Smartbook 8 equity

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common 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 will show ______ of paid-in-capital in excess of par value.

$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.

$90,000

Which of the following statements are true? - A partnership is a separate legal entity created by the authority of a state government. - A proprietorship is the simplest form of business organization to organize and operate. - The requirements for establishing a corporation vary from state to state. - Corporations are subject to less regulation than proprietorships.

- 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? - All corporations have common stock. - When a company liquidates, common stockholders are the least likely investors to bear the risk of loss. - Common stockholders have the right to buy and sell stock. - Common stockholders do not have the right to vote on matters that affect the corporate charter.

- All corporations have common stock. - Common stockholders have the right to buy and sell stock.

Which of the following statements are true? - Owner withdrawals are shown in the capital statement of a proprietorship. - Distributions to the owner of a proprietorship are called dividends. - The Retained Earnings account is shown on the balance sheet of a proprietorship. - The balance sheet of a proprietorship contains a single Owner's Capital account.

- Owner withdrawals are shown in the capital statement of a proprietorship. - The balance sheet of a proprietorship contains a single Owner's Capital account.

When a company issues no-par common stock, the ______. - cash inflow is classified as a financing activity - entire amount of the proceeds is placed into the Common Stock account. - company cannot pay dividends because there is no par value on which dividends can be based

- cash inflow is classified as a financing activity - entire amount of the proceeds is placed into the Common Stock account.

Common stockholders have the right to ______. - vote on significant matters that affect the corporate charter - examine financial statements before they are issued to the general public - share in the distribution of profits - use corporate assets to satisfy personal needs - participate in the election of directors

- vote on significant matters that affect the corporate charter - share in the distribution of profits - participate in the election of directors

Match the account title shown in the right column with the order in which they are presented in the stockholders' equity section of a balance sheet. Use the number 1 to represent the account title shown first, the number 2 to represent the second title, and so on.

1. Par value Preferred Stock 2. Stated Value Common Stock 3. Class B Common Stock 4. Paid-in Capital in Excess of Par Value Preferred Stock 5. Paid-in Capital in Excess of Stated Value Common 6. Retained Earnings

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common 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 legal capital is $

150,000

Which of the following statements is true?

Corporations are not legally required to declare cash dividends.

Which of the following statements are true? - If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever. - Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders. - Dividends in arrears must be paid before a company can pay interest on debt. - Like creditors, preferred stockholders can force a company into bankruptcy if dividends in arrears are not paid.

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

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Which financial statements were affected by the stock issue? - Statement of cash flows - Income statement - Balance sheet

- Statement of cash flows - Balance sheet

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 ______. - cash flow from financing activities increased by $240,000 - total assets increase by $240,000 - total liabilities increased by $90,000 - the income statement was not affected - total stockholder's equity increased by $150,000

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

Preferred stock ______. - has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders - has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to creditors - dividends are paid before dividends are distributed to common stockholders - always pays a dividend yearly, with any unpaid amounts paid in future years

- 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

Corporations purchase treasury stock to ______. - generate gains, thereby improving the amount of net income - have stock available to satisfy the requirements of employee stock option plans - be in a position to cast votes for the members of the board of directors - avoid a hostile takeover - keep the price of the stock high when it appears to be falling

- have stock available to satisfy the requirements of employee stock option plans - avoid a hostile takeover - keep the price of the stock high when it appears to be falling

Cumulative dividends ______. - may also be called dividends in arrears - are normally assigned to common stock - are paid to preferred stockholders only after common stockholders receive their dividends - are dividends that accumulate for future payment when a company fails to pay a periodic dividend

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

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common 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, ______. - total assets increased by $240,000 - the income statement was not affected - total stockholder's equity increased by $150,000 - total liabilities increased by $90,000 - cash flow from investing activities increased by $240,000

- total assets 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 ______. - total stockholder's equity increased by $150,000 - cash flow from financing activities increased by $240,000 - total assets increase by $240,000 - total liabilities increased by $90,000 - the income statement was not affected

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

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

A forecast of projected profitability

Which financial statement is affected on both the date of declaration and the payment date of a dividend?

Balance Sheet

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

True

Treasury stock is ______ on the balance sheet.

a contra equity

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

common

Creditors cannot claim owners' personal assets as payment for the company's debts if the company is organization as a(n)

corporation

A corporation becomes legally obligated to make a cash dividend on the _______ date.

declaration

Corporations become legally obligated to pay dividends on the ______.

declaration date

Paying a previously declared cash dividend ______.

decreases both liabilities and assets

The date of record for a cash dividend ______.

has no effect on the financial statements

The issue of no-par common stock does not affect the ______.

income statement

Declaring a cash dividend ______.

increases liabilities and decreases stockholders' equity

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

limited liability

Corporations normally list _________ stock before _______ stock in the stockholders' section of the balance sheet.

preferred, common

Owner contributions and retained earnings are combined in a single capital account on the balance sheets of ______.

proprietorships

A company's financial statements are not impacted on the date of ______ of a cash dividend.

record

When a corporation purchases its own stock, the stock purchased is called ________ stock.

treasury

Distributions to owners of proprietorships are called

withdraws