Choose the correct answer

1. The pre-emptive right of a common stockholder is the right to

a. share proportionately in corporate assets upon liquidation.

b. share proportionately in any new issues of stock of the same class.

c. receive cash dividends before they are distributed to preferred stockholders.

d. exclude preferred stockholders from voting rights.

2. Total stockholders' equity represents

a. a claim to specific assets contributed by the owners.

b. the maximum amount that can be borrowed by a company.

c. a claim against a portion of the total assets of a company.

d. only the amount of earnings that have been retained in the business.

3. . Stockholders' equity is generally classified into two major categories:

a. contributed capital and appropriated capital.

b. appropriated capital and retained earnings.

c. retained earnings and unappropriated capital.

d. earned capital and contributed capital.

4. The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is

a. the pro forma method.

b. the proportional method.

c. the incremental method.

d. either the proportional method or the incremental method.

5. Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $530,000. How much of the proceeds would be allocated to the common stock?

a. $250,000

b. $240,909

c. $289,091

d. $281,563