PROBLEM II

TRUE OR FALSE

The initial owners of stock of a newly formed corporation are called directors.

a$.$ True

b$.$ False

A deficit is reported in in the stockholder's equity section of the balance sheet.

a$.$ True

b$.$ False

The main source of paid$-$in$-$capital is from issuing stock.

a$.$ True

b$.$ False

The number of shares of outstanding stock is equal to the number of shares

authorized minus the number of shares issued.

a$.$ True

b$.$ False

If $50,000$ shares are authorized, $37,000$ shares issued, and $2,000$ shares are

reacquired, the number of outstanding shares is $39,000.$

a$.$ True

b$.$ False

Preferred stockholders must receive their current year dividends before the common

stockholders can receive anu dividends.

a$.$ True

b$.$ False

The par value of stock is an arbitrary per share amount defined in many states as

legal capital.

a$.$ True

b$.$ False

When common stock is issued in exchange for land, the land should be recorded in

the accounts at the par amount of the stock issued.

a$.$ True

b$.$ False

When a corporation issues stock at a premium, it reports the premium as another

income item on the income statement.

a$.$ True

b$.$ False

When no$-$par stock is issued, the Common Stock account is credited for the selling

price of the stock issued

a$.$ True

b$.$ False

A corporation is a separate entity for accounting purposes but not for legal purposes.

a$.$ True

b$.$ False

Under the Internal Revenue Code, corporations are required to pay federal income

taxes

a$.$ True

b$.$ False

Organizational expenses are classified as intangible assets on the balance sheet.

a$.$ True

b$.$ False

The balance in retained earnings at the end of the period is created by closing entries.

a$.$ True

b$.$ False