3. TRUE/FALSE STATEMENTS If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation. 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. The par value of common stock must always be equal to its market value on the date the stock is issued. When no-par value stock does not have a stated value, the entire proceeds from the issuance of the stock becomes legal capital. The stockholders' equity section of a corporation's balance sheet consists of (1) paid-in capital, (2) retained earnings, and (3) drawings. When a corporation has only one class of capital stock, it is identified as preferred stock. Retained earnings is usually subtracted from paid-in capital to arrive at total stockholders' equity. The par value of stock issued for noncash assets is never a factor in determining the cost of the assets received. Preferred stockholders generally do not have the right to vote for the board of directors. Dividends in arrears on cumulative preferred stock are considered a liability. Treasury stock is a contra stockholders' equity account. The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity. 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. 4. Cash dividends are not a liability of the corporation until they are declared by the board of directors