MCQs_Company Shares

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1.

The stockholders of a corporation have unlimited liability.

[removed]A.

True

 

[removed]B.

False



2.

Which of these is not a major advantage of a corporation?

[removed]A.

Separate legal existence

 

[removed]B.

Continuous life

 

[removed]C.

Government regulations

 

[removed]D.

Transferable ownership rights



3.

Which one of the following is a major disadvantage of a corporation?

[removed]A.

Limited liability of stockholders

 

[removed]B.

Additional taxes

 

[removed]C.

Transferable ownership rights

 

[removed]D.

Limited life



4.

Which of the following is not a characteristic of a corporation?

[removed]A.

Separate legal existence

 

[removed]B.

Unlimited liability for stockholders

 

[removed]C.

Easy transfer of ownership interests

 

[removed]D.

Ability to acquire capital easily



5.

Which of the following is a disadvantage of the corporate business form?

[removed]A.

No income taxes

 

[removed]B.

Government regulation

 

[removed]C.

Continuous life

 

[removed]D.

Easy acquisition of capital



6.

Which of the following is not a stockholder's right?

[removed]A.

The preemptive right

 

[removed]B.

The right to share in dividends

 

[removed]C.

The right to vote in the election for the board of directors

 

[removed]D.

The right to participate in management decisions



7.

Ernest, an individual, receives $100 from Vernon Corp. in dividends and is in the 28% tax bracket. Vernon Corp. already paid corporate taxes on the $100 at a 20% tax rate. How much in personal taxes will Ernest need to pay?

[removed]A.

$0

 

[removed]B.

$28

 

[removed]C.

$8

 

[removed]D.

$20



8.

The par value of corporate shares issued represents a corporation's legal capital.

[removed]A.

True

 

[removed]B.

False



9.

Which of these statements is false?

[removed]A.

Ownership of common stock gives the owner a voting right.

 

[removed]B.

The stockholders' equity section begins with paid-in capital amounts.

 

[removed]C.

The authorization of capital stock does not result in a formal accounting entry.

 

[removed]D.

Legal capital is intended to protect stockholders.



10.

If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital?

[removed]A.

$7,000

 

[removed]B.

$3,000

 

[removed]C.

$4,000

 

[removed]D.

$0



11.

Which of the following represents the amount per share of stock that must be retained in the business for the protection of corporate creditors?

[removed]A.

Legal capital

 

[removed]B.

Par value

 

[removed]C.

Market value

 

[removed]D.

Stated value



12.

Which of the following represents the maximum number of shares a corporation can issue?

[removed]A.

Outstanding shares

 

[removed]B.

Issued shares

 

[removed]C.

Authorized shares

 

[removed]D.

Treasury shares



13.

DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance?

[removed]A.

Debit to Paid-in Capital in Excess of Par Value for $3,000

 

[removed]B.

Debit to Cash for $15,000

 

[removed]C.

Credit to Common Stock for $15,000

 

[removed]D.

Credit to Common Stock for $18,000



14.

Wynola, Inc. issued 1,000 shares of common stock at $10 per share. If the stock has a par value of $4 per share, which of the following will be part of the journal entry to record the issuance?

[removed]A.

Credit to Common Stock for $4,000

 

[removed]B.

Debit to Cash for $4,000

 

[removed]C.

Credit to Paid-in Capital in Excess of Par Value for $10,000

 

[removed]D.

Debit to Retained Earnings for $6,000



15.

Harrison, Inc. issued 4,000 shares of common stock at $12 per share. If the stock has a par value of $0.50 per share, which of the following will be part of the journal entry to record the issuance?

[removed]A.

Credit to Common Stock for $2,000

 

[removed]B.

Debit to Cash for $4,000

 

[removed]C.

Credit to Paid-in Capital in Excess of Par Value for $48,000

 

[removed]D.

Debit to Retained Earnings for $46,000



16.

Harrison, Inc. issued 600 shares of common stock at $10 per share. If the stock was no-par value stock, which of the following will be part of the journal entry to record the issuance?

[removed]A.

Debit to Cash for $600

 

[removed]B.

Credit to Paid-in Capital in Excess of Par for $600

 

[removed]C.

Credit to Common Stock for $6,000

 

[removed]D.

Debit to Paid-in Capital $6,000



17.

The 13th Street Grill issued 10,000 of $1 par value common stock for $5 per share. Which of the following will be part of the journal entry to record the issuance?

[removed]A.

A debit of $10,000 to Common Stock

 

[removed]B.

A debit of $50,000 to Common Stock

 

[removed]C.

A credit of $10,000 to Common Stock

 

[removed]D.

A credit of $50,000 to Common Stock



18.

Dynatech issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, which accounts are credited?

[removed]A.

Common Stock $10,000 and Gain on Stock Sale $2,000

 

[removed]B.

Common Stock $12,000

 

[removed]C.

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000

 

[removed]D.

Common Stock $10,000 and Retained Earnings $2,000



19.

When treasury stock is purchased, the number of outstanding shares decreases.

[removed]A.

True

 

[removed]B.

False



20.

For what reason might a company acquire treasury stock?

[removed]A.

To reissue the shares to officers and employees under bonus and stock compensation plans

 

[removed]B.

To signal to the stock market that management believes the stock is overpriced

 

[removed]C.

To increase profit

 

[removed]D.

To increase the number of shares of stock outstanding



21.

Which one of the following decreases when a corporation purchases treasury stock?

[removed]A.

Authorized shares

 

[removed]B.

Issued shares

 

[removed]C.

Treasury shares

 

[removed]D.

Outstanding shares



22.

What method is normally used to account for treasury stock?

[removed]A.

Stated value method

 

[removed]B.

Legal value method

 

[removed]C.

Par value method

 

[removed]D.

Cost method



23.

If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders' equity be reduced?

[removed]A.

$5,000

 

[removed]B.

$12,000

 

[removed]C.

$0

 

[removed]D.

$7,000



24.

A corporation sold 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $12.00 per share. Which of the following will be debited to record the repurchase of the 100 shares?

[removed]A.

Common Stock for $1,200

 

[removed]B.

Treasury Stock for $1,200

 

[removed]C.

Treasury Stock for $200

 

[removed]D.

Cash for $1,200



25.

Which of the following increases when a corporation purchases treasury stock?

[removed]A.

Number of shares authorized

 

[removed]B.

Number of shares issued

 

[removed]C.

Number of treasury shares

 

[removed]D.

Number of outstanding shares



26.

A cumulative dividend feature means that preferred stockholders must be paid only current-year dividends before common stockholders receive dividends.

[removed]A.

True

 

[removed]B.

False



27.

Dividends in arrears are reported as a current liability on the balance sheet.

[removed]A.

True

 

[removed]B.

False



28.

A corporation has cumulative preferred stock on which it pays dividends of $20,000 per year. The dividends are in arrears for two years. If the corporation plans to distribute $90,000 as dividends in the current year, how much will the common stockholders receive?

[removed]A.

$20,000

 

[removed]B.

$30,000

 

[removed]C.

$40,000

 

[removed]D.

$60,000



29.

Which one of the following statements is incorrect?

[removed]A.

Dividends cannot be paid on common stock while any dividend on preferred stock is in arrears.

 

[removed]B.

Dividends in arrears on preferred are not considered a liability.

 

[removed]C.

Dividends may be paid on common stock while dividends are in arrears on preferred stock.

 

[removed]D.

When preferred stock is noncumulative, any dividend passed in a year is lost forever.



30.

Which one of the following is not a right of preferred stockholders?

[removed]A.

Priority in relation to dividends

 

[removed]B.

Priority voting rights

 

[removed]C.

Priority to the assets in the event of liquidation

 

[removed]D.

Priority to dividends, assets and voting rights.



31.

Which of the following is a feature associated only with preferred stock?

[removed]A.

Dividend preference

 

[removed]B.

Preference to assets in the event of liquidation

 

[removed]C.

Cumulative dividends

 

[removed]D.

All of the answer choices are correct



32.

M-Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2014. No dividends were declared in 2012 or 2013. If M-Bot wants to pay $375,000 of dividends in 2014, how much will common stockholders receive?

[removed]A.

$0

 

[removed]B.

$295,000

 

[removed]C.

$215,000

 

[removed]D.

$135,000



 

33.

How are dividends in arrears reported in the financial statements?

[removed]A.

As a liability

 

[removed]B.

As an expense

 

[removed]C.

In a footnote

 

[removed]D.

As an equity item

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