Question 1

Determining the value to be placed on the consideration that stock purchasers will exchange for shares is the responsibility of the shareholders.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is correct regarding a two-for-one stock split?

Accepted Answer

A) The purpose of the split may be to decrease the value per share of the stock. 
B) The purpose of the split is to make a distribution to the stockholders. 
C) After the split, each stockholder will have greater ownership interest in the corporation. 
D) The value of each share of stock will increase as a result of the split. 
A) The purpose of the split may be to decrease the value per share of the stock. 
B) The purpose of the split is to make a distribution to the stockholders. 
C) After the split, each stockholder will have greater ownership interest in the corporation. 
D) The value of each share of stock will increase as a result of the split.

Question 3

The federal government leaves corporate stock regulation to the states since corporations are state-created entities.

Accepted Answer

A) True 
 B)False

Question 4

The board of directors cannot declare dividends when the corporation:

Accepted Answer

A) is insolvent. 
B) is merging with another corporation. 
C) is the subject of a takeover bid. 
D) issues new stock. 
A) is insolvent. 
B) is merging with another corporation. 
C) is the subject of a takeover bid. 
D) issues new stock.

Question 5

A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corporate assets of an ongoing company.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is correct with regard to common stock?

Accepted Answer

A) The Revised Act has eliminated the terms "preferred" and "common." 
B) Common stock does not have any special contract rights or preferences. 
C) Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. 
D) All of the above are correct with regard to common stock. 
A) The Revised Act has eliminated the terms "preferred" and "common." 
B) Common stock does not have any special contract rights or preferences. 
C) Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. 
D) All of the above are correct with regard to common stock.

Question 7

In Klang v.Smith's Food & Drug Centers, Inc., the court found:

Accepted Answer

A) that the balance sheets of a corporation constitute conclusive evidence of capital impairment regarding a corporation's repurchase of shares. 
B) the corporation's repurchase of shares violated a statutory prohibition against impairment of capital. 
C) the directors may appropriately revalue corporate assets to reflect current value. 
D) criminal negligence existed. 
A) that the balance sheets of a corporation constitute conclusive evidence of capital impairment regarding a corporation's repurchase of shares. 
B) the corporation's repurchase of shares violated a statutory prohibition against impairment of capital. 
C) the directors may appropriately revalue corporate assets to reflect current value. 
D) criminal negligence existed.

Question 8

Treasury stock is issued but not outstanding.

Accepted Answer

A) True 
 B)False

Question 9

The Revised Act, the 1980 Amendments to the MBCA, and over half of the states have eliminated the concept of:

Accepted Answer

A) par value. 
B) stated capital. 
C) capital surplus. 
D) All of the above. 
A) par value. 
B) stated capital. 
C) capital surplus. 
D) All of the above.

Question 10

In which of the following ways do debt and equity securities necessarily differ?

Accepted Answer

A) Ownership interest. 
B) Voting rights. 
C) Redeemability. 
D) Convertibility. 
A) Ownership interest. 
B) Voting rights. 
C) Redeemability. 
D) Convertibility.

Question 11

A corporation's proportional distribution of additional shares of the corporation's capital stock to its shareholders is a:

Accepted Answer

A) stock or share dividend. 
B) stock split. 
C) redemption. 
D) None of the above. 
A) stock or share dividend. 
B) stock split. 
C) redemption. 
D) None of the above.

Question 12

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

Question 13

The shareholders normally determine the price for which shares will be issued unless the charter permits the board of directors to set the price.

Accepted Answer

A) True 
 B)False

Question 14

The MBCA as amended in 1980 and the Revised Act have adopted a net asset test for the issuance of dividends.

Accepted Answer

A) True 
 B)False

Question 15

A shareholder may be required to repay a dividend paid by the corporation.

Accepted Answer

A) True 
 B)False

Question 16

Participating stock will:

Accepted Answer

A) share in excess earnings after preferred payments along with common stock. 
B) accumulate dividends that will be paid later. 
C) participate in earnings only to the extent that all other classes do. 
D) participate in earnings to the same extent as common stock. 
A) share in excess earnings after preferred payments along with common stock. 
B) accumulate dividends that will be paid later. 
C) participate in earnings only to the extent that all other classes do. 
D) participate in earnings to the same extent as common stock.

Question 17

Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of $50 a share.These shares, which are now issued but not outstanding, are 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 18

When a corporation issues no par value stock, the entire consideration received constitutes stated capital unless the board of directors allocates a portion of the consideration to capital surplus.

Accepted Answer

A) True 
 B)False

Question 19

The directors of Premier Glass Company authorize the issuance of 100 shares of common stock for $25 per share to Justin for property the directors value at $2,500.The valuation:

Accepted Answer

A) is, in all jurisdictions, a matter of opinion on the part of the directors and their valuation is conclusive. 
B) if incorrect, whether or not made in good faith, subjects Justin to liability for the difference between the valuation and the actual worth of the property. 
C) under the Revised Act, depends on the directors' determination of the consideration's "adequacy." 
D) if fraudulent, subjects the directors to liability to Premier for the difference between the fraudulent valuation and the actual worth of the property. 
A) is, in all jurisdictions, a matter of opinion on the part of the directors and their valuation is conclusive. 
B) if incorrect, whether or not made in good faith, subjects Justin to liability for the difference between the valuation and the actual worth of the property. 
C) under the Revised Act, depends on the directors' determination of the consideration's "adequacy." 
D) if fraudulent, subjects the directors to liability to Premier for the difference between the fraudulent valuation and the actual worth of the property.

Question 20

Debt securities represent an ownership interest in the corporation.

Accepted Answer

A) True 
 B)False

Exam 35: Financial Structure of Corporations

Determining the value to be placed on the consideration that stock purchasers will exchange for shares is the responsibility of the shareholders.

Which of the following is correct regarding a two-for-one stock split?

The federal government leaves corporate stock regulation to the states since corporations are state-created entities.

The board of directors cannot declare dividends when the corporation:

A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corporate assets of an ongoing company.

Which of the following is correct with regard to common stock?

In Klang v.Smith's Food & Drug Centers, Inc., the court found:

Treasury stock is issued but not outstanding.

The Revised Act, the 1980 Amendments to the MBCA, and over half of the states have eliminated the concept of:

In which of the following ways do debt and equity securities necessarily differ?

A corporation's proportional distribution of additional shares of the corporation's capital stock to its shareholders is a:

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

The shareholders normally determine the price for which shares will be issued unless the charter permits the board of directors to set the price.

The MBCA as amended in 1980 and the Revised Act have adopted a net asset test for the issuance of dividends.

A shareholder may be required to repay a dividend paid by the corporation.

Participating stock will:

Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of $50 a share.These shares, which are now issued but not outstanding, are known as:

When a corporation issues no par value stock, the entire consideration received constitutes stated capital unless the board of directors allocates a portion of the consideration to capital surplus.

The directors of Premier Glass Company authorize the issuance of 100 shares of common stock for $25 per share to Justin for property the directors value at $2,500.The valuation:

Debt securities represent an ownership interest in the corporation.

Introduction to Law

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Intentional Torts

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Introduction to Contracts

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