1. All of the following represent advantages of Corporations over other business entities Except: A) unlimited shareholders' liability B) continuity of existence C) separate legal entity D) ease of transferring ownership 2. Which of the following is a disadvantage of the corporate form of business organization? A} mutual agency B) government regulation C) limited liability D) difficulty in transferring ownership 3. Share capital (or contributed capital) represents: A) investments by the creditors of a corporation B) capital that the corporation has earned through protable operations C) investments by the shareholders of a corporation D) retained earnings 4. Retained earnings: A) is classied as an asset on the corporate balance sheet B) is part of CDnti-ibuted capital C} represents investments by the shareholders of the corporation D) represents capital earned by protable operations 5. All of the following transactions increase shareholders' equity except: A) issuance of common shares 13) profitable operations C) declaration of a cash dividend D) issuance of convertible preferred shares 6. A profitable corporation would close out income summary by: A) debiting income summary and crediting share capital 8) debiting income summary and crediting retained earnings C) crediting income summary and debiting retained earnings D) crediting income summary and debiting share capital 7. Which of the following is a priority granted to preferred shareholders? A) voting for the corporate board of directors 3) receiving assets before creditors if the corporation liquidates C} receiving dividends before common shareholders D) receiving a guaranteed fixed dollar amount of dividends each year 8) The interest rate that determines the amount of cash the borrower pays each year, as an interest payment, to the bondholder is the: A) stated interest rate B) effective interest rate C) market interest rate D) explicit interest rate 9} A $1, 000 bond quoted at 102.5 is selling for: A) $1,025.00 B) $1,000.25 C) $1,000.00 D} $1,250.00 10} Another name for the principal amount of a bond is: A) market value B) equivalent value C) maturity value D) effective value WW Dawson Corporation is considering two plans for raising $1,000,000 to expand its operations into the west. The first plan involves the sale of 5%, 10-year bonds that could be issued at face value, and the second plan involves the sale of 50,000 common shares. Either alternative would raise $1,000,000. Prior to any new nancing, Dawson Corporation has net income of $800,000 and 100,000 common shares outstanding. Management believes the expansion will generate additional project income of $400,000 before interest and taxes. The income tax rate is 30%. Calculate the following under both plans: 1. The project net income 2. The total net income 3. Earnings per share
