Question 1
Alpha Corporation's has 1,500 shares of $40 par, 7% cumulative preferred stock and 2,200 shares of $10 par common stock. Alpha paid $10,000 in cash dividends including one-year dividends in arrears to preferred stockholders. Common stockholders will receive:
A. $0.
B. $1,600.
C. $220.
D. $5,800.
Question 2
Washington Corporation issued 4,000 shares of its $20 par value common stock for $23 per share. The entry to record the issuance would include a:
A. debit to Paid-in Capital in Excess of Par Value for $12,000.
B. credit to Common Stock for $12,000.
C. debit to Cash for $80,000.
D. credit to Common Stock for $80,000.
Question 3
No entry was recorded for the exchange of stock for land. This error would cause:
A. the period end stockholders' equity to be overstated.
B. the period end stockholders' equity to be understated.
C. the period's net income to be understated.
D. Both A and C are correct.
Question 4
Five hundred shares of $25 par common stock was exchanged for a piece of equipment with a fair market value of $13,500. The journal entry to record the transaction would include a credit to:
A. Equipment for $12,500.
B. Credit to Common Stock for $13,500.
C. Credit to Paid-In Capital in Excess of Par-Common for $1,000.
D. Debit to Common Stock for $12,500.
Question 5
Articles of incorporation contain all of the following except:
A. the location of the business.
B. the life expectancy (usually forever) of the business.
C. the names of the directors.
D. the nature of the business.
Question 6
The articles of incorporation are:
A. submitted by the incorporators to the Governor of the State for approval.
B. submitted by the incorporators to the IRS for approval.
C. submitted by the incorporators to the Office of the Secretary of State for approval.
D. submitted by the incorporators to Securities and Exchange Commission for approval.
Question 7
Which of the following is a characteristic of a corporation?
A. A corporation cannot own property in its name.
B. When stockholders sell their shares, the corporation is dissolved.
C. Cash dividends to the stockholders are non-taxable.
D. The stockholders have limited liability.
Question 8
Dividends in arrears occur when the company does not pay dividends to:
A. cumulative preferred stockholders.
B. non-participating common stockholders.
C. participating preferred stockholders.
D. non-cumulative preferred stockholders.
Question 9
Monarch Company reported Subscriptions Receivable-Common Stock of $1,500 and Common Stock Subscribed of $3,200 on its balance sheet. All the following are true except:
A. the original stock subscribed totaled $3,200.
B. the remaining amount to be collected from subscribers before the shares will be issued is $1,500.
C. Monarch previously issued $1,700 of the subscribed stock.
D. the amount previously collected on the stock subscriptions is $1,700.
Question 10
Revenue earned by the business was recorded as additional paid-in capital. This error would cause:
A. the period end assets to be overstated.
B. the period's net income to be understated.
C. the period's net income to be overstated.
D. None of these are correct.
Question 11
The Logan Company issued 140 shares of its $12 par value stock for $14 per share. The entry to record the receipt of cash and issuance of the stock would include a:
A. credit to Common Stock for $1,960.
B. debit to Cash of $1,680; credit to Common Stock for $1,680.
C. debit to Cash for $1,960.
D. debit to Discount on Common Stock for $280
Question 12
Officers of the corporation are:
A. appointed by the board of directors.
B. stockholders of the corporation.
C. appointed by the stockholders.
D. None of these answers are correct.
Question 13
The Collins Corporation Stockholders' Equity section includes the following:
Preferred Stock $ 12,000
Common Stock 15,000
Paid-in Capital in Excess of Par-Preferred 2,700
Paid-in Capital in Excess of Par-Common 4,100
Retained Earnings 8,200
What was the total amount preferred stock was sold for?
A. $16,100
B. $20,200
C. $14,700
D. $12,000
Question 14
The major parts of the Stockholders' Equity section of the balance sheet are:
A. Stock, Paid-in Capital, and Retained Earnings.
B. Paid-in Capital and Retained Earnings.
C. Stock and Retained Earnings.
D. Authorized Stock and Preferred Stock.
Question 15
Which of the following is not a characteristic of a corporation?
A. No mutual agency
B. Limited liability
C. Unlimited life
D. Ease of formation
Question 16
If preferred stock is cumulative, the preferred stockholders:
A. have a right to certain dividends every year.
B. will always receive a yearly dividend.
C. may receive a bonus.
D. All of these answers are correct.
Question 17
Authorized capital stock is:
A. shares issued to the corporation's officers.
B. shares that pay dividends.
C. shares sold and in stockholder possession.
D. shares listed in the charter.
Question 18
Rhubarb Corporation's outstanding stock is 100 shares of $100, 11% cumulative nonparticipating preferred stock and 2,000 shares of $12 par value common stock. Rhubarb paid $1,600 cash dividends during the year. Common stockholders received:
A. $0.
B. $500.
C. $1,100.
D. $2,500.
Question 19
The TM Stockholders' Equity section includes the following:
Preferred Stock $ 3,800
Common Stock 7,700
Paid-in Capital in Excess of Par-Preferred 400
Paid-in Capital in Excess of Par-Common 2,250
Retained Earnings 6,000
What was the total amount common stock was sold for?
A. $11,500
B. $7,700
C. $9,950
D. $13,700
Question 20
Characteristics of a corporation include:
A. stockholders having limited liability.
B. choosing a board of directors.
C. stockholders having unlimited liability.
D. direct management by the stockholders.