Chapter 11—Financing: Equity Key
1. Which form of financing allows the source of the funds to share in the wealth if the company who received
the financing does well?
2. Which form of financing requires repayment, regardless of whether the company receiving the funds does
well?
3. Which type of business organization is characterized by unlimited liability and limited life?
4. Which of the following types of business organization is owned by one person?
5. Which of the following types of business organization is NOT a separate legal entity from its owner or
owners?
6. Which of the following events would NOT dissolve a partnership?
7. Which of the following types of business organization is easy to start and easy to terminate?
8. Which type of business organization allows the business to be a separate, distinct entity from the owners?
9. Which of the following is a characteristic of corporations?
10. The right of current stockholders to purchase additional shares in order to maintain the same percentage
ownership of new shares is called
11. Which of the following organizations has a Retained Earnings account?
12. Which of the following is NOT true of a corporation?
13. Which of the following statements is true of a corporation?
14. Which type of business organization is characterized by limited liability?
15. Which of the following is a characteristic of the corporate form of business organization?
16. Which of the following is NOT a basic right of a common stockholder?
17. The investors in a corporation are called
18. Which of the following is NOT a step that must be taken when starting a corporation that will operate across
state lines?
19. Which of the following is a basic right of a preferred stockholder?
20. Which of the basic stockholder rights do preferred stockholders normally give up?
21. Compared with preferred stock, common stock usually has a favorable preference in terms of
22. Which of the following is NOT true regarding “legal capital”?
23. When common stock is issued in exchange for a noncash asset and the market value of the stock is
determinable, the acquired asset should usually be recorded at an amount equal to
24. A Paid-In Capital account can be credited with all of the following transactions EXCEPT
25. Treasury stock is stock that is
26. A loss on the sale of treasury stock is recognized when treasury stock is sold at
27. Treasury stock is classified on the balance sheet as what type of account?
28. If treasury stock is sold for less than its cost, and there were no previous treasury stock sales, the difference
between the sales price and cost is debited to
29. When common stock is issued in exchange for a noncash asset and the market value of the stock cannot be
determined, the acquired asset should usually be recorded at an amount equal to the
30. Which of the following statements is true of treasury stock?
31. A corporation’s contributed capital is
32. Which of the following is NOT one of the common reasons for a firm to buy back its own stock?
33. When 30,000 shares of $10 par-value common stock are issued at $30 per share, Paid-In Capital in Excess
of Par, Common Stock is credited for
34. On January 1, 2012, Georgi Company was authorized to issue 10,000 shares of $2 par common stock and
5,000 shares of $5 preferred stock. Given this information, if Georgi Company issued 2,000 shares of common
stock (with no known market value) for land with a book value of $15,000 (market value $10,000), the entry to
record the transaction would include a
35. On January 1, 2012, Georgi Company was authorized to issue 10,000 shares of $2 par common stock and
5,000 shares of $5 preferred stock. Given this information, if Georgi Company issued 3,000 shares of common
stock for $7 per share on January 10, 2012, the entry to record the issuance of the stock would include a
36. On January 1, 2012, Georgi Company was authorized to issue 10,000 shares of $2 par common stock and
5,000 shares of $5 preferred stock. Given this information, if Georgi Company issued 2,000 shares of preferred
stock for $20 per share on January 31, 2012, the entry to record the issuance of the stock would include a
37. At the beginning of the year, Salina Company issued 10,000 shares of no par common stock for $100 each.
The journal entry to record this transaction would include a
38. At the beginning of the year, Brandt Company issued 5,000 shares of $1 par common stock in exchange for
land with a book value of $130,000 and a market value of $100,000. The market value of the stock at the date of
the transaction was $20 per share. The entry to record this transaction would include a
39. Moony Corporation had 20,000 shares of $4 par-value common stock outstanding on January 1, 2012. On
January 10, 2012, the firm purchased 2,000 of its outstanding shares for $18 per share. On July 22, 2012, it
reissued 1,000 shares at $22 per share. Given this information, the entry to record the purchase of this stock on
January 10 would include a debit to
40. Moony Corporation had 20,000 shares of $4 par-value common stock outstanding on January 1, 2012. On
January 10, 2012, the firm purchased 2,000 of its outstanding shares for $18 per share. On July 22, 2012, it
reissued 1,000 shares at $22 per share. Given this information, the entry to record the reissuance of the stock on
July 22 would include a credit to
41. Moony Corporation had 20,000 shares of $4 par-value common stock outstanding on January 1, 2012. On
January 10, 2012, the firm purchased 2,000 of its outstanding shares for $18 per share. On July 22, 2012, it
reissued 1,000 shares at $22 per share. Given this information, the entry to record the reissuing of the remaining
1,000 shares on August 17, 2012, at $12 per share would probably include a
42. During the year, Trenton Company purchased 3,000 shares of its $10 par common stock at $50 per share
and later sold it for $40 per share. How much did total stockholders’ equity change because of these treasury
stock transactions?
43. Which of the following is NOT an important date associated with dividends?
44. Which of the following statements about retained earnings is true?
45. When do dividends become liabilities?
46. The declaration of a common cash dividend
47. The declaration and payment of cash dividends
48. Which of the following dividend preferences is associated with common stock?
49. Dividends in arrears on preferred stock are classified as
50. Dividends in arrears on preferred stock are
51. As compared with preferred stock, common stock usually has favorable preferences in terms of
52. The declaration of dividends by a company
53. Dividends in arrears are associated with the
54. Dividends declared are reported on the
55. Which of the following groups of stockholders receive first priority to the receipt of a dividend?
56. The dividend payout ratio is a measure of
57. On April 30, 2012, Loufti Company declared a dividend of $40,000. Loufti Company decided that the
dividend would be paid on June 15, 2012, to all shareholders of record on May 25, 2012. The journal entry to
record the declaration of the dividend on April 30 would include a
58. On April 30, 2012, Loufti Company declared a dividend of $40,000. Loufti Company decided that the
dividend would be paid on June 15, 2012, to all shareholders of record on May 25, 2012. The journal entry to
record the date of record on May 25 would include a
59. On April 30, 2012, Loufti Company declared a dividend of $40,000. Loufti Company decided that the
dividend would be paid on June 15, 2012, to all shareholders of record on May 25, 2012. The journal entry to
record the payment of the dividend on June 15 would include a
60. Goshen Co. has 24,000 shares of no-par common stock with a $20 stated value and 10,000 shares of $30
par, 5 percent noncumulative preferred stock outstanding. If the company declares cash dividends of $68,000,
the total amount of the dividend paid to preferred stockholders is
61. The Retained Earnings balance of Mantua Company was $128,700 on January 1, 2012. Net income for 2012
was $72,820. If Retained Earnings had a credit balance of $57,750 after closing entries were posted on
December 31, 2012, and if additional stock of $35,750 was issued during the year, dividends declared during
2012 were