Question 1

Which of the following statements regarding the date of a cash dividend declaration is not accurate?

Accepted Answer

A)  The dividend can be rescinded once it has been declared.
B)  The corporation is committed to a legal, binding obligation.
C)  The board of directors formally authorizes the cash dividend.
D)  A liability account must be increased.

Question 2

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

Accepted Answer

A) True 
 B)False

Question 3

Stockholders of a corporation directly elect

Accepted Answer

A)  the president of the corporation.
B)  the board of directors.
C)  the treasurer of the corporation.
D)  all of the employees of the corporation.

Question 4

A successful corporation can have a continuous and perpetual life.

Accepted Answer

A) True 
 B)False

Question 5

A separate paid-in capital account is used to record each of the following except the issuance of

Accepted Answer

A)  no-par stock.
B)  par value stock.
C)  stated value stock.
D)  treasury stock above cost.

Question 6

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

Accepted Answer

A)  Common Stock Dividends Distributable.
B)  Common Stock.
C)  Paid-in Capital in Excess of Par.
D)  Retained Earnings.

Question 7

A net loss

Accepted Answer

A)  occurs if operating expenses exceed cost of goods sold.
B)  is not closed to Retained Earnings if it would result in a debit balance.
C)  is closed to Retained Earnings even if it would result in a debit balance.
D)  is closed to the paid-in capital account of the stockholders' equity section of the balance sheet.

Question 8

The two ways that a corporation can be classified by ownership are

Accepted Answer

A)  publicly held and privately held.
B)  stock and non-stock.
C)  inside and outside.
D)  majority and minority.

Question 9

Jason Thomas has invested $200,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Thomas stand to lose?

Accepted Answer

A)  Up to his total investment of $200,000.
B)  Zero.
C)  The $200,000 plus any personal assets the creditors demand.
D)  $100,000.

Question 10

A corporation must be incorporated in each state in which it does business.

Accepted Answer

A) True 
 B)False

Question 11

Farmer Company reports the following amounts for 2015:  The 2015 rate of return on common stockholders' equity is

Accepted Answer

A)  30.0%.
B)  24.0%.
C)  27.0%.
D)  33.8%.

Question 12

In published annual reports

Accepted Answer

A)  subdivisions within the stockholders' equity section are routinely reported in detail.
B)  capital surplus is used in place of retained earnings.
C)  the individual sources of additional paid-in capital are often combined.
D)  retained earnings is often not shown separately.

Question 13

The effect of a stock dividend is to

Accepted Answer

A)  decrease total assets and stockholders' equity.
B)  change the composition of stockholders' equity.
C)  decrease total assets and total liabilities.
D)  increase the book value per share of common stock.

Question 14

Retained earnings are occasionally restricted

Accepted Answer

A)  to set aside cash for dividends.
B)  to keep the legal capital associated with paid-in capital intact.
C)  due to contractual loan restrictions.
D)  if preferred dividends are in arrears.

Question 15

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Accepted Answer

A)  Preferred Stock for $840,000.
B)  Paid-in Capital from Preferred Stock for $840,000.
C)  Preferred Stock for $700,000 and Retained Earnings for $140,000.
D)  Preferred Stock for $700,000 and Paid-in Capital in Excess of Par-Preferred Stock for $140,000.

Question 16

Land Inc. has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 300,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Land declares a 10% stock dividend on its common stock:

Accepted Answer

A)  net income will decrease by $150,000.
B)  retained earnings will decrease by $150,000 and total stockholders' equity will increase by $150,000.
C)  retained earnings will decrease by $900,000 and total stockholders' equity will increase by $900,000.
D)  retained earnings will decrease by $900,000 and total paid-in capital will increase by $900,000.

Question 17

The authorized stock of a corporation

Accepted Answer

A)  only reflects the initial capital needs of the company.
B)  is indicated in its by-laws.
C)  is indicated in its charter.
D)  must be recorded in a formal accounting entry.

Question 18

Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock

Accepted Answer

A)  remains the same.
B)  is reduced to $2 per share.
C)  is reduced to $5 per share.
D)  is reduced to $20 per share.

Question 19

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)  Declaration of dividends by the board of directors
D)  Retained earnings

Question 20

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

Exam 11: Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Which of the following statements regarding the date of a cash dividend declaration is not accurate?

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

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A net loss

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A successful corporation can have a continuous and perpetual life.

Correct AnswerverifiedShow Answer

The effect of a stock dividend is to

Correct AnswerverifiedShow Answer

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

Correct AnswerverifiedShow Answer

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Correct AnswerverifiedShow Answer

The two ways that a corporation can be classified by ownership are

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

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A separate paid-in capital account is used to record each of the following except the issuance of

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Farmer Company reports the following amounts for 2015: The 2015 rate of return on common stockholders' equity is

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Jason Thomas has invested $200,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Thomas stand to lose?

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The authorized stock of a corporation

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In published annual reports

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If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

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Stockholders of a corporation directly elect

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Retained earnings are occasionally restricted

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Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock

Correct AnswerverifiedShow Answer

A corporation must be incorporated in each state in which it does business.

Correct AnswerverifiedShow Answer

Land Inc. has retained earnings of $800,000 and total stockholders' equity of $2,000,000. It has 300,000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Land declares a 10% stock dividend on its common stock:

Correct AnswerverifiedShow Answer

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