Strayer ACC557 (Strayer) Week 8 Chapter 11 Quiz

ACC 557 (Strayer) WK 8 Chapter 11 QuizTRUE-FALSE STATEMENTS 1. A corporation is not an entity which is separate and distinct from its owners. 2. A corporation can be organized for the purpose of making a profit or it may be not-for-profit. 3. A corporation acts under its own name rather than in the name of its stockholders. 4. If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation. 5. A corporation must be incorporated in each state in which it does business. 6. A stockholder has the right to vote in the election of the board of directors. 7. A proxy is a legal document that instructs a stockholder’s agent how to vote shares of stock for the stockholder. 8. As soon as a corporation is authorized to issue stock, an accounting journal entry should be made recording the total value of the shares authorized. 9. The par value of common stock must always be equal to its market value on the date the stock is issued. 10. When no-par value stock does not have a stated value, the entire proceeds from the issuance of the stock becomes legal capital. 11. A corporation can issue more shares than it is authorized in its charter, if the board of directors approves of an increase in the number of authorized shares. 12. The market value of a corporation’s stock is determined by the number of shares that the corporation has been authorized to issue. 13. Stock can be issued only in exchange for cash. 14. The par value of stock issued for noncash assets is never a factor in determining the cost of the assets received. 15. The acquisition of treasury stock by a corporation increases total assets and total stockholders’ equity. 16. Treasury stock should not be classified as a current asset. 17. Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of Treasury Stock being recognized on the income statement. 18. Treasury stock is a contra stockholders’ equity account. 19. The number of common shares outstanding can never be greater than the number of shares issued. 20. Preferred stock has contractual preference over common stock in certain areas. 21. Preferred stockholders generally do not have the right to vote for the board of directors. 22. Dividends in arrears on cumulative preferred stock are considered a liability. 23. Dividends may be declared and paid in cash or stock. 24. Cash dividends are not a liability of the corporation until they are declared by the board of directors. 25. The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified. 26. A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease. 27. A 3-for-1 common stock split will increase total stockholders’ equity but reduce the par or stated value per share of common stock. 28. Retained earnings represents the amount of cash available for dividends. 29. Net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts. 30. A debit balance in the Retained Earnings account is identified as a deficit. 31. A correction in income of a prior period involves either a debit or credit to the Retained Earnings account. 32. Prior period adjustments to income are reported in the current year’s income statement. 33. Retained earnings that are restricted are unavailable for dividends. 34. Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends. 35. A retained earnings statement shows the same information as a corporation income statement. 36. A detailed stockholders’ equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record. 37. Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision of the stockholders’ equity section of the balance sheet. 38. Return on common stockholders’ equity is computed by dividing net income by ending stockholders’ equity. 39. Many companies prepare a stockholders’ equity statement instead of presenting a detailed stockholders’ equity section in the balance sheet.a40. The stockholders’ equity statement shows the changes in each stockholders’ equity account and in total stockholders’ equity during the year.41. Book value per share of common stock is the same amount as the market value per share. 42. A successful corporation can have a continuous and perpetual life. 43. Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs. 44. The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value. 45. The cost of a noncash asset acquired in exchange for common stock should be either the fair value of the consideration given up or the consideration received, whichever is more clearly determinable. 46. Under the cost method, Treasury Stock is debited at the price paid to reacquire the shares, and the same amount is credited to Treasury Stock when the shares are sold. 47. A dividend based on paid-in capital is termed a liquidating dividend. 48. Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders’ equity section. 49. A prior period adjustment is reported as an adjustment of the beginning balance of Retained Earnings. 50. In the stockholders’ equity section, paid-in capital and retained earnings are reported and the specific sources of paid-in capital are identified.MULTIPLE CHOICE QUESTIONS 51. Which one of the following is a privately held corporation?a. Intelb. General Electricc. Caterpillar Inc.d. Cargill Inc. 52. The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees isa. the sole proprietorship.b. the partnership.c. the corporation.d. not known. 53. Under the corporate form of business organizationa. a stockholder is personally liable for the debts of the corporation.b. stockholders’ acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.c. the corporation’s life is stipulated in its charter.d. stockholders wishing to sell their corporation shares must get the approval of other stockholders. 54. Stockholders of a corporation directly electa. the president of the corporation.b. the board of directors.c. the treasurer of the corporation.d. all of the employees of the corporation. 55. The chief accounting officer in a company is known as thea. controller.b. treasurer.c. vice-president.d. president. 56. A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that aa. corporation is organized for the purpose of making a profit.b. corporation is subject to more federal and state government regulations.c. corporation is an accounting economic entity.d. corporation’s temporary accounts are closed at the end of the accounting period. 57. Which one of the following would not be considered an advantage of the corporate form of organization?a. Limited liability of ownersb. Separate legal existencec. Continuous lifed. Government regulationMore Questions are Included…