Question 1

Because of the limited liability feature, stockholders may be held liable for the debts of the business.

A) TrueB) False

Question 2

A corporation is created by registering your business name, while appointing a board of directors and filing articles of incorporation.

A) TrueB) False

Question 3

Preferred stock has no difference with common stock for both dividends and liquidation proceeds.

A) TrueB) False

Question 4

Common stock and preferred stock both have a par value.

A) TrueB) False

Question 5

A dividend declaration increases total stockholders' equity.

A) TrueB) False

Question 6

Treasury stock transactions typical produce losses in the income statement, but not gains.

A) TrueB) False

Question 7

A stock split will have no effect on par value, but a stock dividend will not.

A) TrueB) False

Question 8

Which of the following is not a feature of the corporate form of organization

A)

Limited liability.

B)

Perpetual existence.

C)

Transferability of ownership.

D)

None of these.

Question 9

Which of the following statements is true

A)

Preemptive rights make it easy for a corporation to issue additional shares.

B)

A corporate entity is typically of unlimited duration.

C)

One purpose of a corporation is to avoid "double taxation."

D)

A corporation can issue common or preferred stock, but not both.

E)

None of these.

Question 10

Which of the following is not a characteristic of the corporate form of organization

A)

The owners of a corporation cannot lose more than the amount of their investment.

B)

Shares of stock in a corporation are readily transferable.

C)

The company President decides the amount of dividends to be paid.

D)

The corporation is an effective vehicle for obtaining large amounts of capital.

E)

None of these.

Question 11

Little Bo Beep Corporation issued 5,000 shares of $2 par value common stock.The issue price was $7.50 per share.The entry to record this transaction includes a:

A)

debit to Cash for $10,000.

B)

debit to Paid-in Capital in Excess of Par for $27,500.

C)

debit to Common Stock for $10,000.

D)

credit to Gain on Stock $37,500.

E)

None of these.

Question 12

Which of the following events is first when a corporation pays a dividend

A)

Declaration.

B)

Payment.

C)

Ex-dividend.

D)

Date of record.

E)

None of these.

Question 13

When a payment of a previously declared dividend is paid, it normally has the following effect:

A)

a decrease in liabilities.

B)

a decrease in working capital.

C)

a decrease in stockholders' equity.

D)

All of the above.

E)

None of these.

Question 14

Preferred stocks typically:

A)

possess voting rights.

B)

participate in earnings.

C)

receive regular interest payments.

D)

are used to avoid "double-taxation.".

E)

None of these.

Question 15

The statement of stockholders' equity includes information about:

A)

Beginning equity account balances.

B)

Ending equity account balances.

C)

Dividends.

D)

All of the above.

E)

None of these.

Question 16

Which of the following is a potential limitation of financial statement analysis

A)

Lack of comparability of firms in different industries

B)

The impact of changing economic conditions

C)

The impact of having more than one acceptable alternative accounting principle for accounting for a given transaction or economic event

D)

All of these answers are correct.

Question 17

Book value per share is an amount related to shares of common stock.

A) TrueB) False

Question 18

When completing financial statement analysis for Buzz Lightyear Corporation, which of the following are forms of comparison:

A)

Comparing changes in the same item over a number of periods.

B)

Comparing key relationships within the same year.

C)

Comparing key items to industry averages.

D)

All of these answers are correct.

Question 19

When a stock dividend is issued, it will:

A)

decrease total assets.

B)

increase retained earnings.

C)

decrease paid-in capital.

D)

not affect total equity.

Question 20

When the common stock account is disclosed on the balance sheet, it is reported at:

A)

current market value.

B)

average issue price.

C)

par or stated value.

D)

lower of cost or market.