1. What is ordinarily the first step in the formation of a corporation?
a.Development of by-laws for the corporation
b.Issuance of the corporate charter
c.Application for incorporation to the appropriate Secretary of State
d.Registration with the SEC
2.Which of the following statements is not considered a disadvantage of the corporate form of organization?
a.Additional taxes
b.Government regulations
c.Limited liability of stockholders
d.Separation of ownership and management
3.Which of the following represents the largest number of common shares?
a.Treasury shares
b.Issued shares
c.Authorized shares
d.Outstanding shares
4.If Kiner Company issues 3,000 shares of $5 par value common stock for $70,000, the account
a.Paid-in Capital in Excess of Par Value will be credited for $15,000.
b.Common Stock will be credited for $15,000.
c.Paid-in Capital in Excess of Par Value will be credited for $70,000.
d.Cash will be debited for $55,000.
5.Rancho Corporation sold 200 shares of treasury stock for $40 per share. The cost for the shares was $30. The entry to record the sale will include a
a.credit to Gain on Sale of Treasury Stock for $6,000.
b.credit to Paid-in Capital from Treasury Stock for $2,000.
c.debit to Paid-in Capital in Excess of Par Value for $2,000.
d.credit to Treasury Stock for $8,000.
6.Corporations generally issue stock dividends in order to
a.increase the market price per share.
b.exceed stockholders' dividend expectations.
c.increase the marketability of the stock.
d.decrease the amount of capital in the corporation.
7.Retained earnings is increased by each of the following except
a.some disposals of treasury stock.
b.net income.
c.prior period adjustments.
d.All of these increase retained earnings.
8.Prior period adjustments
a.may only increase retained earnings.
b.may only decrease retained earnings.
c.may either increase or decrease retained earnings.
d.do not affect retained earnings.
9.If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a
a.large stock dividend.
b.cash dividend.
c.contingent dividend.
d.small stock dividend
10.Andy Eggers has invested $150,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Eggers stand to lose?
a.Up to his total investment of $150,000.
b.Zero.
c.The $150,000 plus any personal assets the creditors demand.
d.$100,000.
11.Which of the following is not true of a corporation?
a.It may buy, own, and sell property.
b.It may sue and be sued.
c.The acts of its owners bind the corporation.
d.It may enter into binding legal contracts in its own name.
12.Dividends in arrears on cumulative preferred stock
a.are shown in stockholders' equity of the balance sheet.
b.must be paid before common stockholders can receive a dividend.
c.should be recorded as a current liability until they are paid.
d.enable the preferred stockholders to share equally in corporate earnings with the common stockholders.
13.A company would not acquire treasury stock
a.in order to reissue shares to officers.
b.as an asset investment.
c.in order to increase trading of the company's stock.
d.to have additional shares available to use in acquisitions of other companies.
14.If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is
a.Common Stock Dividends Distributable.
b.Common Stock.
c.Paid-in Capital in Excess of Par.
d.Stock Dividends.
15.Stock dividends and stock splits have the following effects on retained earnings:
Stock Splits Stock Dividends
a. Increase No change
b. No change Decrease
c. Decrease Decrease
d. No change No change
16.Which one of the following is not necessary in order for a corporation to pay a cash dividend?
a.Adequate cash
b.Approval of stockholders
c.Declaration of dividends by the board of directors
d.Retained earnings
17.Somento Forest Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock?
a.$60 per share
b.$60,000 in total
c.$100,000 in total
d.$0.60 per share
18. Bento, Inc. had 500,000 shares of common stock outstanding before a stock split occurred, and 1,500,000 shares outstanding after the stock split. The stock split was
a.2-for-5.
b.5-for-1.
c.1-for-5.
d.3-for-1.
19.A prior period adjustment that corrects income of a prior period requires that an entry be made to
a.an income statement account.
b.a current year revenue or expense account.
c.the retained earnings account.
d.an asset account.
20.The following selected amounts are available for Vizio Company.
Retained earnings (beginning) $1,600
Net loss 300
Cash dividends declared 200
Stock dividends declared 200
What is its ending retained earnings balance?
a. $1,300
b. $1,400
c. $900
d. $1,200