Deck 14: Sole Proprietorships,partnerships, Andcorporations

Question 1

If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation.

Answer 1

True

Question 2

The chief accounting officer in a company is known as the

A)controller.
B)treasurer.
C)vice-president.
D)president.

Answer 2

D

Question 3

The values assigned to assets during the formation of a partnership must

A)equal in value.
B)include the effect of inflation.
C)be agreed upon by all of the partners.
D)be recorded by the partnership.

Answer 3

D

Question 4

When preferred stock is cumulative, preferred dividends not declared in a given period are called dividends in arrears.

Question 5

Dividends may be declared and paid in cash or stock.

Question 6

The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is

A)the sole proprietorship.
B)the partnership.
C)the corporation.
D)not known.

Question 7

One major challenge of owning a sole proprietorship is

A)raising funds on one person's collateral.
B)finding shareholders.
C)the division of net income.
D)double taxation.

Question 8

In a partnership each partner's initial investment should be recorded at the fair _______ value of the assets at the date of their transfer to the partnership.

A)book
B)market
C)investment
D)asset

Question 9

Which one of the following is an advantage of a partnership?

A)Mutual agency
B)Ease of decision making
C)Limited life
D)Unlimited liability

Question 10

Which one of the following is not a characteristic of a partnership?

A)Co-ownership of property
B)Mutual agency
C)Unlimited life
D)Unlimited liability

Question 11

In a partnership the same basis of division usually applies to both net income and net loss.

Question 12

Which one of the following is not a characteristic of a sole proprietorship?

A)Easy formation
B)No dilution of profits
C)Limited life
D)Limited liability

Question 13

Organization costs are expensed immediately, even though they conceptually benefit the corporation over its entire life.

Question 14

Each partner's initial investment in a partnership should be recorded at the book value of the asset at the date of their transfer to the partnership.

Question 15

In a partnership mutual agency means

A)both partners must sign a contract in order for it to be binding.
B)each partner acts on behalf of the partnership when engaging in partner business.
C)each partner must consult the other before making any major business decisions.
D)the act of any partner is not binding on all other partners, especially when partners act beyond the scope of their aurthority.

Question 16

In a partnership the basis of division of net income or net loss is usually referred to as

A)the profit and loss ratio.
B)the income and loss ratio.
C)the income ratio.
D)all of the above.

Question 17

Partnership net income or net loss is shared equally unless

A)the partnership contract specifically indicates the manner in which net income and net loss are to be divided.
B)at the end of the year the partners agree to divide the income at a different percentage.
C)one partner has put more effort and time into the business than the other.
D)the government changes their tax laws requiring the partners to pay more personal income taxes.

Question 18

The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.

Question 19

Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of Treasury Stock being recognized on the income statement.

Question 20

In a partnership each partner is personally and individually liable for all partnership liabilities.

Question 21

If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at

A)fair market value.
B)cost.
C)zero.
D)a nominal amount.

Question 22

Which of the following statements concerning taxation is accurate?

A)Partnerships pay state income taxes but not federal income taxes.
B)Corporations pay federal income taxes but not state income taxes.
C)Corporations pay federal and state income taxes.
D)Only the owners must pay taxes on corporate income.

Question 23

Which one of the following is not an ownership right of a stockholder in a corporation?

A)To vote in the election of directors
B)To declare dividends on the common stock
C)To share in assets upon liquidation
D)To share in corporate earnings

Question 24

Treasury stock should be reported in the financial statements of a corporation as a(n)

A)investment.
B)liability.
C)deduction from total paid-in capital.
D)deduction from total paid-in capital and retained earnings.

Question 25

Which of the following represents the largest number of common shares?

A)Treasury shares
B)Issued shares
C)Outstanding shares
D)Authorized shares

Question 26

Corporations generally issue stock dividends in order to

A)increase the market price per share.
B)exceed stockholders' dividend expectations.
C)increase the marketability of the stock.
D)decrease the amount of capital in the corporation.

Question 27

The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to

A)decrease current liabilities and stockholders' equity.
B)increase total assets and stockholders' equity.
C)increase current liabilities and stockholders' equity.
D)decrease stockholders' equity and total assets.

Question 28

A small stock dividend is defined as

A)less than 30% but greater than 25% of the corporation's issued stock.
B)between 50% and 100% of the corporation's issued stock.
C)more than 30% of the corporation's issued stock.
D)less than 20-25% of the corporation's issued stock.

Question 29

Treasury Stock is a(n)

A)contra asset account.
B)retained earnings account.
C)asset account.
D)contra stockholders' equity account.

Question 30

Which of the following is not a significant date with respect to dividends?

A)The declaration date
B)The incorporation date
C)The record date
D)The payment date

Question 31

Baden Bagels Inc.has 5,000 shares of 8%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2005.There were no dividends declared in 2004.The board of directors declares and pays a $50,000 dividend in 2005.What is the amount of dividends received by the common stockholders in 2005?

A)$0
B)$40,000
C)$50,000
D)$10,000

Question 32

The effect of a stock dividend is to

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 33

Treasury stock is

A)stock issued by the U.S.Treasury Department.
B)stock purchased by a corporation and held as an investment in its treasury.
C)corporate stock issued by the treasurer of a company.
D)a corporation's own stock which has been reacquired but not canceled.

Question 34

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

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

Question 35

Which of the following is not true of a corporation?

A)It may buy, own, and sell property.
B)It may sue and be sued.
C)The acts of its owners bind the corporation.
D)It may enter into binding legal contracts in its own name.

Question 36

Jade Juices Inc.had 200,000 shares of common stock outstanding before a stock split occurred, and 400,000 shares outstanding after the stock split.The stock split was

A)2 for 4.
B)4 for 1.
C)1 for 4.
D)2 for 1.