Question 1

A successful corporation can have a continuous and perpetual life.

Accepted Answer

A) True 
 B)False

Question 2

In the stockholders' equity section, paid-in capital and retained earnings are reported and the specific sources of paid-in capital are identified.

Accepted Answer

A) True 
 B)False

Question 3

A corporation purchases 20,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

A)  Increase by $200,000 
B)  Decrease by $500,000 
C)  Increase by $500,000 
D)  Decrease by $200,000 
A)  Increase by $200,000 
B)  Decrease by $500,000 
C)  Increase by $500,000 
D)  Decrease by $200,000

Question 4

A corporation purchases 30,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

A)  Increase by $1,050,000 
B)  Decrease by $600,000 
C)  Decrease by $1,050,000 
D)  Increase by $600,000 
A)  Increase by $1,050,000 
B)  Decrease by $600,000 
C)  Decrease by $1,050,000 
D)  Increase by $600,000

Question 5

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

Accepted Answer

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 
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 6

A corporate board of directors does not generally

Accepted Answer

A)  select officers. 
B)  formulate operating policies. 
C)  declare dividends. 
D)  execute policy. 
A)  select officers. 
B)  formulate operating policies. 
C)  declare dividends. 
D)  execute policy.

Question 7

When a corporation has only one class of capital stock, it is identified as preferred stock.

Accepted Answer

A) True 
 B)False

Question 8

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

Accepted Answer

A) True 
 B)False

Question 9

Warren Company had the following transactions.
1. Issued 5,000 shares of common stock with a stated value of $10 for $110,000.
2. Issued 2,000 shares of $100 par preferred stock at $107 for cash.
Instructions
Prepare the journal entries to record the above stock transactions.

Accepted Answer

The answer of Warren Company had the following transactions.
1. Issued...

Question 10

Dividends in arrears on cumulative preferred stock

Accepted Answer

A)  are considered to be a non-current liability. 
B)  are considered to be a current liability. 
C)  only occur when preferred dividends have been declared. 
D)  should be disclosed in the notes to the financial statements. 
A)  are considered to be a non-current liability. 
B)  are considered to be a current liability. 
C)  only occur when preferred dividends have been declared. 
D)  should be disclosed in the notes to the financial statements.

Question 11

If a stockholder cannot attend a stockholder's meeting, he may delegate his voting rights by means of

Accepted Answer

A)  an absentee ballot. 
B)  a proxy. 
C)  a certified letter. 
D)  a telegram. 
A)  an absentee ballot. 
B)  a proxy. 
C)  a certified letter. 
D)  a telegram.

Question 12

Elton Manufacturing Corporation purchased 4,000 shares of its own previously issued $10 par common stock for $92,000. As a result of this event,

Accepted Answer

A)  Elton's Common Stock account decreased $40,000. 
B)  Elton's total stockholders' equity decreased $92,000. 
C)  Elton's Paid-in Capital in Excess of Par Value account decreased $52,000. 
D)  All of the above. 
A)  Elton's Common Stock account decreased $40,000. 
B)  Elton's total stockholders' equity decreased $92,000. 
C)  Elton's Paid-in Capital in Excess of Par Value account decreased $52,000. 
D)  All of the above.

Question 13

Treasury stock is

Accepted Answer

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 retired. 
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 retired.

Question 14

Which of the following is an incorrect statement about a corporation?

Accepted Answer

A)  A corporation is an entity separate and distinct from its owners. 
B)  Creditors ordinarily have recourse only to corporate assets in satisfaction of their claims. 
C)  A corporation may be formed in writing, orally, or implied. 
D)  A corporation is subject to numerous state and federal regulations. 
A)  A corporation is an entity separate and distinct from its owners. 
B)  Creditors ordinarily have recourse only to corporate assets in satisfaction of their claims. 
C)  A corporation may be formed in writing, orally, or implied. 
D)  A corporation is subject to numerous state and federal regulations.

Question 15

Sandwick Corporation was organized on January 1, 2010, with authorized capital of 500,000 shares of $10 par value common stock. During 2010, Sandwick issued 20,000 shares at $12 per share, purchased 2,000 shares of treasury stock at $13 per share, and sold 2,000 shares of treasury stock at $14 per share. What is the amount of additional paid-in capital at December 31, 2010?

Accepted Answer

A)  $0 
B)  $2,000 
C)  $40,000 
D)  $42,000 
A)  $0 
B)  $2,000 
C)  $40,000 
D)  $42,000

Question 16

In published annual reports, subdivisions within the stockholders' equity section are seldom presented, but additional information is frequently included in the footnotes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 17

If a corporation's stock is traded on the major stock exchanges, the corporation must generally report periodically to a federal agency known as the ____________________.

Accepted Answer

Securities

Question 18

A separate paid-in capital account is used to record each of the following except the issuance of

Accepted Answer

A)  no-par stock. 
B)  par value stock. 
C)  stated value stock. 
D)  treasury stock above cost. 
A)  no-par stock. 
B)  par value stock. 
C)  stated value stock. 
D)  treasury stock above cost.

Question 19

The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 20

Venco Corporation's December 31, 2010 balance sheet showed the following:
8% preferred stock, $20 par value, cumulative, 10,000 shares  
Venco declared and paid a $38,000 cash dividend on December 15, 2010. If the company's dividends in arrears prior to that date were $9,000, Triad's common stockholders received

Accepted Answer

A)  $29,000. 
B)  $14,000. 
C)  $17,000. 
D)  no dividend. 
A)  $29,000. 
B)  $14,000. 
C)  $17,000. 
D)  no dividend.

Exam 13: Corporations: Organization and Capital Stock Transactions

A successful corporation can have a continuous and perpetual life.

In the stockholders' equity section, paid-in capital and retained earnings are reported and the specific sources of paid-in capital are identified.

A corporation purchases 20,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?

A corporation purchases 30,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

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

A corporate board of directors does not generally

When a corporation has only one class of capital stock, it is identified as preferred stock.

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

Warren Company had the following transactions. 1. Issued 5,000 shares of common stock with a stated value of $10 for $110,000. 2. Issued 2,000 shares of $100 par preferred stock at $107 for cash. Instructions Prepare the journal entries to record the above stock transactions.

Dividends in arrears on cumulative preferred stock

If a stockholder cannot attend a stockholder's meeting, he may delegate his voting rights by means of

Elton Manufacturing Corporation purchased 4,000 shares of its own previously issued $10 par common stock for $92,000. As a result of this event,

Treasury stock is

Which of the following is an incorrect statement about a corporation?

In published annual reports, subdivisions within the stockholders' equity section are seldom presented, but additional information is frequently included in the footnotes to the financial statements.

If a corporation's stock is traded on the major stock exchanges, the corporation must generally report periodically to a federal agency known as the ____________________.

A separate paid-in capital account is used to record each of the following except the issuance of

The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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