ch 8 accounting

limited liability

A chief advantage of the corporate form of business is ______.

false

A two for one stock split will double the amount of total stockholder's equity shown on the balance sheet. This statement is

30,000

Alpha Associates was organized on January 1, Year 1. Alpha was organized as a partnership. Alpha reported $200,000 of before tax income during Year 1 and the partners withdrew $30,000 from the company. Assuming a corporate income tax rate of 30% and a personal income tax rate of 15%, the total amount of tax collected by the government is

restricts

Appropriating retained earnings ______ the amount of retained earnings available to distribute as dividends.

income statement statement of cash flows

Appropriating retained earnings does not affect the ______.

Equity Exchange

Appropriating retained earnings is a(n) ______ event.

equity exchange

Appropriating retained earnings is a(n) ______ event.

total assets increase by $240,000 cash flow from financing activities increased by $240,000 the income statement was not affected

Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value preferred stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. As a result of the stock issue ______.

$90,000

Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value preferred stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's balance sheet showed ______ of paid-in-capital in excess of stated value.

corporation

Creditors cannot claim owners' personal assets as payment for the company's debts if the company is organization as a(n) ___ . (Enter only one word per blank.)

may also be called dividends in arrears are dividends that accumulate for future payment when a company fails to pay a periodic dividend

Cumulative dividends ______.

25,000 (Reason: $25 market value × 10,000 shares outstanding × 10% stock dividend = $25,000 decrease in retained earnings.)

Fontaine Incorporated issued a 10% stock dividend on its $20 par value common stock. On the distribution date, there were there were 12,000 shares of stock issued and 10,000 shares of stock outstanding. The market value of the stock was $25. As a result of the stock dividend, the amount of retained earnings decreased by ______.

slightly higher than one half of what it was immediately before the split.

Immediately after a two for one common stock split, the per share market price of the issuing corporation's common stock is expected to be

greater risk and greater potential rewards than preferred stockholders.

In general, common stockholders experience

false

It is easier to acquire influential control in a company that has closely held stock ownership than in a company that has widely held stock ownership. This statement is

stock dividend

Jake Corporation paid its stockholders a dividend by issuing them additional shares of its stock. This type of event is called a

more than the par value.

Normally companies sell stock for an amount that is

has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders dividends are paid before dividends are distributed to common stockholders

Preferred stock ______.

outstanding

Stock dividends are based on the number of shares ______.

equal to the market value of the stock, less than the market value of the stock, more than the market value of the stock

The book value of a share of stock may be

$40,000

The corporation paid the maximum amount of dividends possible in each year of operation. The dividend paid to common stockholders at the end of Year 3 is

$70,000

The corporation paid the maximum amount of dividends possible in each year of operation. The dividend paid to preferred stockholders at the end of Year 2 is

common

The greatest potential for rewards when a corporation prospers rests with ______ stockholders.

true

The market price of common stock is based on investors' expectations about future earnings. This statement is

A measure of capital generated through earnings.

The term "Retained Earnings" is best explained by which of the following statements?

True

True or false: The financial statement effects of issuing stated value stock are identical to the financial statement effects of issue par value stock.

decreases and Paid-in Capital increases

When a corporation issues a stock divided, Retained Earnings ______.

a corporation

Which of the following entities would report income tax expense on its income statement?

Sole proprietorship

Which of the following has a single owner?

unlimited liability

Which of the following is a disadvantage of a sole proprietorship?

Reduce the likelihood of a hostile takeover

Which of the following is a reason a company would acquire treasury stock?

The corporation does not have adequate retained earnings, The corporation does not have adequate cash, The board and management prefer to reinvest all net income for future growth

Which of the following is a reason why a corporation may choose not to pay dividends?

The right to vote before the common stockholders at the corporation's annual meeting.

Which of the following is not normally a preference given to the holders of preferred stock?

A forecast of projected profitability

Which of the following is not normally included in the articles of incorporation?

A proprietorship is the simplest form of business organization to organize and operate. The requirements for establishing a corporation vary from state to state.

Which of the following statements are true?

Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders. If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever.

Which of the following statements are true?

Number of shares authorized

Which of the following terms designates the maximum number of shares of stock that a corporation may issue?

A corporation must record a liability for cash dividends on the date of record.

false

If a corporation has issued noncumulative preferred stock, common stockholders may receive greater dividends than if the corporation has issued cumulative preferred stock.

false

Preferred stock carries voting rights that give the preferred stockholders greater power in the corporation's decision-making process than common stockholders have.

false

Preferred stockholders generally have no preference to assets when the company is liquidated.

false

The class or type of stock that every corporation must have is preferred stock.

false

The number of shares of stock outstanding generally is greater than the number of shares of stock issued.

false

When a corporation records a stock dividend, it decreases the retained earnings account for the par value of the stock.

false

A corporation is a legal entity created by the authority of a state government, separate and distinct from its owners.

true

Liability is a significant disadvantage of the partnership form of business organization.

true

Preferred stockholders generally have a preference to dividends.

true

Preferred stockholders generally have no voting rights in a corporation.

true

Preferred stockholders generally receive a set or fixed amount of dividends.

true