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| 1 | |
Which of the following is a separate legal entity? |
| | A) | Corporation |
| | B) | Sole proprietorship |
| | C) | Partnership |
| | D) | All of the above |
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| 2 | |
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 personal liability |
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| 3 | |
Which of the following is one reason of greatest importance for businesses to incorporate? |
| | A) | Continuity of existence |
| | B) | Participation in dividends |
| | C) | Limited personal liability |
| | D) | Prospect of high profits |
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| 4 | |
The transferable shares of corporate ownership are known as which of the following? |
| | A) | Capital stock |
| | B) | Public stock |
| | C) | Private stock |
| | D) | Treasury stock |
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| 5 | |
A publicly owned corporation is required by law to do which of the following? |
| | A) | Prepare and issue financial statements in conformity with generally accepted accounting principles. |
| | B) | Have their annual statements audited by an independent firm of certified public accountants. |
| | C) | Comply with federal securities laws. |
| | D) | Do all of the above. |
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| 6 | |
To which account should the costs incurred in chartering a new corporation be charged? |
| | A) | Common Stock |
| | B) | Professional Expenses |
| | C) | Retained Earnings |
| | D) | Organization Costs |
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| 7 | |
Organization costs are classified as which of the following? |
| | A) | Intangible asset |
| | B) | Long-term asset |
| | C) | Capital asset |
| | D) | Stockholders' equity |
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| 8 | |
Who has the primary function of setting corporate policies? |
| | A) | Stockholders |
| | B) | Board of directors |
| | C) | Operations officers |
| | D) | Chief executive officer (CEO) |
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| 9 | |
Which of the following is false? |
| | A) | The board of directors may include 'outside' directors. |
| | B) | Individual stockholders must be corporate officers in order to conduct business on behalf of the corporation. |
| | C) | The chief financial officer (CFO) has custody of the company's funds. |
| | D) | On a company's organization chart, the top of the hierarchy is the stockholders. |
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| 10 | |
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 |
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| 11 | |
Which of the following is a right usually given to stockholders by their ownership of capital stock of a corporation? |
| | A) | Membership on the board of directors |
| | B) | Share in distribution of earnings |
| | C) | Election to a corporate officer position |
| | D) | All of the above |
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| 12 | |
Which of the following is incorrect? |
| | 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. |
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| 13 | |
Which position has custody of the company's funds and is generally responsible for the planning and controlling the company's cash position? |
| | A) | Chief financial officer (CFO) |
| | B) | President of the board of directors |
| | C) | Treasurer of the company |
| | D) | Chief executive office (CEO) |
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| 14 | |
Which of the following statements is true? |
| | A) | A separate account is maintained for each stockholder in the general ledger |
| | B) | A separate account is maintained for each stockholder in a subsidiary ledger. |
| | C) | The stockholder accounts are lumped together in one account in a subsidiary ledger. |
| | D) | Entries in a stockholder ledger are made in dollars and cents. |
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| 15 | |
Which of the following accounts is not included in 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 |
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| 16 | |
The price that a corporation will seek for a new issue of stock is based on which of the following? |
| | A) | Financial strength of the company |
| | B) | Current state of the investment market |
| | C) | Expected future earnings and dividends |
| | D) | All of the above |
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| 17 | |
The legal capital per share is determined by which of the following? |
| | A) | Par value of the common stock |
| | B) | Market value per share of common stock |
| | C) | Total of stockholders' equity |
| | D) | Book value per share of common stock |
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| 18 | |
Ten thousand shares of common stock with a par value of $5 per share are issued at a price of $7 per share. The journal entry to record this transaction will include which of the following? |
| | A) | A debit to Cash for $50,000 |
| | B) | A credit to Additional Paid-in Capital for $20,000 |
| | C) | A credit to Capital Stock for $70,000 |
| | D) | A debit to Discount on Capital Stock for $20,000 |
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| 19 | |
The issuance of common stock at a price less than is par value is seldom encountered because of which of the following? |
| | A) | Stockholders will not purchase stock at a price below par value |
| | B) | No-par value stock is more attractive to investors |
| | C) | The sale of common stock at a discount is illegal in most states |
| | D) | Par value is so low, generally, that the market price is never less than par value |
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| 20 | |
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. Calculate the total stockholders' equity of the corporation. |
| | A) | $31,000 |
| | B) | $40,000 |
| | C) | $52,000 |
| | D) | $55,000 |
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| 21 | |
Which of the following is not a characteristic of preferred stock? |
| | A) | Preference over common stock as to dividends |
| | B) | Preference over common stock as to assets in event of the liquidation of the company. |
| | C) | Redeemable at the option of the stockholder |
| | D) | Cumulative voting rights. |
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| 22 | |
Consider the following:
| 8% cumulative preferred stock, $100 par value, authorized 50,000 shares, issued 20,000 shares | $2,000,000 | | Additional paid-in capital, preferred stock | 500,000 | | Common stock, $1 par value, authorized 10 million shares, issued 5 million shares | 5,000,000 | | Additional paid-in capital, common stock | 1,200,000 | | Retained earnings | 3,200,000 |
Calculate the total paid-in capital of the corporation. |
| | A) | $8,700,000 |
| | B) | $1,700,000 |
| | C) | $4,900,000 |
| | D) | $11,900,000 |
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| 23 | |
Preferred Stock, with a par value of $50 per share and a dividend preference of 10%, is listed in 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 |
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| 24 | |
Preferred Stock, with a par value of $100 per share and a dividend preference of 9%, is listed in 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, calculate the amount that the preferred shareholders will receive before common shareholders are paid any dividend. |
| | A) | $200,000 |
| | B) | $270,000 |
| | C) | $360,000 |
| | D) | $450,000 |
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| 25 | |
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 share of common stock? |
| | A) | $30 |
| | B) | $29 |
| | C) | $25 |
| | D) | $20 |
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| 26 | |
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. Calculate the book value per share of the common stock. |
| | A) | $10 |
| | B) | $11 |
| | C) | $15 |
| | D) | $20 |
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| 27 | |
Preferred Stock, $100 par, totals $500,000. Common Stock totals $500,000 and Additional Paid-in Capital, Common Stock 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) | $105 per share |
| | D) | $110 per share |
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| 28 | |
Preferred Stock, $100 par, 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 |
| | B) | $135 |
| | C) | $170 |
| | D) | $175 |
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| 29 | |
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 the preferred stock? |
| | A) | $100 |
| | B) | $105 |
| | C) | $120 |
| | D) | $130 |
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| 30 | |
Preferred Stock (1,000 shares) totals $100,000 and has a par value of $100. 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 per share of the preferred stock? |
| | A) | $100.00 |
| | B) | $101.00 |
| | C) | $110.00 |
| | D) | $125.00 |
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| 31 | |
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 the common stock? |
| | A) | $100.00 |
| | B) | $108.33 |
| | C) | $113.33 |
| | D) | $133.33 |
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| 32 | |
One thousand shares of 10% preferred stock totals $100,000 and has a par value of $100 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 per share of the preferred stock? |
| | A) | $100.00 |
| | B) | $110.00 |
| | C) | $120.00 |
| | D) | $130.00 |
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| 33 | |
What are the three primary elements of stockholders' equity of most companies? |
| | A) | Common stock, preferred stock, and paid-in capital |
| | B) | Common stock, preferred stock, and retained earnings. |
| | C) | Common stock, additional paid-in capital, and retained earnings. |
| | D) | Paid-in capital, treasury stock, and retained earnings. |
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| 34 | |
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% |
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| 35 | |
Which of the following is false? |
| | A) | Book value is a historical concept. |
| | B) | Investors' confidence in a company's management can be measured. |
| | C) | Book value excludes amounts earned and retained by the corporation. |
| | D) | The sign of a successful corporation is when the market price of its stock exceeds the book value of its stock. |
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| 36 | |
Anchor, 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 split. After the stock split, what will be the total number of shares issued and the par value per share? |
| | A) | 50,000 shares with a par value of $10 per share |
| | B) | 500,000 shares with a par value of $100 per share |
| | C) | 500,000 shares with a par value of $10 per share |
| | D) | 5,000,000 shares with a par value of $1 per share |
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| 37 | |
The issuance of the 3-for-1 stock split of 3,000,000 shares of $3 par common stock requires which of the following? |
| | A) | A journal entry crediting Common Stock for $9,000,000 |
| | B) | A journal entry crediting Additional Paid-in Capital for $6,000,000 |
| | C) | A journal entry crediting Retained Earning for $6,000,000 |
| | D) | Something other than a journal entry |
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| 38 | |
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. |
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| 39 | |
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 for $10,000. |
| | D) | A credit to Additional Paid-in Capital: Treasury Stock Transactions for $10,000 |
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| 40 | |
How are the cash outflows and cash inflows reported for buying and selling of treasury stock? |
| | A) | As financing activities in the statement of cash flows. |
| | B) | As investing activities in the statement of cash flows. |
| | C) | As operating activities in the statement of cash flows. |
| | D) | As a note to the financial statements. |
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| 41 | |
Common Stock totals $100,000, Additional Paid-in Capital, $10,000, Retained Earnings $15,000, and Treasury Stock, $5,000. Calculate the amount of total stockholders' equity? |
| | A) | $130,000 |
| | B) | $125,000 |
| | C) | $120,000 |
| | D) | $110,000 |
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| 42 | |
Consider the following information:
| Net income | $2,000 | | Preferred stock dividends | $100 | | Average number of common shares | 10,000 | | Average common stockholders' equity | $79,600 | | Average total stockholders' equity | $14,285 |
What are the earnings per share (common shares), the return on common stockholders' equity, and the return on equity, respectively? |
| | A) | $1.90, 20%, and 14% |
| | B) | $0.20, 14%, and 24% |
| | C) | $2.00, 25%, and 140% |
| | D) | $0.19, 2.39%, and 14.0% |
| | E) | $1.90, 14%, and 2.39% |
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