1. A disadvantage of the corporate form of business entity is
a. mutual agency for stockholders
b. unlimited liability for stockholders
c. corporations are subject to more governmental regulations
d. The ease of transfer of ownership
2. The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?
a. Retained Earnings
b. Treasury Stock
c. Organizational Expenses
d. Common Stock
3. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
a. 5,000
b. 45,000
c. 40,000
d. 50,000
4. The par value per share of common stock represents
a. The minimum-selling price of the stock established by the articles of incorporation.
b. the minimum amount the stockholder will receive when the corporation is liquidated
c. An arbitrary amount established in the articles of incorporation
d. the amount of dividends per share to be received each year
5. A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
a. $15,000
b. $32,000
c. $17,000
d. $2,000
6. The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for cash at $70 per share. The entry to record the transaction will consist of a debit to Cash for $700,000 and a credit or credits to
a. Preferred Stock for $700,000.
b. Preferred stock for $500,000 and Paid-in Capital in Excess of Par Value-Preferred Stock for $200,000.
c. Preferred Stock for $500,000 and Retained Earnings for $200,000.
d. Paid-in Capital from Preferred Stock for $700,000.
7. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared?
a. $80,000
b. $10,000
c. $90,000
d. $100,000
8. Which of the following statements is not true about a 2-for-1 split?
a. Par value per share is reduced to half of what it was before the split.
b. Total contributed capital increases.
c. The market price will probably decrease.
d. A stockholder with ten shares before the split owns twenty shares after the split.
9. The primary purpose of a stock split is to
a. increase paid-in capital
b. Reduce the market price of the stock per share
c. increase the market price of the stock per share
d. increase retained earnings
10. Treasury stock should be reported in the financial statements of a corporation as a(n)
a. Investment.
b. Liability.
c. Deduction from total paid-in capital.
d. Deduction from total paid-in capital and retained earnings.
11. On the statement of cash flows, the cash flows from operating activities section would include
a. receipts from the issuance of capital stock
b. receipts from the sale of investments
c. payments for the acquisition of investments
d. Cash receipts from sales activities
12. A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under
a. Investing activities
b. financing activities
c. noncash investing and financing activities
d. operating activities
13. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in
a. the cash flows from financing activities section
b. the cash flows from investing activities section
c. a separate schedule
d. The cash flows from operating activities section
14. Accounts receivable arising from trade transactions amounted to $44,000 and $53,000 at the beginning and end of the year, respectively. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is
a. $105,000
b. $114,000
c. $96,000
d. $158,000