Online Tutorial Quiz

Please answer all questions

1		One of the advantages of the corporate form of ownership is limited personal liability.
			A)	True
			B)	False
2		A special feature of the corporation is the ease of transferability of ownership.
			A)	True
			B)	False
3		Double taxation refers to the corporation's earnings being taxable to the corporation when earned, and earnings being taxable to stockholders when distributed as dividends.
			A)	True
			B)	False
4		Information that, by law, must be made available to the general public is called private information.
			A)	True
			B)	False
5		A corporation owned by a small group of stockholders, and not publicly owned, is called a closely held corportion.
			A)	True
			B)	False
6		The costs to organize a corporation are amortized over a period of not greater than 10 years or fewer than 5 years.
			A)	True
			B)	False
7		A stock certificate is a document that shows evidence of the ownership of a specific number of shares.
			A)	True
			B)	False
8		The responsibility of setting corporate policies and protecting the rights and interests of the stockholders lies with the corporate officers.
			A)	True
			B)	False
9		When there are numerous stockholders, a stockholders subsidiary ledger is maintained.
			A)	True
			B)	False
10		A stock transfer agent and a stock registrar perform separate functions.
			A)	True
			B)	False
11		A bank or trust company retained by a corporation to maintain its records of capital stock ownership and make transfers from one investor to another is called a stock registrar.
			A)	True
			B)	False
12		Another term for paid-in capital is retained capital.
			A)	True
			B)	False
13		An underwriter provides the same basic services to corporations selling stock as they do for corporations selling bonds.
			A)	True
			B)	False
14		Legal capital is equal to, and represents, the par value or stated value of the capital stock issued.
			A)	True
			B)	False
15		Legal capital is equal to the market value of the capital stock issued.
			A)	True
			B)	False
16		An Additional Paid-in Capital account shows the amounts invested in a corporation by stockholders in excess of par value or stated value.
			A)	True
			B)	False
17		A type of capital stock that possesses the basic rights of ownership, including the right to vote, is called common stock.
			A)	True
			B)	False
18		Preferred stock is a class of capital stock usually having preferences as to dividends and in the distribution of assets in event of liquidation.
			A)	True
			B)	False
19		Cumulative preferred stock is guaranteed dividends.
			A)	True
			B)	False
20		Callable preferred shares can be exchanged at the stockholder's option for shares of common stock.
			A)	True
			B)	False
21		Preferred shares that can be converted into shares of common stock of the issuing corporation, at the option of the preferred stockholder, are called convertible preferred stock.
			A)	True
			B)	False
22		Common stock can be issued for assets other than cash.
			A)	True
			B)	False
23		Donated Capital is an account showing capital given to a corporation for which no payment has been made and for which no capital stock has been issued in exchange.
			A)	True
			B)	False
24		The stockholders' equity represented by each share of common stock is called the par value per share.
			A)	True
			B)	False
25		The annual dividend paid to a share of stock, expressed as a percentage of the stock's market value, is called the dividend payout ratio.
			A)	True
			B)	False
26		Book value and market value can be significantly different.
			A)	True
			B)	False
27		An increase in the number of shares outstanding with a corresponding decrease in par value per share is accomplished through a stock split.
			A)	True
			B)	False
28		A stock split reduces the par value of the stock and increases the number of shares issued.
			A)	True
			B)	False
29		Shares of a corporation's stock that have been issued and then reacquired, but not canceled, are called treasury stock.
			A)	True
			B)	False
30		When treasury stock is reissued at a price greater than its purchase price, the gain is recorded on the income statement.
			A)	True
			B)	False
31		Which of the following items is not an advantage of the corporate form of ownership?
			A)	Professional management
			B)	Ease of accumulating capital
			C)	Limited life
			D)	Limited liability
			E)	Ease of transfer of ownership
32		Who has the primary function of setting corporate policies?
			A)	Stockholders
			B)	Board of directors
			C)	Operations officers
			D)	Chief Executive Officer (CEO)
			E)	State government
33		Who has the responsibility for canceling the stock certificates of the seller and preparing new certificates for the buyer of the shares of stock?
			A)	Underwriter
			B)	Stock registrar
			C)	Stock transfer agent
			D)	Board of directors
			E)	None of the above
34		To which account should the costs incurred in chartering a new corporation be charged?
			A)	Common stock
			B)	Organization Expense
			C)	Retained Earnings
			D)	Professional Services Expense
			E)	Organization Costs
35		Which of the following is not correct?
			A)	A corporation may be heavily taxed.
			B)	A corporation has a board of directors.
			C)	All stockholders have a vote and a voice in business operations.
			D)	A corporation is a legal entity.
			E)	Corporate earnings may be taxed twice.
36		Which of the following accounts is not a part of the paid-in capital section of the balance sheet?
			A)	Preferred Stock
			B)	Retained Earnings
			C)	Additional Paid-in Capital, Common Stock
			D)	Common Stock
			E)	Additional Paid-in Capital, Preferred Stock
37		Common Stock totals $200,000, Additional Paid-in Capital, $50,000, and Retained Earnings, $40,000. If 20,000 shares of common stock are authorized and 10,000 shares have been issued, what is the book value per common share?
			A)	$30.00
			B)	$28.00
			C)	$25.00
			D)	$20.00
			E)	None of the above
38		One thousand shares of 10% preferred stock totals $100,000. Common Stock totals $200,000, Additional Paid-in Capital, $50,000, and Retained Earnings, $150,000. A total of 20,000 shares of common stock have been issued and are outstanding. What is the book value per share of the common stock?
			A)	$10.00 per share
			B)	$11.00 per share
			C)	$15.00 per share
			D)	$20.00 per share
			E)	None of the above
39		The Common Stock of the business totals $40,000. The Additional Paid-in Capital, Common Stock totals $3,000 and the Retained Earnings has a deficit balance of $12,000. What is the total stockholders' equity of the corporation?
			A)	$32,000
			B)	$40,000
			C)	$52,000
			D)	$55,000
			E)	None of the above
40		Preferred Stock, with a par value of $50 per share and a 10% dividend preference, is listed on the balance sheet with a total equity balance of $1,000,000. If dividends are declared and paid at the end of the year, what amount of dividends will be paid to the preferred shareholders?
			A)	$100,000
			B)	$200,000
			C)	$225,000
			D)	$250,000
			E)	$275,000
41		Preferred Stock, with a par value of $100 per share and a 9% dividend rate, is listed on the balance sheet at $1,000,000. If dividends are declared and paid at the end of the year, and dividends are 3 years in arrears, what amount will the preferred shareholders receive before common shareholders are paid any dividend?
			A)	$200,000
			B)	$270,000
			C)	$360,000
			D)	$400,000
			E)	$480,000
42		Preferred Stock, $100 par, callable at $105, totals $500,000. Common Stock totals $500,000 and Additional Paid-in Capital is $100,000. Retained Earnings totals $250,000. If there are no dividends in arrears, what is the book value per share of the preferred stock?
			A)	$100 per share
			B)	$102 per share
			C)	$108 per share
			D)	$110 per share
			E)	None of the above
43		Preferred Stock, $100 par, callable at $105, totals $500,000. Common Stock, $100 par, totals $500,000 and Additional Paid-in Capital is $100,000. Retained Earnings totals $250,000. If there are no dividends in arrears, what is the book value per share of the common stock?
			A)	$100 per share
			B)	$135 per share
			C)	$165 per share
			D)	$175 per share
			E)	None of the above
44		Preferred Stock, 10%, $100 par, totals $500,000. Common Stock totals $600,000 and Additional Paid-in Capital is $200,000. Retained Earnings has a deficit balance of $20,000 and dividends are $100,000 in arrears. What is the book value per share of preferred stock?
			A)	$100 per share
			B)	$105 per share
			C)	$120 per share
			D)	$130 per share
			E)	None of the above
45		Preferred Stock (1000 shares) totals $100,000 and has a call price of $110 per share. Common Stock totals $200,000, Additional Paid-in Capital, $50,000, and Retained Earnings, $50,000. A total of 10,000 shares of common stock have been issued and are outstanding. Assuming no dividends are in arrears, what is the book value of the preferred stock?
			A)	$100.00 per share
			B)	$101.00 per share
			C)	$110.00 per share
			D)	$125.00 per share
			E)	None of the above
46		Preferred Stock, 10%, $100 par, totals $500,000. Common Stock, $100 par, totals $600,000, and Additional Paid-in Capital is $200,000. Retained Earnings has a deficit balance of $20,000 and dividends are $100,000 in arrears. What is the book value per share of common stock?
			A)	$100 per share
			B)	$108.33 per share
			C)	$113.33 per share
			D)	$133.33 per share
			E)	$137.50 per share
47		One thousand shares of 10% preferred stock totals $100,000 and has a call price of $110 per share. Common Stock totals $200,000, Additional Paid-in Capital, $50,000, and Retained Earnings, $50,000. A total of 10,000 shares of common stock have been issued and are outstanding. Assuming dividends are two years in arrears, what is the book value of the preferred stock?
			A)	$100.00 per share
			B)	$110.00 per share
			C)	$120.00 per share
			D)	$130.00 per share
			E)	None of the above
48		The dividend yield on preferred stock is 10% on a market price of $80 per share at the end of Year One. The preferred stock is selling for $40 at the end of Year Two. What is its dividend yield at the end of Year Two?
			A)	20%
			B)	10%
			C)	8%
			D)	16%
			E)	None of the above
49		Baker, Incorporated has 100,000 shares of $50 par value common stock authorized and issued. The board of directors has authorized a 5-for-1 stock. After the stock split, what will be the total number of shares issued and the par value of these shares?
			A)	50,000 shares with a par value of $10.00 per share.
			B)	500,000 shares with a par value of $100.00 per share.
			C)	500,000 shares with a par value of $10.00 per share.
			D)	5,000,000 shares with a par value of $1.00 per share.
			E)	None of the above
50		A corporation purchased treasury stock for $50,000 cash. The journal entry for this transaction included which of the following?
			A)	A debit to Cash and a credit to Common stock.
			B)	A debit to Treasury Stock and a credit to Cash.
			C)	A debit to Retained Earnings and a credit to Treasury Stock.
			D)	A debit to Treasury Stock and a credit to Preferred Stock.
			E)	None of the above
51		Treasury stock purchased by the corporation for $50,000 in cash is later sold for $60,000. Cash is debited, and Treasury Stock is credited. What other account and dollar amount is a part of the journal entry?
			A)	A debit to Retained Earnings for $10,000.
			B)	A credit to Retained Earnings for $10,000.
			C)	A credit to Gain on the Sale of Treasury Stock.
			D)	A credit to Additional Paid-in Capital: Treasury Stock Transactions.
			E)	None of the above
52		Common Stock totals $100,000, Additional Paid-in Capital, $10,000, Retained Earnings $15,000, and Treasury Stock. $5,000. What is the amount of total stockholders' equity?
			A)	$130,000
			B)	$125,000
			C)	$120,000
			D)	$110,000
			E)	None of the above

Net Income $ 2,000
Preferred stock dividends 100
Average number of common shares outstanding 10,000
Average common stockholders' equity 79,600
Average total stockholders' equity 14,000

53		What are the earnings per share, the return on common stockholders' equity, and the return on equity, respectively?
			A)	$1.90, 20%, and 14%
			B)	$2.00, 14%, and 24%
			C)	$2.00, 25%, and 140%
			D)	$1.90, 25%, and 24%
			E)	$1.90, 14%, and 24%