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True False Quiz
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1.
Shareholders have unlimited liability.
A)True
B)False
2.
In some cases the 'double taxation' of corporations can be advantageous.
A)True
B)False
3.
The amortization period for corporation organization costs cannot exceed twenty years.
A)True
B)False
4.
Ultimate control of a corporation rests with the shareholders, not the board of directors.
A)True
B)False
5.
Shareholders must be present at annual shareholder meetings to elect the members of the board of directors.
A)True
B)False
6.
The right of shareholders to purchase additional shares of common share issued by the corporation is called the preemptive right.
A)True
B)False
7.
Authorized shares refer to the shares the corporation has issued.
A)True
B)False
8.
An underwriter will purchase an issuance of shares directly from the issuing corporation at an amount equal to the probable market value of the shares to shareholders.
A)True
B)False
9.
Shares do not have to have a par value.
A)True
B)False
10.
Shareholders' equity is made up of the total contributed capital plus retained earnings.
A)True
B)False
11.
Common shares may be issued for noncash assets.
A)True
B)False
12.
When no-par common shares are sold for $27, the entire proceeds of the share issue are credited to Common Shares.
A)True
B)False
13.
Preferred shares are guaranteed cash dividends.
A)True
B)False
14.
Preferred shares that have the cumulative feature are guaranteed their cash dividends.
A)True
B)False
15.
If a corporation that has regularly paid cash dividends to holders of common shares fails to pay a cash dividend, the cash dividend is said to be in arrears.
A)True
B)False
16.
Preferred shares that have the right to share in dividends above the fixed rate or amount stated on the share certificate are known as participating preferred shares.
A)True
B)False
17.
A corporation has no legal commitment to pay dividends until the board of directors takes formal action to declare a dividend.
A)True
B)False
18.
The call price or redemption value of preferred shares is often below the par value of the shares.
A)True
B)False
19.
Preferred shares that have the right to be exchanged for common shares of the issuing corporation, at the option of the preferred shareholders, are known as cumulative preferred shares.
A)True
B)False
20.
Issuing preferred shares to increase the return to common shareholders is called financial leverage.
A)True
B)False
21.
In order to pay a cash dividend, a corporation must have adequate cash and adequate retained earnings.
A)True
B)False
22.
A journal entry is required on the date of declaration, date of record, and date of payment.
A)True
B)False
23.
On the date of declaration, the journal entry should debit either the Cash Dividends account or Retained Earnings account, and credit the Common Dividends Payable account.
A)True
B)False
24.
Preferred shares have a priority (or senior status) relative to common shares in the areas such as dividends, assets in case of liquidation, and voting rights.
A)True
B)False
25.
When preferred shares are cumulative and in arrears, the amount in arrears must be distributed to preferred shareholders before any dividends are distributed to common shareholders.
A)True
B)False
26.
Cash Dividends account is an expense account that gathers information about total dividends declared during the reporting period.
A)True
B)False





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