of the stock and increase the number of shares outstanding.

Increase total stockholders' equity.

The entry to record the issuance of common stock at a price above its par value includes:

A credit to Additional Paid-in Capital: Common Stock.

A credit to a liability account for the difference between the price paid by the stockholders and the par value of the stock.

When a corporation issues capital stock at a price higher than the par value:

The amount received in excess of par value becomes part of paid-in capital.

The amount received over par value increases retained earnings.

The entire issue price is credited to the Capital Stock account.

The amount received in excess of par value constitutes profit to the issuing corporation.

When no-par stock is issued:

The issue price is credited to the Capital Stock account.

The entire amount received is credited to the Additional Paid-in Capital account.

There is no legal capital created because there is no par or stated value.

The transaction usually involves only an exchange for non-cash assets or services, since the stock has no value on the stock exchanges.

Which statement is true about a stock split?

Total shareholders' equity remains the same.

Total shareholders' equity increases.

Total shareholders' equity decreases.

A change in total stockholders' equity depends upon whether it is a 2-for-1 split or a 1-for-2 split.

Which of the following is not a characteristic of most preferred stock?

Dividends that vary as income changes

Preference as to assets in the event of liquidation of the company.

The financial statements of a corporation that failed during the current year to pay any dividends on its cumulative preferred stock should:

Include a footnote disclosing the amount of the dividends in arrears.

Include the amount of the omitted dividends among its current liabilities.

Show the amount of the omitted dividends as a deduction from retained earnings.

List the omitted dividends as a long-term liability.

If the preferred stock of a corporation is cumulative:

Dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock.

Dividends on preferred stock are guaranteed.

Dividends cannot be declared in an amount less than that stated on the stock certificate.

Preferred stockholders participate in dividends paid in excess of a stated amount on the common shares.

Decreases total stockholders' equity.

Increases total stockholders' equity.

Does not change total stockholders' equity.

The purchase of treasury stock for cash will:

Not increase nor decrease stockholders' equity.

Which of the following best describes the book value of a share of stock?

Net assets divided by the number of shares outstanding.

The amount at which the stock would sell on the market if sold by a willing and informed seller to a willing and informed buyer.

Total assets of the company, as reported in the accounting records, divided by the number of shares of stock outstanding.

A 2-for-1 stock split:

Should logically cause the market price per share to drop by approximately 50%.

Is accounted for in the same way as a 100% stock dividend

Increases the number of outstanding shares of common stock, but par value per share remains the same as before the split.

Is recorded by transferring the par value of additional shares from retained earnings to the common stock account.

Treasury stock represents:

Previously outstanding shares that have been repurchased by the issuing company.

Shares of ownership in the United States Treasury Department.

Authorized shares that have never been issued.

Stock that had been issued by a corporation, and later reacquired, is classified as:

Non-participating preferred stock

Which of the following does not appear in a corporate income statement?

Gains and losses from treasury stock transactions.

The income or loss from a segment of the business that has been discontinued during the current year.

Gains and losses not expected to recur in the foreseeable future.

When treasury stock is reissued at a price above cost:

Total paid-in capital is increased.

The corporation recognizes a gain to be recorded on the income statement.

The re-issuance is treated as an extraordinary item in the corporation's income statement.

Retained earnings is increased.

ch11

Authored by Tolganay Zhunisbay

Others

1st Grade

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47 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The advantages of corporations going public include all of the following except:

Professional management

Transferability of ownership

Limited shareholder liability

Ability to remove assets

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In a “pump-and-dump” scheme, the owners of the company:

Falsely claim the business has high growth potential.

Artificially raise the price of the stock.

Sell the stock at a high price.

Falsely claim the business has high growth potential, artificially raise the price of the stock, and sell the stock at a high price.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In order to limit the use of a shell company, the SEC has proposed:

Greater financial disclosures.

Eliminating this type of company.

Arresting promoters of shell companies for fraud.

That its stock only be sold in foreign countries.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The ownership of common stock in a corporation usually carries the following rights:

To vote for directors.

To declare dividends.

To share in a distribution of assets if the corporation is to be liquidated

Both declare dividends and share in a distribution of assets if the corporation is to be liquidated.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The board of directors' primary functions include all of the following except:

Hiring corporate officers.

Setting officers' salaries.

Declaring dividends.

Protecting the interests of the officers.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Shares that have been sold and are in the hands of stockholders are called:

Outstanding

Issued

Treasury

Underwritten

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Book value per share of common stock is derived by which of the following:

Stockholders equity divided by the number of shares authorized.

Stockholders equity divided by the number of shares outstanding.

Net income divided by the number of shares outstanding.

Net income divided by the number of shares authorized.

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ch11

The advantages of corporations going public include all of the following except:

In a “pump-and-dump” scheme, the owners of the company:

In order to limit the use of a shell company, the SEC has proposed:

The ownership of common stock in a corporation usually carries the following rights:

The board of directors' primary functions include all of the following except:

Shares that have been sold and are in the hands of stockholders are called:

Book value per share of common stock is derived by which of the following:

The net assets of a corporation are equal to:

When shares of stock are sold from one investor to another, they will trade at:

The market price of a preferred stock will be affected by:

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