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

Question 1

Which of the following is an advantage of a corporation?

A)Double taxation
B)Continuous life
C)Unlimited liability
D)Non-transfer of ownership

Answer 1

B

Question 2

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

Answer 2

C

Question 3

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

Answer 3

True

Question 4

Which of the following business types is largest by number?

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

Question 5

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

Question 6

Stockholders will be issued ________ physically or electronically.

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

Question 7

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

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

Question 8

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

Question 9

Stock that is held by stockholders is called:

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

Question 10

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

Question 11

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

Question 12

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

A)Ease of raising capital
B)Government regulation
C)Limited liability
D)Transfer of ownership

Question 13

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 14

A corporation must incorporate through the local government of any state it chooses.

Question 15

A business wanting to incorporate must file articles of incorporation with:

A)the federal government.
B)the state office dealing with incorporation.
C)the local government.
D)any state in which they will do business.

Question 16

A corporation is a separate legal entity from its owners.

Question 17

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.

Question 18

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 19

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

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

Question 20

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

Question 21

If you own 500 shares (2% of a corporation's stock)and the corporation issues 15,000 new shares,how many total shares will you have after exercising your preemptive rights?

A)500
B)300
C)800
D)0

Question 22

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

Question 23

Dennis owns 2% of the total shares in a company;if the company issues a dividend he will receive 2% of the dividend.

Question 24

A stockholder may have three basic rights.

Question 25

At least one "class" of stock MUST have:

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

Question 26

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 27

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

Question 28

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

Question 29

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 30

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 31

If you own 800 shares (3% of a corporation's stock)and the corporation issues 10,000 new shares,how many of the new shares can your purchase under preemptive right?

A)0
B)300
C)800
D)1,100

Question 32

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

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

Question 33

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 34

Which right do preferred stockholders receive before common stockholders?

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

Question 35

If you own 800 shares (3% of a corporation's stock)and the corporation issues 10,000 new shares,how many total shares will you have after exercising your preemptive right?

A)0
B)300
C)800
D)1,100

Question 36

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

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

Question 37

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 38

Stated value is assigned:

A)when the corporate charter is filed.
B)at a later date,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 39

Retained Earnings represent internally generated capital.

Question 40

If you own 500 shares (2% of a corporation's stock)and the corporation issues 15,000 new shares,how many of the new shares can you purchase under preemptive right?

A)500
B)300
C)800
D)0

Question 41

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 42

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 43

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

Question 44

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 45

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 46

A company issues 15,000 shares of its $25 par common stock for $29 per share.The amount to be debited to Cash is:

A)$60,000.
B)$435,000.
C)$375,000.
D)$405,000.

Question 47

A company issues 50,000 shares of its $8 par common stock for $15 per share.The amount to be debited to Cash is:

A)$50,000.
B)$400,000.
C)$350,000.
D)$750,000.

Question 48

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

Question 49

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 50

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

Question 51

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 52

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

Question 53

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 54

Lionworks,Inc.issues 2,000 shares of $40 par common stock for $43 per share.The amount credited to paid-in capital in excess of par is:

A)$80,000.
B)$86,000.
C)$6,000.
D)$0.

Question 55

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 56

Evergreen Corp.issues 10,000 shares of $5 par common stock for $6.50 per share.The amount credited to paid-in capital in excess of par is:

A)$65,000.
B)$10,000.
C)$50,000.
D)$15,000.

Question 57

Illusions Corp.issues 5,000 shares of $20 par common stock for $28 per share.The amount credited to paid-in capital in excess of par is:

A)$100,000.
B)$40,000.
C)$6,000.
D)$140,000.

Question 58

The entry to record TLR,Inc.selling 800 shares of $6 par common stock at $8 per share would be to:

A)debit Cash $6,400;credit Common Stock $4,800;credit Paid-In Capital in Excess of Par-Common Stock $1,600.
B)debit Cash $4,800;credit Common Stock $4,800.
C)debit Cash $6,400;debit Paid-In Capital in Excess of Par-Common $1,600;credit Common Stock $8,000.
D)debit Cash $6,400;credit Common Stock $6,400.

Question 59

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 60

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

Question 61

Ironworks,Inc.issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000.Which of the following is NOT part of the journal entry for this transaction?

A)Debiting equipment for $3,000
B)Crediting Common Stock for $3,000
C)Crediting paid-in capital in excess of par-common for $600
D)Crediting Common Stock for $2,400

Question 62

Five hundred shares of $25 par common stock were exchanged for a piece of equipment with a current market value of $13,500.The journal entry to record the transaction would include a:

A)debit to Equipment for $12,500.
B)debit to Common Stock for $12,500.
C)credit to Paid-In Capital in Excess of Par-Common for $1,000.
D)credit to Common Stock for $13,500.

Question 63

Which of the following is NOT a date associated with cash dividends?

A)Date of issuance
B)Date of declaration
C)Date of payment
D)Date of record

Question 64

Cumulative common stock will pay dividends in arrears.

Question 65

Corporations declare cash dividends from Retained Earnings.

Question 66

The entry to record selling 150 shares of $30 stated value common stock for $40 per share would include:

A)debiting Common Stock for $6,000.
B)crediting Cash for $6,000.
C)crediting Paid-in Capital in Excess of Stated Value for $1,500.
D)debiting Paid-in Capital in Excess of Stated Value for $1,500.

Question 67

The entry to record selling 500 shares of stated value $40 common stock for $52 per share would be:

A)debit Cash $26,000;credit Common Stock $20,000;credit Paid-in Capital in Excess of Stated Value-$6,000.
B)debit Cash $20,000;credit Common Stock $20,000.
C)debit Cash $20,000;debit Paid-in Capital in Excess of Stated Value-$6,000;credit Common Stock $26,000.
D)debit Cash $26,000;credit Common Stock $26,000.

Question 68

TLR Productions issued 40 shares of $20 par value stock to its accountant in full payment for her $900 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 $800.
B)credit to Common Stock for $900.
C)credit to Common Stock for $800.
D)debit to Paid-in Capital in Excess of Par-Common for $100.

Question 69

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

Question 70

A company has 25,000 shares of $12 par,8% preferred stock.The 8% refers to the stock's:

A)market rate.
B)dividend rate.
C)paid-in capital rate.
D)interest rate.

Question 71

The entry to record selling 300 shares of stated value $60 common stock for $70 per share would be:

A)debit Cash $21,000;credit Common Stock $21,000.
B)debit Cash $18,000;credit Common Stock $18,000.
C)debit Cash $18,000;debit Paid-in Capital in Excess of Stated Value-$3,000;credit Common Stock $21,000.
D)debit Cash $21,000;credit Common Stock $18,000;credit Paid-in Capital in Excess of Stated Value-$3,000.

Question 72

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 73

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

Question 74

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

Question 75

A company issued 500 shares of $3 par common stock in exchange for a piece of equipment with a current market value of $20,000.Which of the following is the correct journal entry for this transaction?

A)

B)

C)

D)

Question 76

The entry to record S&C,Inc.selling 1,000 shares of $12 par common stock for $20 per share would be to:

A)debit Cash $20,000;credit Common Stock $20,000.
B)debit Cash $20,000;credit Common Stock $12,000;credit Paid-In Capital in Excess of Par-Common Stock $8,000.
C)debit Cash $12,000;credit Common Stock $12,000.
D)debit Cash $12,000;debit Paid-In Capital in Excess of Par-Common $8,000;credit Common Stock $20,000.

Question 77

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

Question 78

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 79

Evergreen Building,Inc.issued 2,000 shares of $18 par common stock in exchange for a truck with a current market value of $40,000.Which of the following is NOT part of the journal entry for this transaction?

A)Debiting equipment for $40,000
B)Crediting Common Stock for $40,000
C)Crediting Common Stock for $36,000
D)Crediting paid-in capital in excess of par-common for $4,000

Question 80

NW Stone Supply issued 50 shares of $15 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 $750
B)Crediting Common Stock for $750
C)Debiting equipment for $1,000
D)Crediting paid-in capital in excess of par-common for $250