Question 1

Winstead Co.is authorized by its articles of incorporation to sell 50,000 shares of stock.The company:

Accepted Answer

A) may not sell 55,000 shares under any circumstances. 
B) must sell the number of shares authorized by its articles of incorporation. 
C) would issue void securities for any shares the company purports to sell over the 50,000. 
D) must repay, with interest from the date of purchase, any purchaser of shares over 50,000. 
A) may not sell 55,000 shares under any circumstances. 
B) must sell the number of shares authorized by its articles of incorporation. 
C) would issue void securities for any shares the company purports to sell over the 50,000. 
D) must repay, with interest from the date of purchase, any purchaser of shares over 50,000.

Question 2

The board of directors may issue bonds without the authorization or consent of the shareholders.

Accepted Answer

A) True 
 B)False

Question 3

A stock split results in a larger proportion of corporate ownership by the shareholder.

Accepted Answer

A) True 
 B)False

Question 4

A distribution may be in the form of:

Accepted Answer

A) declaration or payment of a dividend. 
B) a purchase, redemption, or other acquisition of shares. 
C) a distribution of indebtedness. 
D) All of these. 
A) declaration or payment of a dividend. 
B) a purchase, redemption, or other acquisition of shares. 
C) a distribution of indebtedness. 
D) All of these.

Question 5

If a "liquidation preference" is provided, preferred stock usually has priority over common stock.

Accepted Answer

A) True 
 B)False

Question 6

A company may not initially issue all the shares authorized by the corporate charter.It can hold back shares.

Accepted Answer

A) True 
 B)False

Question 7

The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company.

Accepted Answer

A) True 
 B)False

Question 8

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels.In lieu of payment under this bond, a holder may exchange it for stock of the corporation.This bond would be a:

Accepted Answer

A) callable income bond. 
B) convertible participating bond. 
C) convertible unsecured bond. 
D) convertible secured bond. 
A) callable income bond. 
B) convertible participating bond. 
C) convertible unsecured bond. 
D) convertible secured bond.

Question 9

Which of the following is incorrect with regard to treasury shares?

Accepted Answer

A) No dividends may be paid on treasury shares. 
B) They are issued but not outstanding. 
C) A corporation may sell treasury shares for any amount the board of directors determines, even if the shares have a par value that is more than the sale price. 
D) The concept of treasury stock was created by the MBCA and is carried forward in the RMBCA. 
A) No dividends may be paid on treasury shares. 
B) They are issued but not outstanding. 
C) A corporation may sell treasury shares for any amount the board of directors determines, even if the shares have a par value that is more than the sale price. 
D) The concept of treasury stock was created by the MBCA and is carried forward in the RMBCA.

Question 10

Warrick makes a $10,000 investment in a debenture issued by F & M Company.Warrick is now a secured creditor of F & M Company.

Accepted Answer

A) True 
 B)False

Question 11

Treasury shares are shares that have been authorized but have not yet been issued.

Accepted Answer

A) True 
 B)False

Question 12

Bonds subject to a redemption provision which permits the corporation to redeem or pay off all, or a part, of the issue before maturity at a specified redemption price are known as bonds.

Accepted Answer

A) secured 
B) income 
C) callable 
D) convertible 
A) secured 
B) income 
C) callable 
D) convertible

Question 13

A corporate bond creates a debtor-creditor relationship between the corporation and the holder of the security.

Accepted Answer

A) True 
 B)False

Question 14

Discuss the use and types of stock options.

Accepted Answer

Stock options entitle their holders to p

Question 15

The most restrictive test for the issuance of dividends by a corporation is the net assets test.

Accepted Answer

A) True 
 B)False

Question 16

Percy buys stock in XTX Corporation that pays dividends of $5 per share before dividends are paid on other stock of XTX.If the dividends are not paid in any given year, the dividends for that year must be paid when the company next declares dividends, until fully paid.Percy's dividends per year will not exceed $5 per share.Percy's stock is:

Accepted Answer

A) cumulative common stock. 
B) noncumulative preferred stock. 
C) cumulative preferred stock. 
D) participating preferred stock. 
A) cumulative common stock. 
B) noncumulative preferred stock. 
C) cumulative preferred stock. 
D) participating preferred stock.

Question 17

What are the two major issues regarding payment for shares?

Accepted Answer

Two major issues arise regarding payment

Question 18

"Capital surplus" would be credited with the excess received over par value for par value shares issued by the corporation.

Accepted Answer

A) True 
 B)False

Question 19

ZYX Corporation purchases 1,000 shares of its own stock from Jones, a shareholder, at a price of $50 a share. These shares will be known as:

Accepted Answer

A) treasury shares. 
B) preemptive shares. 
C) preferred stock. 
D) no par stock. 
A) treasury shares. 
B) preemptive shares. 
C) preferred stock. 
D) no par stock.

Question 20

If 100 shares of $50 par value stock were issued at $75 per share, how much would constitute capital surplus?

Accepted Answer

A) $750 
B) $7,500 
C) $2,500 
D) $5,000 
A) $750 
B) $7,500 
C) $2,500 
D) $5,000

Exam 34: Financial Structure

Winstead Co.is authorized by its articles of incorporation to sell 50,000 shares of stock.The company:

The board of directors may issue bonds without the authorization or consent of the shareholders.

A stock split results in a larger proportion of corporate ownership by the shareholder.

A distribution may be in the form of:

If a "liquidation preference" is provided, preferred stock usually has priority over common stock.

A company may not initially issue all the shares authorized by the corporate charter.It can hold back shares.

The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company.

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels.In lieu of payment under this bond, a holder may exchange it for stock of the corporation.This bond would be a:

Which of the following is incorrect with regard to treasury shares?

Warrick makes a $10,000 investment in a debenture issued by F & M Company.Warrick is now a secured creditor of F & M Company.

Treasury shares are shares that have been authorized but have not yet been issued.

Bonds subject to a redemption provision which permits the corporation to redeem or pay off all, or a part, of the issue before maturity at a specified redemption price are known as bonds.

A corporate bond creates a debtor-creditor relationship between the corporation and the holder of the security.

Discuss the use and types of stock options.

The most restrictive test for the issuance of dividends by a corporation is the net assets test.

What are the two major issues regarding payment for shares?

"Capital surplus" would be credited with the excess received over par value for par value shares issued by the corporation.

ZYX Corporation purchases 1,000 shares of its own stock from Jones, a shareholder, at a price of $50 a share. These shares will be known as:

If 100 shares of $50 par value stock were issued at $75 per share, how much would constitute capital surplus?

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Relationship of Principal and Agent

Relationship With Third Parties

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature, Formation, and Powers

Management Structure

Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

Antitrust

Consumer Protection

Employment Law

Securities Regulation

Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Decedents Estates

51: The Legal Environment Of Business

52: Contracts.

53: Agency.

54: Sales

55: Negotiable Instruments

56: Unincorporated Business Association

57: Corporations

58: Debtor and Creditor Relation

59: Regulation of Business

60: Property.

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