Worksheetsch11
Total questions: 47
Worksheet time: 24mins
The advantages of corporations going public include all of the following except:
Professional management
Transferability of ownership
Limited shareholder liability
Ability to remove assets
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.
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.
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.
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.
Shares that have been sold and are in the hands of stockholders are called:
Outstanding
Issued
Treasury
Underwritten
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.
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.
When shares of stock are sold from one investor to another, they will trade at:
Par value
Book value
Market value
Stated value
The market price of a preferred stock will be affected by:
The dividend rate.
The chance that the company will not operate profitably.
The level of interest rates.
The dividend rate, the chance that the company will not operate profitably, and the level of interest rates.
Which of the following is not a characteristic of the corporate form of organization?
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.
Stockholders have authority to decide by majority vote the amount of dividends to be paid.
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.
Cumulative dividends.
Voting rights.
Callable at the option of the corporation.
Which of the following is not an addition to total paid-in-capital?
Retained earnings.
Treasury stock.
Neither retained earnings nor treasury stock.
Both retained earnings and treasury stock.
A primary disadvantage of the corporate form of organization is:
Unlimited personal liability for business debts.
Ownership is difficult to transfer.
Corporate earnings are subject to double taxation.
Management is separated from ownership.
Public corporations are required by law or regulation to perform all of the following except:
Submit much of their financial information to the SEC for review.
Make regularly scheduled dividend payments to all stockholders.
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 vote for directors and on key issues.
To participate in dividends declared.
To share in the distribution of assets if the corporation is liquidated.
To select the Chief Executive Officer.
The rights of a common stockholder do not include the right
To vote for directors
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 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 responsible for formulating corporate policy and for hiring corporate officers.
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:
All assets other than retained earnings.
Legal capital plus retained earnings.
Total stockholders' equity minus retained earnings.
Legal capital minus retained earnings.
If a corporation has issued a single class of stock, it must be:
Common Stock.
Preferred Stock.
Stock issued at Par-value.
Cumulative preferred Stock.
Which of the following best describes retained earnings?
Cash available for dividends.
The amount initially invested in the business by stockholders.
Cash available for expansion and growth.
Income that has been reinvested in the business rather than distributed as dividends to stockholders.
A deficit appears in a corporation's financial statements:
Among the operating expenses.
Among the liabilities.
As a deduction from assets.
As a deduction from total paid-in capital.
Which of the following would usually be the greatest amount?
The number of shares authorized.
The number of shares issued.
The number of shares outstanding.
They must all be the same amount.
In a corporation's organization chart, which is the highest position?
Stockholders
Board of directors
CEO
President
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 preferred stock is convertible, it is so at the option of the:
Board of directors
CEO
CFO
Stockholders
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:
Tends to establish a ceiling for the market price of the stock.
Tends to establish a floor for the market price of the stock.
Represents legal capital and is not related to the market price of the stock.
Is increased by net income and decreased by dividends.
A 2-for-1 stock split will:
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.
Not change 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 Cash.
A credit to a liability account for the difference between the price paid by the stockholders and the par value of the stock.
A credit to Additional Paid-in Capital: Common Stock.
A debit to Common Stock.
When a corporation issues capital stock at a price higher than the par value:
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.
The amount received in excess of par value becomes part of paid-in capital.
When no-par stock is issued:
The entire amount received is credited to the Additional Paid-in Capital account.
The issue price is credited to the Capital Stock 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 increases.
Total shareholders' equity decreases.
Total shareholders' equity remains the same.
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 dividends.
Preference as to assets in the event of liquidation of the company.
No voting power.
The financial statements of a corporation that failed during the current year to pay any dividends on its cumulative preferred stock should:
Include the amount of the omitted dividends among its current liabilities.
Include a footnote disclosing the amount of the dividends in arrears.
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 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.
Dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock.
Treasury stock:
Is an asset.
Increases total stockholders' equity.
Decreases total stockholders' equity.
Does not change total stockholders' equity.
The purchase of treasury stock for cash will:
Increase stockholders' equity.
Not increase nor decrease stockholders' equity.
Decrease stockholders' equity.
Not change total assets.
Treasury stock should most often be recorded:
At cost
Par value
Fair market value at year end
Face value
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.
Total stockholders' equity divided by the number of shares authorized.
A 2-for-1 stock split:
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.
Should logically cause the market price per share to drop by approximately 50%.
Treasury stock represents:
Shares of ownership in the United States Treasury Department.
A current asset.
Authorized shares that have never been issued.
Previously outstanding shares that have been repurchased by the issuing company.
Stock that had been issued by a corporation, and later reacquired, is classified as:
Treasury stock
Non-participating preferred stock
Restricted stock
Issued shares
The purchase of treasury stock for cash will have which effect upon the following items?
Option A
Option B
Option C
Option D
Which of the following does not appear in a corporate income statement?
Gains and losses from treasury stock transactions.
Income tax expense.
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:
The corporation recognizes a gain to be recorded on the income statement.
Total paid-in capital is increased.
The re-issuance is treated as an extraordinary item in the corporation's income statement.
Retained earnings is increased.
