Deck 10: Corporations: Paid-In Capital and Retained Earnings

Question 1

The number of shares of stock that a corporation is given the right to sell is called:

A)issued stock.
B)authorized stock.
C)outstanding stock.
D)capital stock.

Answer 1

authorized stock.

Question 2

Outstanding stock of a corporation represents 100% of its ownership.

Answer 2

True

Question 3

The basic unit of stock is called a(n):

A)authorization.
B)certificate.
C)share.
D)ownership record.

Answer 3

share.

Question 4

Authorized capital stock are those shares:

A)listed in the charter.
B)issued to the corporation's officers.
C)sold and in stockholder possession.
D)that pay dividends.

Question 5

A corporate charter describes the purpose, place of business, and other details of the business being incorporated.

Question 6

Stockholders will be issued ________ physically or electronically.

A)charters
B)articles of incorporation
C)authorized stock
D)stock certificates

Question 7

Which of the following business types dominates by the amount of business transacted?

A)Partnerships
B)Proprietorships
C)Corporations
D)Government entities

Question 8

Which of the following is an advantage of a corporation?

A)Tax regulations
B)Continuous life
C)Unlimited liability
D)All of the above are advantages

Question 9

Which of the following business types is largest by number?

A)Not-for-profits
B)Proprietorships and partnerships
C)Corporations
D)Government entities

Question 10

Stock that is held by stockholders is called:

A)issued stock.
B)authorized stock.
C)outstanding stock.
D)open stock.

Question 11

Which of the following are considered to be legal entities that exist separate and distinct from their owners?

A)Sole proprietorships
B)Partnerships
C)Corporations
D)Organizations with more than 100 partners

Question 12

A corporation is a separate legal entity from its owners.

Question 13

Changes in ownership through transfer of shares of stock have no effect on the life of a corporation.

Question 14

One disadvantage to the corporate form of organization is:

A)government regulations.
B)limited liability.
C)transfer of ownership policies.
D)ability to raise capital.

Question 15

Corporations are the most numerous form of business activity.

Question 16

The first step in becoming a corporation is to file a(n)_______ with the state government.

A)business plan
B)bank statement
C)corporate charter
D)list of board members

Question 17

Limited liability means that the stockholders of a corporation share a personal liability for all debts of the corporation.

Question 18

Capital stock represents the number of shares of stock a corporation is authorized by a state to sell.

Question 19

A corporation must incorporate in every state in which it does business.

Question 20

Which of the following is NOT an advantage of a corporation?

A)Unlimited liability
B)Ease of raising capital
C)Ease of transfer ownership
D)Continuous life

Question 21

Earnings that a stockholder receives from a corporation is an example of which stockholder right?

A)Vote
B)Dividends
C)Liquidation
D)Preemption

Question 22

Preferred stock is considered a voting "class" of stock.

Question 23

Preferred stockholders generally have the same basic rights as common stockholders EXCEPT for:

A)voting.
B)dividends.
C)liquidation.
D)preemption.

Question 24

At least one "class" of stock MUST have:

A)preemptive rights.
B)dividend rights.
C)liquidation rights.
D)voting rights.

Question 25

For most companies, preemptive rights are the exception, rather than the rule.

Question 26

Retained Earnings represent internally generated capital.

Question 27

Which right do preferred stockholders receive before common stockholders?

A)Selling rights
B)Dividend rights
C)Voting rights
D)Preemptive rights

Question 28

Carol owns 3% of the total shares in a company; if the company issues a dividend she will receive 3% of the dividend.

Question 29

If you own 1,200 shares (3% of a corporation's stock)and the corporation issues 11,000 new shares, how many total shares will you have after exercising your preemptive right?

A)0
B)330
C)1,164
D)1,530

Question 30

Maintaining their proportionate share in the ownership of a corporation when new stock is available to be purchased is an example of which stockholder right?

A)Vote
B)Dividends
C)Liquidation
D)Preemption

Question 31

If you own 700 shares (5% of a corporation's stock)and the corporation issues 17,000 new shares, how many total shares will you have after exercising your preemptive rights?

A)665
B)850
C)1,550
D) 0

Question 32

One of the ways a stockholder can help manage a corporation is through their right to vote.

Question 33

If you own 700 shares (2% of a corporation's stock)and the corporation issues 19,000 new shares, how many of the new shares can you purchase under preemptive right?

A)686
B)380
C)1,080
D) 0

Question 34

Stockholders receiving their proportionate share of any assets left after a company goes out of business is an example of which stockholder right?

A)Vote
B)Dividends
C)Liquidation
D)Preemption

Question 35

If a stock has a stated value of $1, this means that the stock sells for $1 per share.

Question 36

Which is NOT a value placed on a certificate for a share of the company's stock?

A)Par
B)Stated value
C)No par
D)Market value

Question 37

Which of the following stockholder rights is the one that allows a stockholder to participate in the management of a corporation?

A)Vote
B)Dividends
C)Liquidation
D)Preemption

Question 38

If you own 1,100 shares (7% of a corporation's stock)and the corporation issues 14,000 new shares, how many of the new shares can your purchase under preemptive right?

A)0
B)980
C)1,023
D)2,080

Question 39

Stockholders' Equity consists of contributed capital and paid-in capital.

Question 40

Values such as par, stated value, and no-par are assigned based upon:

A)federal regulation.
B)choice of the organizers of the corporation.
C)tax law.
D)market values of the stock.

Question 41

Par value is assigned.

A)when the corporate charter is filed.
B)when the company decides to issue the stock.
C)after the stock has been issued.
D)at the first meeting of the organizers of the corporation.

Question 42

A company can have a profit or loss when buying or selling its own stock.

Question 43

A corporation may issue stock for assets other than cash, requiring the recording of the assets at fair market value.

Question 44

If there is only one class of stock outstanding, such stock would be classified as:

A)authorized stock.
B)common stock.
C)preferred stock.
D)issued stock.

Question 45

The formula needed to compute "additional paid-in capital in excess of par" is:

A)number of shares of stock times par value per share of stock.
B)number of shares of stock times selling price per share of stock.
C)number of shares of stock times (selling price per share - par value per share).
D)number of shares of stock times (selling price per share + par value per share).

Question 46

A company issues 15,000 shares of its $22 par common stock for $32 per share. The amount to be debited to Cash is:

A)$330,000.
B)$480,000.
C)$150,000.
D)$810,000.

Question 47

A company issues 25,000 shares of its $25 par common stock for $27 per share. The entry to record this will include a debit to Cash for $675,000.

Question 48

A journal entry for the sale of $10 par-common stock for $18 per share would include a:

A)credit to Cash.
B)debit to Common Stock.
C)credit to Paid-In Capital in Excess of Par-Common Stock.
D)debit to Paid-In Capital in Excess of Par-Common Stock.

Question 49

Stockholders' Equity consists of:

A)contributed capital and paid-in capital.
B)common stock and preferred stock.
C)paid-in capital and Retained Earnings.
D)legal capital and paid in capital.

Question 50

Many companies raise capital by issuing stock directly to stockholders or by using an underwriter.

Question 51

Stated value is assigned:

A)when the corporate charter is filed.
B)when the company decides to issue the stock.
C)after the stock has been issued.
D)at the first meeting of the organizers of the corporation.

Question 52

The issue price of the stock usually is equal to the par value of the stock.

Question 53

A company issues 55,000 shares of its $5 par common stock for $20 per share. The amount to be debited to Cash is:

A)$275,000.
B)$825,000.
C)$1,375,000.
D)$1,100,000.

Question 54

A company issues 20,000 shares of its $28 par common stock for $32 per share. The entry to record this will include a debit to Cash for $560,000.

Question 55

The type of stock that does NOT carry paid-in capital in excess of par is called:

A)par stock.
B)no-par stock.
C)stated value stock.
D)outstanding stock.

Question 56

The initial selling price for a share of stock is called the:

A)stated value
B)par value
C)issue price
D)list price

Question 57

When stock is sold, the total paid-in capital should equal the amount of cash received.

Question 58

Lionworks, Inc. issues 5,000 shares of $40 par common stock for $43 per share. The amount credited to paid-in capital in excess of par is:

A)$200,000.
B)$215,000.
C)$15,000.
D)$0.

Question 59

If shares of preferred stock are sold at par value for cash, the transaction would be entered by:

A)debiting Cash and crediting Preferred Stock.
B)debiting Preferred Stock and crediting Cash.
C)debiting Cash and crediting Paid-in Capital in Excess of Par.
D)debiting Paid-In Capital in Excess of Par and crediting Preferred Stock.

Question 60

Accounting for stock at a stated value is almost identical to recording:

A)outstanding stock.
B)no-par stock.
C)issued stock.
D)par stock.

Question 61

The entry to record selling 800 shares of stated value $37 common stock for $59 per share would be:

A)debit Cash $47,200; credit Common Stock $29,600; credit Paid-in Capital in Excess of Stated Value-$17,600.
B)debit Cash $29,600; credit Common Stock $29,600.
C)debit Cash $29,600; debit Paid-in Capital in Excess of Stated Value-$17,600; credit Common Stock $47,200.
D)debit Cash $47,200; credit Common Stock $47,200.

Question 62

A company issued 700 shares of $2 par common stock in exchange for a piece of equipment with a current market value of $24,000. Which of the following is the correct journal entry for this transaction?

A)
B)
C)
D)

Question 63

If a company has 2,500 shares authorized and 1,500 have been issued, the annual dividends on $20 par 5% preferred stock is $1,500.

Question 64

Evergreen Corp. issues 12,000 shares of $5 par common stock for $8.50 per share. The amount credited to paid-in capital in excess of par is:

A)$102,000.
B)$60,000.
C)$12,000.
D)$42,000.

Question 65

If a corporation has both common and preferred stock, the preferred stockholders will receive their dividends first, if the money is available.

Question 66

The entry to record TLR, Inc. selling 1,200 shares of $6 par common stock at $10 per share would be to:

A)debit Cash $12,000; credit Common Stock $7,200; credit Paid-In Capital in Excess of Par-Common Stock $4,800.
B)debit Cash $7,200; credit Common Stock $7,200.
C)debit Cash $12,000; debit Paid-In Capital in Excess of Par-Common $4,800; credit Common Stock $16,800.
D)debit Cash $12,000; credit Common Stock $12,000.

Question 67

The portion of Stockholders' Equity that can be used for dividends is referred to as legal capital.

Question 68

Evergreen Building, Inc. issued 2,000 shares of $14 par common stock in exchange for a truck with a current market value of $45,000. Which of the following is NOT part of the journal entry for this transaction?

A)Debiting equipment for $45,000
B)Crediting Common Stock for $45,000
C)Crediting Common Stock for $28,000
D)Crediting paid-in capital in excess of par-common for $17,000

Question 69

Illusions Corp. issues 8,000 shares of $24 par common stock for $29 per share. The amount credited to paid-in capital in excess of par is:

A)$192,000.
B)$40,000.
C)$8,000.
D)$232,000.

Question 70

The entry to record selling 700 shares of stated value $50 common stock for $74 per share would be:

A)debit Cash $51,800; credit Common Stock $51,800.
B)debit Cash $35,000; credit Common Stock $35,000.
C)debit Cash $35,000; debit Paid-in Capital in Excess of Stated Value-$16,800; credit Common Stock $51,800.
D)debit Cash $51,800; credit Common Stock $35,000; credit Paid-in Capital in Excess of Stated Value-$16,800.

Question 71

The entry to record S&C, Inc. selling 1,500 shares of $9 par common stock for $22 per share would be to:

A)debit Cash $33,000; credit Common Stock $33,000.
B)debit Cash $33,000; credit Common Stock $13,500; credit Paid-In Capital in Excess of Par-Common Stock $19,500.
C)debit Cash $13,500; credit Common Stock $13,500.
D)debit Cash $13,500; debit Paid-In Capital in Excess of Par-Common $19,500; credit Common Stock $33,000.

Question 72

NW Stone Supply issued 50 shares of $14 par common stock in exchange for a piece of equipment with a current market value of $1,000. Which of the following is NOT part of the journal entry for this transaction?

A)Debiting equipment for $700
B)Crediting Common Stock for $700
C)Debiting equipment for $1,000
D)Crediting paid-in capital in excess of par-common for $300

Question 73

If a company has 3,000 shares authorized and 2,000 have been issued, the annual dividends on $18 par 3% preferred stock is $1,620.

Question 74

The entry to record selling 400 shares of $28 stated value common stock for $44 per share would include:

A)debiting Common Stock for $17,600.
B)crediting Cash for $17,600.
C)crediting Paid-in Capital in Excess of Stated Value for $6,400.
D)debiting Paid-in Capital in Excess of Stated Value for $6,400.

Question 75

TLR Productions issued 40 shares of $16 par value stock to its accountant in full payment for her $1,300 fee for assisting in setting up the new company. The entry to record the issuance of the stock would include a:

A)debit to Common Stock for $640.
B)credit to Common Stock for $1,300.
C)credit to Common Stock for $640.
D)debit to Paid-in Capital in Excess of Par-Common for $660.

Question 76

Corporations declare cash dividends from Retained Earnings.

Question 77

Ironworks, Inc. issued 400 shares of $9 par common stock in exchange for a piece of equipment with a current market value of $5,000. Which of the following is NOT part of the journal entry for this transaction?

A)Debiting equipment for $5,000
B)Crediting Common Stock for $5,000
C)Crediting paid-in capital in excess of par-common for $1,400
D)Crediting Common Stock for $3,600

Question 78

Paying dividends causes a decrease in total assets, but an increase in total Stockholders' Equity.

Question 79

Cumulative common stock will pay dividends in arrears.

Question 80

Preferred stock may have its dividend rate listed as a percentage of par value per share or as a flat stated amount.