Question 1

The transfer of stock between shareholders is

Accepted Answer

A)  recorded in the general journal. 
B)  recorded in the capital stock transfer journal. 
C)  recorded in the minute book. 
D)  not recorded by the corporation. 
A)  recorded in the general journal. 
B)  recorded in the capital stock transfer journal. 
C)  recorded in the minute book. 
D)  not recorded by the corporation.

Question 2

The conversion ratio is the number of shares of common stock for which a share of convertible preferred stock may be exchanged.

Accepted Answer

A) True 
 B)False

Question 3

Organization costs should be

Accepted Answer

A)  treated as an operating expense when incurred. 
B)  debited to an intangible asset account when incurred and systematically charged to expense over a period of up to 40 years. 
C)  debited to an intangible asset account when incurred and carried at the original amount until the business ceases operations. 
D)  debited to an intangible asset account when incurred and carried at the original amount until the business begins to earn a profit. 
A)  treated as an operating expense when incurred. 
B)  debited to an intangible asset account when incurred and systematically charged to expense over a period of up to 40 years. 
C)  debited to an intangible asset account when incurred and carried at the original amount until the business ceases operations. 
D)  debited to an intangible asset account when incurred and carried at the original amount until the business begins to earn a profit.

Question 4

Callable preferred stock gives the issuing corporation the right to repurchase the preferred shares from its shareholders at a specified price.

Accepted Answer

A) True 
 B)False

Question 5

State laws prohibit the issuance of stock at less than par or stated value.

Accepted Answer

A) True 
 B)False

Question 6

A corporation has 10,000 shares of 6 percent,$50 par-value cumulative preferred stock and 50,000 shares of $4 par-value common stock outstanding.Last year,no dividends were paid.This year,the board of directors decided to pay a dividend of $80,000.The common stockholders will receive a dividend of

Accepted Answer

A)  $0.40 a share. 
B)  $1.00 a share. 
C)  $1.60 a share. 
D)  $2.00 a share. 
A)  $0.40 a share. 
B)  $1.00 a share. 
C)  $1.60 a share. 
D)  $2.00 a share.

Question 7

A reduction in dividends distributed to shareholders from one year to the next leads to loss of investor confidence and reduced market prices for the stock.

Accepted Answer

A) True 
 B)False

Question 8

Organization costs are often expensed when incurred.

Accepted Answer

A) True 
 B)False

Question 9

The entry to record the issuance of 2,000 shares of $10 par-value common stock for $14 a share consists of a debit to Cash for $28,000 and a credit to Common Stock for

Accepted Answer

A)  $28,000. 
B)  $20,000 and a credit to Gain on Sale of Common Stock for $8,000. 
C)  $20,000 and a credit to Treasury Stock for $8,000. 
D)  $20,000 and a credit to Paid-in Capital in Excess of Par Value-Common Stock for $8,000. 
A)  $28,000. 
B)  $20,000 and a credit to Gain on Sale of Common Stock for $8,000. 
C)  $20,000 and a credit to Treasury Stock for $8,000. 
D)  $20,000 and a credit to Paid-in Capital in Excess of Par Value-Common Stock for $8,000.

Question 10

The holder of a share of 12 percent,$100 par-value preferred stock would receive a dividend of ____________________ per share before any dividend was paid to common stockholders.

Accepted Answer

The answer of The holder of a share of 12...

Question 11

Assets acquired through the issuance of stock are recorded at their historical cost.

Accepted Answer

A) True 
 B)False

Question 12

Elsinore Corporation has outstanding 200,000 shares of $100 par-value preferred stock,issued at an average price of $110 a share.The preferred stock is convertible into common stock at the rate of five shares of common stock for each share of preferred stock.Louis Reynault owns 500 shares of the preferred stock.During the current year he decides to convert 225 shares into common stock.How many shares of common stock will he receive?

Accepted Answer

The answer of Elsinore Corporation has outstanding 200,000 shares of...

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Market value is the figure selected by the organizers of the corporation to be assigned to each share of stock for accounting purposes. 
B)  If there is only one class of stock,the stock is called preferred stock. 
C)  The authorized capital stock is the number of shares that have been issued and are still in the hands of stockholders. 
D)  In the event of liquidation,preferred stockholders have a claim on assets before that of common stockholders. 
A)  Market value is the figure selected by the organizers of the corporation to be assigned to each share of stock for accounting purposes. 
B)  If there is only one class of stock,the stock is called preferred stock. 
C)  The authorized capital stock is the number of shares that have been issued and are still in the hands of stockholders. 
D)  In the event of liquidation,preferred stockholders have a claim on assets before that of common stockholders.

Question 14

Which of the following statements is correct?

Accepted Answer

A)  The owners of preferred stock are the only stockholders who have the right to vote. 
B)  All stockholders are guaranteed the right to receive annual dividends. 
C)  The issuing corporation may retain the right to repurchase shares of preferred stock from the stockholders at a specific price. 
D)  In a liquidation,common shareholders are paid before preferred shareholders. 
A)  The owners of preferred stock are the only stockholders who have the right to vote. 
B)  All stockholders are guaranteed the right to receive annual dividends. 
C)  The issuing corporation may retain the right to repurchase shares of preferred stock from the stockholders at a specific price. 
D)  In a liquidation,common shareholders are paid before preferred shareholders.

Question 15

Subchapter S corporations

Accepted Answer

A)  are subject to double taxation of profits typical of corporate organizations. 
B)  require that shareholders report their share of profits on their partnership tax returns. 
C)  are limited liability corporations. 
D)  are entities formed as corporations but are treated essentially as a partnership so the corporation pays no income tax. 
A)  are subject to double taxation of profits typical of corporate organizations. 
B)  require that shareholders report their share of profits on their partnership tax returns. 
C)  are limited liability corporations. 
D)  are entities formed as corporations but are treated essentially as a partnership so the corporation pays no income tax.

Question 16

The ___________________ accounts for all stock issued by a corporation and receives all cancelled and newly issued stock certificates from the transfer agent.

Accepted Answer

The answer of The ___________________ accounts for all stock issued...

Question 17

Ari Hightower owns 200 shares of preferred stock that is convertible into common stock at the rate of 3 shares for every share surrendered.If she surrenders all her preferred stock,she will have _____________________ shares of common stock.

Accepted Answer

The answer of Ari Hightower owns 200 shares of preferred...

Question 18

Stock is issued to investors at the time they sign the stock subscription contract.

Accepted Answer

A) True 
 B)False

Question 19

The Common Stock Subscribed account has a(n)____________________ balance.

Accepted Answer

The answer of The Common Stock Subscribed account has a(n)____________________...

Question 20

Participating preferred stockholders

Accepted Answer

A)  receive dividends only after common stockholders have been paid dividends. 
B)  receive preference dividend amounts as well as a share of other dividends paid. 
C)  receive cumulative dividends if dividends are passed in previous years. 
D)  give up their voting rights in exchange for dividend preferences. 
A)  receive dividends only after common stockholders have been paid dividends. 
B)  receive preference dividend amounts as well as a share of other dividends paid. 
C)  receive cumulative dividends if dividends are passed in previous years. 
D)  give up their voting rights in exchange for dividend preferences.

Exam 20: Corporations: Formation and Capital Stock Transactions

The transfer of stock between shareholders is

The conversion ratio is the number of shares of common stock for which a share of convertible preferred stock may be exchanged.

Organization costs should be

Callable preferred stock gives the issuing corporation the right to repurchase the preferred shares from its shareholders at a specified price.

State laws prohibit the issuance of stock at less than par or stated value.

A corporation has 10,000 shares of 6 percent,$50 par-value cumulative preferred stock and 50,000 shares of $4 par-value common stock outstanding.Last year,no dividends were paid.This year,the board of directors decided to pay a dividend of $80,000.The common stockholders will receive a dividend of

A reduction in dividends distributed to shareholders from one year to the next leads to loss of investor confidence and reduced market prices for the stock.

Organization costs are often expensed when incurred.

The entry to record the issuance of 2,000 shares of $10 par-value common stock for $14 a share consists of a debit to Cash for $28,000 and a credit to Common Stock for

The holder of a share of 12 percent,$100 par-value preferred stock would receive a dividend of ____________________ per share before any dividend was paid to common stockholders.

Assets acquired through the issuance of stock are recorded at their historical cost.

Which of the following statements is correct?

Which of the following statements is correct?

Subchapter S corporations

The ___________________ accounts for all stock issued by a corporation and receives all cancelled and newly issued stock certificates from the transfer agent.

Ari Hightower owns 200 shares of preferred stock that is convertible into common stock at the rate of 3 shares for every share surrendered.If she surrenders all her preferred stock,she will have _____________________ shares of common stock.

Stock is issued to investors at the time they sign the stock subscription contract.

The Common Stock Subscribed account has a(n)____________________ balance.

Participating preferred stockholders

Accounting: the Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and the Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounting Principles and Reporting Standards

Accounts Receivable and Uncollectible Accounts

Notes Payable and Notes Receivable

Merchandise Inventory

Property, Plant, and Equipment

Accounting for Partnerships

Corporate Earnings and Capital Transactions

Long-Term Bonds

Financial Statement Analyses

The Statement of Cash Flows

Departmentalized Profit and Cost Centers

Accounting for Manufacturing Activities

Job Order Cost Accounting

Process Cost Accounting

Controlling Manufacturing Costs: Standard Costs

Cost-Revenue Analysis for Decision Making

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