61)
A stock dividend decreases the market price of the company’s stock.
A)
True
B)
False
62)
A stock dividend, declared by a corporations’s directors, is a distribution of additional shares of the
corporation’s own stock to its stockholders without the receipt of any payment in return.
A)
True
B)
False
63)
All stock dividends are recorded at par value so there would never be a credit to the paid-in capital
in excess of par value account.
A)
True
B)
False
64)
Paid and declared preferred dividends are called dividends in arrears.
A)
True
B)
False
65)
Cumulative preferred stock has a right to be paid both current and prior periods’ unpaid dividends
before any dividend is paid to common shareholders.
A)
True
B)
False
66)
A liability for a dividend does not exist until the directors declare a dividend.
A)
True
B)
False
67)
Participating preferred stock has a feature that allows its holders to share with common
shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred
stock.
A)
True
B)
False
68)
Corporations issue preferred stock to raise capital without sacrificing control of the corporation
and/or to boost the return earned by common shareholders.
A)
True
B)
False
69)
Treasury stock is stock that has been authorized, issued, and is outstanding.
A)
True
B)
False
70)
Purchasing treasury stock reduces the corporation’s assets and stockholders’ equity by unequal
amounts.
A)
True
B)
False
71)
The Paid–in Capital, Treasury Stock account can never have a debit balance.
A)
True
B)
False
72)
The Paid-in Capital, Treasury Stock account can have a zero or credit balance.
A)
True
B)
False
73)
If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock
is recorded.
A)
True
B)
False
74)
The costs of bringing a corporation into existence, including legal fees, promoter fees, and amounts
paid to obtain a charter are called:
A)
Minimum legal capital.
B)
Selling expenses.
C)
Prepaid fees.
D)
Organization expenses.
E)
Stock subscriptions.
75)
The right of common shareholders to purchase their proportional share of any common stock later
issued by the corporation is called a:
A)
Right to call.
B)
Proxy right.
C)
Voting right.
D)
Preemptive right.
E)
Financial leverage.
76)
A proxy is:
A)
A contractual commitment by an investor to purchase unissued shares of stock.
B)
An arbitrary amount assigned to no-par stock by the corporation’s board of directors.
C)
A document that delegates a stockholder’s voting rights to an agent.
D)
An amount of assets defined by state law that stockholders must invest and leave invested in a
corporation.
E)
The right of common stockholders to protect their proportionate interests in a corporation by
having the first opportunity to purchase additional shares of common stock issued by the
corporation.
77)
The board of directors of a corporation:
A)
Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
B)
Are elected by the corporate registrar.
C)
Are responsible for and have final authority for managing corporate activities.
D)
Are responsible for day–to-day operations of the business.
E)
May not also be executive officers of the corporation, due to the separate entity principle.
78)
The number of shares that a corporation’s charter allows it to sell is referred to as:
A)
Preferred stock.
B)
Common stock.
C)
Authorized stock.
D)
Outstanding stock.
E)
Issued stock.
79)
Par value of a stock refers to the:
A)
Market value of the stock on the date of the financial statements.
B)
Issue price of the stock.
C)
Dividend value of the stock.
D)
Maximum selling price of the stock.
E)
Value assigned per share by the corporate charter.
80)
When a corporation has only one class of stock, the stock is called:
A)
Preferred stock.
B)
No-par value stock.
C)
Common stock.
D)
Stated value stock.
E)
Par value stock.
81)
In many states, the minimum amount that stockholders must contribute to the corporation, and
which is intended to protect the creditors of the corporation, is called the:
A)
Minimum legal capital.
B)
Par value of preferred.
C)
Stated value.
D)
Premium capital.
E)
Working capital.
82)
The total amount of cash and other assets received by a corporation from its stockholders in
exchange for its stock is:
A)
Always equal to its stated value.
B)
Referred to as retained earnings.
C)
Always equal to its par value.
D)
Referred to as paid-in capital.
E)
Always below its stated value.
83)
Stated value of no-par stock is:
A)
The difference between the par value of stock and the amount below or above par value
paid-in by the stockholder.
B)
An amount assigned to no-par stock by the corporation’s board of directors.
C)
The market value of the stock on the date of issuance.
D)
An amount assigned to par value stock by the state of incorporation.
E)
Another name for redemption value.
84)
Stockholders’ equity consists of which of the following?
A)
Long-term assets.
B)
Paid-in capital and retained earnings.
C)
Premiums and discounts.
D)
Paid-in capital and par value.
E)
Retained earnings and cash.
85)
A class of stock that can usually be issued at any price without creating a minimum legal capital
deficiency is called:
A)
No-par stock.
B)
Discounted stock.
C)
Convertible stock.
D)
Noncumulative stock.
E)
Callable stock.
86)
A corporation’s minimum legal capital is established by recording the par or stated value of the
number of shares:
A)
Authorized.
B)
Subscribed.
C)
Outstanding.
D)
Issued.
E)
In treasury.
87)
Retained earnings:
A)
Generally consists of a company’s cumulative net income less any net losses and dividends
declared since its inception.
B)
Represents the amount shareholders are guaranteed to receive upon company liquidation.
C)
Represent an amount of cash available to pay shareholders.
D)
Are never adjusted for anything other than net income or dividends.
E)
Can only be appropriated by setting aside a cash fund.
88)
Prior period adjustments to financial statements can result from:
A)
Unacceptable accounting practices.
B)
Changes in accounting estimates.
C)
Discontinued operations.
D)
Extraordinary items.
E)
Changes in tax law.
89)
Prior period adjustments are reported in the:
A)
Statement of retained earnings.
B)
Multiple-step income statement.
C)
Balance sheet.
D)
Single-step income statement.
E)
Statement of cash flows.
90)
Changes in accounting estimates are:
A)
Accounted for with a cumulative “catch-up” adjustment.
B)
Accounted for in current and future periods.
C)
Considered accounting errors.
D)
Extraordinary items.
E)
Reported as prior period adjustments.
91)
A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000
and paid out cash dividends of $56,250 in the current period. The ending balance in retained
earnings equals:
A) $490,000. B) $116,250. C) $433,750. D) $546,250. E) $426,250.
92)
A company had a beginning balance in retained earnings of $400,000. It had net income of $50,000
and paid out cash dividends of $55,000 in the current period. The ending balance in retained
earnings equals:
A) $505,000. B) $350,000. C) $395,000. D) $455,000. E) $405,000.
93)
Companies report prior period adjustments, net of any income tax effects in the:
A)
Statement of cash flows.
B)
No disclosure is required.
C)
Income statement.
D)
Balance sheet.
E)
Statement of retained earnings.
94)
Changes in retained earnings are commonly reported in the:
A)
Single-step income statement.
B)
Statement of stockholders’ equity.
C)
Balance sheet.
D)
Multiple-step income statement.
E)
Statement of cash flows.
95)
A company made an error in calculating and reporting amortization expense in Year 1. The error
was discovered in Year 2. The item should be reported as a prior period adjustment:
A)
on the Year 2 income statement.
B)
on the Year 1 statement of retained earnings.
C)
on the Year 1 income statement.
D)
accounted for with a cumulative “catch-up” adjustment in Year 2.
E)
on the Year 2 statement of retained earnings.
96)
The statement of changes in stockholders’ equity:
A)
Describes changes in paid-in capital and retained earnings subcategories.
B)
Does not include changes in treasury stock.
C)
Is reported by very few companies.
D)
Is part of the statement of retained earnings.
E)
Shows only the ending balances in stockholders‘ equity.
97)
The amount of income earned per share of a company’s outstanding common stock is known as:
A)
Continuing operations per share.
B)
Earnings per share.
C)
Dividends per share.
D)
Restricted retained earnings per share.
E)
Book value per share.
98)
Mayan Company had net income of $132,000. The weighted-average common shares outstanding
were 80,000. The company has no preferred stock. The company sold 3,000 shares before the end
of the year. There were no other stock transactions. The company’s earnings per share is:
A) $44.00. B) $26.67. C) $1.71. D) $1.59. E) $1.65.