Accounting I Ch.11 - SmartBook

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

[-] $25,000

Thomas Company has $120,000 of assets, $40,000 of liabilities, $50,000 of stock, and $30,000 of retained earnings. Investors own 25,000 shares of Thomas' stock that has a current market value of $5.20 per share. Based on this The book value per share of the stock is ______.

[-] $3.20

Assume that 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 would show $______ of cash inflow from ______ activities

[-] 240,000; financing

Assume that 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 would show $______.

[-] 90,000

Which of the following characteristics make transferring the ownership of a proprietorship difficult? [-] Proprietorships are subject to heavy government regulation. [-] A buyer must purchase the entire business. [-] Most proprietorships are owner operated. [-] Proprietorships are subject to double-taxation.

[-] A buyer must purchase the entire business. [-] Most proprietorships are owner operated.

Which of the following statements are true? [-] All common stock has voting rights. [-] A company may only have one class of preferred stock. [-] A company may have different classes of common stock. [-] Different classes of stock may have different rights and privileges.

[-] A company may have different classes of common stock. [-] Different classes of stock may have different rights and privileges.

Assume that Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. This stock issue affects the ______. [-] Balance Sheet [-] Income Statement [-] Statement of Cash Flows

[-] Balance Sheet [-] Statement of Cash Flows

Paying a previously declared dividend affects the ______. [-] Balance Sheet [-] Statement of Stockholders' Equity [-] Income Statement [-] Statement of Cash Flows

[-] Balance Sheet [-] Statement of Cash Flows

The issue of no-par common stock affects the ______. [-] Balance Sheet [-] Statement of Cash Flows [-] Income Statement

[-] Balance Sheet [-] Statement of Cash Flows

Issuing a stock dividend impacts the ______. [-] Statement of Cash Flows [-] Income Statement [-] Balance Sheet [-] Statement of Changes in Stockholders' Equity

[-] Balance Sheet [-] Statement of Changes in Stockholders' Equity

Which form of business organization offers the greatest ease of transferring ownership?

[-] Corporation

Which form of business organization offers the greatest opportunity to raise capital?

[-] Corporations

True or false: A company may have different classes of preferred stock, but only one class of common stock.

[-] False

Which of the following statements are true? [-] An advantage of preferred stock is that their dividends are usually unlimited. [-] If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever. [-] The amount of a preferred stock dividend is usually stated on the stock certificate. [-] 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. [-] The amount of a preferred stock dividend is usually stated on the stock certificate. [-] Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders.

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

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

Which of the following statements are true? [-] The stock of closely held companies is not sold on major stock exchanges. [-] The extensive regulations of trading on stock exchanges began in the 1980s. [-] Numerous laws specifically affect the operations of proprietorships and partnerships. [-] Trading on a stock exchange is limited to the stockbrokers who are members of the exchange.

[-] The stock of closely held companies is not sold on major stock exchanges. [-] Trading on a stock exchange is limited to the stockbrokers who are members of the exchange.

Which of the following statements are true? [-] To minimize the amount of assets that owners must maintain in the business, many corporations issue stock with very low par values. [-] Many states allow corporations to issue no-par stock. [-] Par value represents the purchase price of stock offered to executives and other premium investors. [-] Since the par value represents the legal capital, it constitutes the most important characteristic of stock.

[-] To minimize the amount of assets that owners must maintain in the business, many corporations issue stock with very low par values. [-] Many states allow corporations to issue no-par stock.

True or false: Acme Company reported significant growth in 2019 which was less growth than analysts expected. Under these conditions, Acme's stock may decline.

[-] True

True or false: Partnerships and proprietorships are usually managed by their owners.

[-] True

True or false: Relationships between shareholders are critically important when assessing the capacity to control a corporation through stock ownership.

[-] True

True or false: The appropriation of retained earnings restricts the amount of retained earnings available for the distribution of dividends.

[-] True

Stock with a stated value is accounted for exactly the same way as stock with ______ value.

[-] a par

Cumulative dividends ______. [-] are paid to preferred stockholders only after common stockholders receive their dividends [-] are normally assigned to common stock [-] 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 [-] may also be called dividends in arrears

The maximum number of shares of stock corporations are legally permitted to issue is the ______ number of shares.

[-] authorized

If a company is forced to liquidate, the highest risk of losing their investment rests with ______ stockholders.

[-] common

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 organized as a(n) ______.

[-] corporation

The benefit of continuity of existence is an advantage of being organized as a(n) ______.

[-] corporation

The life of a ______ continues even after the owner(s) have departed.

[-] corporation

Billions of dollars of capital may be generated by pooling the resources of millions of owners through public stock and bond offerings for companies organized as ______.

[-] corporations

Stock certificates are used as evidence of ownership in ______.

[-] corporations

A corporation becomes legally obligated to pay a cash dividend on the ______ date

[-] declaration

A stock split ______. [-] increases the par value per share [-] decreases the market value per share [-] has no effect on cash flow [-] increases the number of shares outstanding

[-] decreases the market value per share [-] has no effect on cash flow [-] increases the number of shares outstanding

ABC Corporation paid $15,000 to the Internal Revenue Service (IRS) on profits earned and their stockholders paid an additional $6,000 to the IRS for the dividends received from ABC. This phenomenon is commonly called ______ ______.

[-] double; taxation

A company can show a high price-earnings (P/E) ratio, even when the market is not optimistic if ______.

[-] earnings per share is very low

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

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

Double taxation refers to the fact that ______.

[-] income is taxed first at the corporate level and a second time when stockholders receive dividends

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

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

Recording the cash payment of a previously declared dividend decreases ______. [-] liabilities [-] retained earnings [-] net income [-] assets

[-] liabilities [-] assets

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

[-] limited liability

Common stockholders ______. [-] may have a right to vote in the election of the board of directors [-] may share in the distributions of profits [-] have the right to share in the distribution of corporate assets in the case of liquidation [-] do not have the right to vote on matters that affect the corporate charter

[-] may have a right to vote in the election of the board of directors [-] may share in the distributions of profits [-] have the right to share in the distribution of corporate assets in the case of liquidation

Book value per share is ______. [-] measured in historical dollars [-] the value investors are willing to pay for a share of stock [-] calculated by dividing total stockholders' equity by the number of shares of stock owned by investors [-] the price of stock on the date it was originally sold to an investor

[-] measured in historical dollars [-] calculated by dividing total stockholders' equity by the number of shares of stock owned by investors

Par value represents the ______. [-] market value on the date of issue [-] minimum amount of assets that must be retained in the company as protection for creditors [-] price investors must pay to obtain a share of stock [-] maximum liability of the investors

[-] minimum amount of assets that must be retained in the company as protection for creditors [-] maximum liability of the investors

Companies that had paid dividends in the past are ______ (less/more) likely to pay dividends in the future.

[-] more

When considering published financial statements and forecasts, stock prices are influenced ______.

[-] more by forecasts

When a corporation buys treasury stock, the ______. [-] number of shares of stock outstanding decreases [-] number of shares of stock authorized is not affected [-] total amount of stockholders' equity increases

[-] number of shares of stock outstanding decreases [-] number of shares of stock authorized is not affected

When par or stated value stock is issued, the amount received above the par or stated value is recorded in the ______ account.

[-] paid-in capital in excess of par (or stated) value

Corporations are usually managed on a daily basis by ______.

[-] professional executives

Price-earnings (P/E) ratios reported in the financial press are often based on _____ earnings per share.

[-] projected

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 company appropriates retained earnings, total retained earnings ______.

[-] remains unchanged

In predicting the declaration of cash dividend payments a stockholder can examine ______. [-] retained earnings to assess sufficiency for dividend declarations [-] the cash account to assess sufficiency for dividend declarations [-] the audit report for forecasts of past and future dividend declarations [-] liabilities to determine the amount of dividends in arrears

[-] retained earnings to assess sufficiency for dividend declarations [-] the cash account to assess sufficiency for dividend declarations

Common rights assigned to investors who own common stock include the right to ______. [-] 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 [-] examine financial statements before they are issued to the general public

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

When compared to closely held corporations, a widely held corporation generally requires a ______ percentage of ownership to exercise control.

[-] smaller

No legal ownership agreement is required for ______.

[-] sole proprietorships

A business owned by a single individual that is usually established simply by obtaining a local business license is a(n) ______ ______.

[-] sole; proprietorship

When par or stated value stock is issued, the total amount received is ______.

[-] split between two equity accounts

Like par value, ______ value is an arbitrary amount assigned by the board of

[-] stated

Stock dividends have no effect on ______. [-] the statement of cash flows [-] market value of the stock [-] ownership interest in assets [-] total assets [-] net income

[-] the statement of cash flows [-] ownership interest in assets [-] total assets [-] net income

Stock splits have no effect on ______. [-] total assets [-] total liabilities [-] number of shares outstanding [-] total stockholders' equity

[-] total assets [-] total liabilities [-] total stockholders' 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. As a result of the stock issue, ______. [-] total liabilities increased by $90,000 [-] cash flow from investing activities increased by $240,000 [-] total assets increased by $240,000 [-] total stockholder's equity increased by $150,000 [-] the income statement was not affected

[-] total assets increased by $240,000 [-] the income statement was not affected

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

[-] treasury

Preferred stock ______. [-] gives stockholders the exclusive right to vote in the election of members of the board of directors [-] usually has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders [-] usually has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to creditors [-] dividends are usually paid before dividends are distributed to common stockholders

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

Distributions to owners of proprietorships are called ______.

[-] withdrawls