Multiple Choice Questions

1. Which of the following is a characteristic of a corporation?

a. No income tax

b. Mutual agency

c. Limited liability of stockholders

d. Both a and b

2. Spirit World, Inc., issues 280,000 shares of no-par common stock for $9 per share.

The journal entry is:

3. Par value

a. Represents the original selling price for a share of stock.

b. Is established for a share of stock after it is issued.

c. May exist for common stock but not for preferred stock.

d. Represents what a share of stock is worth.

e. Is an arbitrary amount that establishes the legal capital for each share.

4. The paid-in capital portion of stockholders equity does not include

a. Common Stock.

b. Preferred Stock.

c. Retained Earnings.

d. Paid-in Capital in Excess of Par Value.

5. Preferred stock is least likely to have which of the following characteristics?

a. Extra liability for the preferred stockholders

b. The right of the holder to convert to common stock

c. Preference as to dividends

d. Preference as to assets on liquidation of the corporation

6. Which of the following classifications represents the most shares of common stock?

a. Authorized shares

b. Outstanding shares

c. Unissued shares

d. Treasury shares

e. Issued shares

Transcribed Image Text:

Cash 2,520,000 a. Common Stock 560,000 Paid-In Capital in Excess of Par 1,960,000 b. Cash 2,520,000 Common Stock 2,520,000 Cash 2,520,000 C. Common Stock 280,000 Gain on the Sale of Stock 2,240,000 Cash d. 280,000 Common Stock 280,000