Question 1

The major advantages of the corporate form of organization include (1) limited _________________ of owners (2) continuous ____________________ and (3) ease of transferring ___________________.

Accepted Answer

The answer of The major advantages of the corporate form...

Question 2

If no-par stock is issued without a stated value then

Accepted Answer

A)  the par value is automatically $1 per share. 
B)  the entire proceeds are considered to be legal capital. 
C)  there is no legal capital. 
D)  the corporation is automatically in violation of its state charter.

Question 3

Which of the following statements concerning taxation is accurate?

Accepted Answer

A)  Partnerships pay state income taxes but not federal income taxes. 
B)  Corporations pay federal income taxes but not state income taxes. 
C)  Corporations pay federal and state income taxes. 
D)  Only the owners must pay taxes on corporate income.

Question 4

Treasury stock is a contra stockholders' equity account.

Accepted Answer

A) True 
 B)False

Question 5

Treasury stock is generally accounted for by the

Accepted Answer

A)  cost method. 
B)  market value method. 
C)  par value method. 
D)  stated value method.

Question 6

Mountain View Inc. has 50000 shares of 8% $100 par value noncumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2017. There were no dividends declared in 2016. The board of directors declares and pays a $500000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017?

Accepted Answer

A)  $0 
B)  $400000 
C)  $500000 
D)  $100000

Question 7

Dividends are declared out of

Accepted Answer

A)  Capital Stock. 
B)  Paid-in Capital in Excess of Par. 
C)  Retained Earnings. 
D)  Treasury Stock.

Question 8

Bodkin Beverage Company is authorized to issue 20000 shares of 8% $100 par value preferred stock and 500000 shares of no-par common stock with a stated value of $1 per share. If Bodkin issues 12000 shares of common stock to pay its recent attorney's bill of $50000 for legal services on a land access dispute which of the following would be the journal entry for Bodkin to record? a. 
$\begin{array}{llr}
  \text {Legal Expense  } &12,000\
 \text {  Common Stock} &&12,000\
\end{array}$

b.
$\begin{array}{llr}
  \text {Legal Expense  } &50,000\
 \text { Common Stock } &&50,000\
 \text {  } &
\end{array}$

c.
$\begin{array}{llr}
  \text { Legal Expense } &50,000\
 \text {  Common Stock} &&12,000\
 \text { Paid-in Capital in Excess of Stated Value -Common } &&38,000
\end{array}$

d. 
$\begin{array}{llr}
  \text { Legal Expense } &50,000\
 \text { Common Stock } &&12,000\
 \text { Paid-in Capital in Excess of Par - Preferred } &&38,000
\end{array}$

Accepted Answer

The answer of Bodkin Beverage Company is authorized to issue...

Question 9

A corporation purchases 60000 shares of its own $30 par common stock for $45 per share recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

A)  Increase by $2700000 
B)  Decrease by $1800000 
C)  Decrease by $2700000 
D)  Increase by $1800000

Question 10

The stockholders' equity section of Fauberg Marigny Corporation at December 31 is as follows.  Instructions
From a review of the stockholders' equity section answer the following questions.
(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $18000 what is the dividend rate on preferred stock?
(e) If dividends of $36000 were in arrears on preferred stock what would be the balance in Retained Earnings?

Accepted Answer

The answer of The stockholders' equity section of Fauberg Marigny...

Question 11

The concept of an "artificial being" refers to which form of business organization?

Accepted Answer

A)  Partnership 
B)  Sole proprietorship 
C)  Corporation 
D)  Limited partnership

Question 12

Information that is not generally reported for each class of stock on the balance sheet is

Accepted Answer

A)  the market value. 
B)  the par value. 
C)  shares authorized. 
D)  shares issued.

Question 13

Treasury stock should be reported in the financial statements of a corporation as a(n)

Accepted Answer

A)  investment. 
B)  liability. 
C)  deduction from total paid-in capital. 
D)  deduction from total paid-in capital and retained earnings.

Question 14

Paid-In Capital in Excess of Stated Value

Accepted Answer

A)  is credited when no-par stock does not have a stated value. 
B)  is reported as part of paid-in capital on the balance sheet. 
C)  represents the amount of legal capital. 
D)  normally has a debit balance.

Question 15

An inexperienced accountant for Dudley Corporation made the following entries. $\begin{array}{llr}
  \text { July 1  } &\text { Cash } &180,000\
& \text { Common Stock } &&180,000\
 &\text {(Issued 25,000 shares of common stock,  } &\
 &\text { par value $ \$ 6 $ per share) } &\
\
 \text { Sept. 1 } & \text {  Common Stock } &24,000\
& \text {  Retained Earnings} &16,000\
&  \text { Cash } &&40,000\
 &\text { (Purchased 4,000 shares issued on July 1 for the } &\
& \text {  treasury at $ \$ 10 $ per share) } &\
\end{array}$
 Instructions
On the basis of the explanation for each entry prepare the entry that should have been made for the transactions.

Accepted Answer

The answer of An inexperienced accountant for Dudley Corporation made...

Question 16

Under IFRS the term reserves relates to each of the following except

Accepted Answer

A)  asset revaluations. 
B)  contributed (paid-in) capital. 
C)  fair value differences. 
D)  retained earnings.

Question 17

Preferred stock has contractual preference over common stock in certain areas.

Accepted Answer

A) True 
 B)False

Question 18

If Baylor Company issues 8000 shares of $5 par value common stock for $280000

Accepted Answer

A)  Common Stock will be credited for $280000. 
B)  Paid-In Capital in Excess of Par will be credited for $40000. 
C)  Paid-In Capital in Excess of Par will be credited for $240000. 
D)  Cash will be debited for $240000.

Question 19

Roca Company originally issued 30000 shares of $5 par common stock for $240000 on January 3 2017. Roca purchased 1500 shares of treasury stock for $15000 on November 2 2017. On December 6 2017 600 shares of the treasury stock are sold for $7200.
Instructions
Prepare journal entries to record these stock transactions.

Accepted Answer

The answer of Roca Company originally issued 30000 shares of...

Question 20

A corporate board of directors does not generally

Accepted Answer

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

Exam 13: Corporations: Organization and Capital Stock Transactions

The major advantages of the corporate form of organization include (1) limited _ of owners (2) continuous and (3) ease of transferring ___.