Question 1: The Discount on Common Stock account reflects:
a.The difference between the par value of stock and its issue price when it is issued at a price below par value.
b.One share's portion of the issued corporation's net assets recorded in its accounts.
c.The difference between the par value of the stock and the amount contributed by stockholders when the amount contributed is more than par value.
d.An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
Question 2: Stocks that pay relatively large cash dividends on a regular basis are called:
a.Small capital stocks.
b.Mid capital stocks.
c.Growth stocks.
d.Income stocks.
Question 3: A liquidating dividend is:
a.Only declared when a corporation closes down.
b.A return of a part of the original investment back to the stockholders.
c.Not allowed under federal law.
d.Only paid in assets other than cash.
Question 4: A proxy is:
a.A legal document that gives a designated agent of a stockholder the power to vote the stock.
b.A contractual commitment by an investor to purchase unissued shares of stock.
c.An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
d.The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation.
Question 5: The board of directors of a corporation:
a.Are elected by the corporate registrar.
b.Are responsible for day-to-day operations of the business.
c.Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
d.Are responsible for and have final authority for managing corporate activities.
Question 6: The date a board of directors votes to pay a dividend is called the:
a.Date of stockholders' meeting.
b.Date of declaration.
c.Date of record.
e.Date of payment.
ESSAY QUESTIONS
Question 1.What is a stock split? How is a stock split different from a stock dividend?
Question 2.Explain how both a stock split and a stock dividend affect the computation of the weighted average number of shares outstanding.