Question Detail:
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The stockholders of a corporation have unlimited liability.
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Which of these is not a major advantage of a corporation?
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Transferable ownership rights
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Which one of the following is a major disadvantage of a corporation?
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Limited liability of stockholders
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Transferable ownership rights
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Which of the following is not a characteristic of a corporation?
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Unlimited liability for stockholders
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Easy transfer of ownership interests
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Ability to acquire capital easily
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Which of the following is a disadvantage of the corporate business form?
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Easy acquisition of capital
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Which of the following is not a stockholder’s right?
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The right to share in dividends
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The right to vote in the election for the board of directors
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The right to participate in management decisions
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Ernest, an individual, receives $100 from Vernon Corp. in dividends and is in the 28% tax bracket. Vernon Corp. already paid corporate taxes on the $100 at a 20% tax rate. How much in personal taxes will Ernest need to pay?
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The par value of corporate shares issued represents a corporation’s legal capital.
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Which of these statements is false?
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Ownership of common stock gives the owner a voting right.
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The stockholders’ equity section begins with paid-in capital amounts.
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The authorization of capital stock does not result in a formal accounting entry.
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Legal capital is intended to protect stockholders.
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If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital?
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Which of the following represents the amount per share of stock that must be retained in the business for the protection of corporate creditors?
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Which of the following represents the maximum number of shares a corporation can issue?
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DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance?
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Debit to Paid-in Capital in Excess of Par Value for $3,000
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Debit to Cash for $15,000
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Credit to Common Stock for $15,000
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Credit to Common Stock for $18,000
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Wynola, Inc. issued 1,000 shares of common stock at $10 per share. If the stock has a par value of $4 per share, which of the following will be part of the journal entry to record the issuance?
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Credit to Common Stock for $4,000
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Credit to Paid-in Capital in Excess of Par Value for $10,000
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Debit to Retained Earnings for $6,000
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Harrison, Inc. issued 4,000 shares of common stock at $12 per share. If the stock has a par value of $0.50 per share, which of the following will be part of the journal entry to record the issuance?
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Credit to Common Stock for $2,000
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Credit to Paid-in Capital in Excess of Par Value for $48,000
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Debit to Retained Earnings for $46,000
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Harrison, Inc. issued 600 shares of common stock at $10 per share. If the stock was no-par value stock, which of the following will be part of the journal entry to record the issuance?
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Credit to Paid-in Capital in Excess of Par for $600
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Credit to Common Stock for $6,000
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Debit to Paid-in Capital $6,000
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The 13th Street Grill issued 10,000 of $1 par value common stock for $5 per share. Which of the following will be part of the journal entry to record the issuance?
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A debit of $10,000 to Common Stock
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A debit of $50,000 to Common Stock
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A credit of $10,000 to Common Stock
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A credit of $50,000 to Common Stock
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Dynatech issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, which accounts are credited?
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Common Stock $10,000 and Gain on Stock Sale $2,000
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Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000
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Common Stock $10,000 and Retained Earnings $2,000
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When treasury stock is purchased, the number of outstanding shares decreases.
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For what reason might a company acquire treasury stock?
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To reissue the shares to officers and employees under bonus and stock compensation plans
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To signal to the stock market that management believes the stock is overpriced
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To increase the number of shares of stock outstanding
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Which one of the following decreases when a corporation purchases treasury stock?
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What method is normally used to account for treasury stock?
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If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders’ equity be reduced?
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A corporation sold 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $12.00 per share. Which of the following will be debited to record the repurchase of the 100 shares?
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Treasury Stock for $1,200
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Which of the following increases when a corporation purchases treasury stock?
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Number of shares authorized
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Number of treasury shares
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Number of outstanding shares
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A cumulative dividend feature means that preferred stockholders must be paid only current-year dividends before common stockholders receive dividends.
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Dividends in arrears are reported as a current liability on the balance sheet.
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A corporation has cumulative preferred stock on which it pays dividends of $20,000 per year. The dividends are in arrears for two years. If the corporation plans to distribute $90,000 as dividends in the current year, how much will the common stockholders receive?
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Which one of the following statements is incorrect?
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Dividends cannot be paid on common stock while any dividend on preferred stock is in arrears.
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Dividends in arrears on preferred are not considered a liability.
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Dividends may be paid on common stock while dividends are in arrears on preferred stock.
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When preferred stock is noncumulative, any dividend passed in a year is lost forever.
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Which one of the following is nota right of preferred stockholders?
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Priority in relation to dividends
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Priority to the assets in the event of liquidation
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Priority to dividends, assets and voting rights.
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Which of the following is a feature associated only with preferred stock?
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Preference to assets in the event of liquidation
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All of the answer choices are correct
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M-Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2014. No dividends were declared in 2012 or 2013. If M-Bot wants to pay $375,000 of dividends in 2014, how much will common stockholders receive?
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How are dividends in arrears reported in the financial statements?
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