ACCOUNTING 202 MULTIPLE CHOICE QUESTIONS

11. Ed Stone has invested $400,000 in a privatel

y held family corporation. The corporation does not do

well and must declare bankruptcy. What amount does Stone stand to lose?

a. Up to his total investment of $400,000.

b. Zero.

c. The $400,000 plus any pers

onal assets the creditors demand.

d. $200,000.

12. Which of the following statements reflects the tr

ansferability of ownership rights in a corporation?

a. If a shareholder decides to transfer ownership, he must transfer all of his shares.

b. A shareholder may dispose of part or all of his shares.

c. A shareholder must obtain permission from the board of directors before selling shares.

d. A shareholder must obtain permission from at least three other stockholders before selling shares.

13. A corporate board of directors does

not

generally

a. select officers.

b. formulate operating policies.

c. declare dividends.

d. execute policy.

14. The ability of a corporation to obtain capital is

a. enhanced because of limited lia

bility and ease of share transferability.

b. less than a partnership.

c. restricted because of the

limited life of the corporation.

d. about the same as a partnership.

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15. Becker Company

is a publicly held corporation whose $1 par value stock is actively traded at $20 per

share. The company issued 1,000 shares of stock to acquire land recently advertised at $25,000. When

recording this transaction, Becker Company will

a. debit Land for $25,000.

b. credit Common Stock for $20,000.

c. debit Land for $20,000.

d. credit Paid-In Capital in Excess of Par Value for $24,000.

16. Simon Company issued 4,000 shares of its $5 par value common stock in payment of its attorney's bill

of $30,000. The bill was for services performed in helping the company incorporate. Simon should

record this transaction by debiting

a. Legal Expense for $20,000.

b. Legal Expense for $30,000.

c. Organization Expense for $20,000.

d. Organization Expense for $30,000.

17. Trailhead Inc.’s December 31

, 2005 trial balance in

cludes the following balances: Common stock,

$14,000; Paid in Capital in Excess of Par, $36,000, Retained Earnings, $32,000; and Treasury stock,

$3,200. Total stockholders’ equity at December 31 2005 is

a. $46,800

b. $50,000

c. $78,800

d. $85,200

18. Two thousand shares of treasury stock of Meyer, Inc., previously acquired at $12 per share, are sold at

$18 per share. The entry to record

this transaction will include a

a. credit to Treasury Stock for $36,000.

b. debit to Paid-In Capital from Treasury Stock for $12,000.

c. debit to Treasury Stock for $24,000.

d. credit to Paid-In Capital from Treasury Stock for $12,000.

19. Rancho Corporation sold 100 shares of treasury stock for $40 per share. The cost for the shares was

$30. The entry to record the sale will include

a. a credit to Gain on Sale of Treasury Stock for $3,000.

b. a credit to Paid-in Capital from Treasury Stock for $1,000.

c. a debit to Paid-in Capital in Excess of Par Value for $1,000.

d. a credit to Treasury Stock for $4,000.

20. Roberson Corporation was organized on January 1, 2005, with authorized capital of 500,000 shares of

$10 par value common stock. During 2005, Roberson 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 additiona

l paid-in capital at December 31, 2005?

a. $0.

b. $2,000.

c. $40,000.

d. $42,000