ACG2021- Chapter 11

Where is common stock listed in the stockholders' equity section of the balance sheet? Before preferred stock After retained earnings As an asset As part of paid-in capital After treasury stock

As part of paid-in capital

The 13th Street Grill issued 10,000 of $1 par value common stock for $5 per share. Which of the following will be part of the journal entry to record the issuance? A credit of $10,000 to Common Stock A debit of $10,000 to Common Stock A credit of $50,000 to Common Stock A debit of $50,000 to Common Stock None of these

A credit of $10,000 to Common Stock

Which of the following does not affect retained earnings? Dividends Net loss Stock dividends Net income Additional investments by stockholders

Additional investments by stockholders

Which of the following is an advantage of the corporate organizational form? None of these No income taxes Continuous life Government regulation Unlimited liability

Continuous life

Which of the following is not true of a corporation? Corporations pay federal income taxes as a separate entity. Corporate losses must be paid personally by the corporation's shareholders. Corporations may enter into binding legal contracts in its own name. Corporations may buy, own, and sell property. Corporations may sue and be sued.

Corporate losses must be paid personally by the corporation's shareholders.

What method is normally used to account for treasury stock? Legal value method Stated value method Cost method Par value method Equity method

Cost method

Which one of the following statements is incorrect? Dividends may be paid on common stock while dividends are in arrears on preferred stock. When preferred stock is noncumulative, any dividend passed in a year is lost forever. Dividends in arrears on preferred are not considered a liability. All of these statements are correct Dividends cannot be paid on common stock while any dividend on preferred stock is in arrears.

Dividends may be paid on common stock while dividends are in arrears on preferred stock.

Which of these is a disadvantage of corporations? Ability to raise capital Government regulations Continuous life Transferable ownership rights All of these are advantages of corporations

Government regulations

The effect of the declaration of a cash dividend by the board of directors is to Increase total liabilities and decrease total assets. Increase total stockholders' equity and decrease total assets. Increase total assets and increase total liabilities. Increase expenses and increase total liabilities. Increase total liabilities and decrease total stockholders' equity.

Increase total liabilities and decrease total stockholders' equity.

Forming a corporation does not necessarily involve Issuing stock Receiving a state charter Establishing by-laws Incurring debt Obtaining a license from each state where the corporation has operating activities.

Incurring debt

In the stockholders' equity section of the balance sheet, where and how is treasury stock reported? It is reported as a contra Retained Earnings account. It is reported as a deduction appearing after both total paid-in capital and retained earnings. It is reported as an asset. It is reported as a deduction from the Common Stock account. It is reported as an addition to the Common Stock account.

It is reported as a deduction appearing after both total paid-in capital and retained earnings.

Which one of the following is false concerning a retained earnings restriction? It makes a portion of the balance of retained earnings unavailable for dividends. It may arise from legal, contractual, or voluntary causes. It generally is disclosed in the notes to the financial statements. It is reported on the income statement. All of these are true

It is reported on the income statement.

Which of the following is considered an advantage of the corporate form of organization? All of these None of these Taxation. Limited liability of stockholders. Government regulations.

Limited liability of stockholders.

Which of the following is a characteristic of sole proprietorships? Separate legal existence Low taxation Limited liability for owners Ability to acquire capital easily Unlimited life

Low taxation

Willis Company declared a cash dividend of $1.00 per share on 20,000 shares of common stock on December 15. The dividend is to be paid one month later on January 15 to stockholders of record on December 30. Which of the following summarizes the effects of the journal entry recorded on the date of record on December 30? It decreases liabilities and decreases assets. It increases stockholders' equity and increases liabilities. It decreases stockholders' equity and increases liabilities. No journal entry is recorded on the date of record. It decreases stockholders' equity and decreases assets.

No journal entry is recorded on the date of record.

Which one of the following decreases when a corporation purchases treasury stock? Authorized shares Treasury shares All of these Issued shares Outstanding shares

Outstanding shares

Which of the following accounts is listed first in the stockholders' equity section of the balance sheet? Common stock if common stock had been issued. Otherwise, preferred stock is listed first. Common stock because all corporations have outstanding common stock. Retained earnings. Treasury stock. Preferred stock if preferred stock had been issued. Otherwise, common stock is listed first.

Preferred stock if preferred stock had been issued. Otherwise, common stock is listed first.

Which one of the following is not a right of preferred stockholders? Priority in relation to dividends None of these are rights of preferred stockholders Priority to the assets in the event of liquidation Preferred stockholders have all of these rights Priority voting rights

Priority voting rights

If a corporation incurred a net loss in the current year, which of the following is true? The company debited Cash in a closing entry. The company debited a paid-in capital account in a closing entry. The company debited Retained Earnings in a closing entry. The company credited Retained Earnings in a closing entry. The company credited a paid-in capital account in a closing entry.

The company debited Retained Earnings in a closing entry.

Which one of the following is true with regard to a corporation's stock? The number of outstanding shares equals or exceeds the number of issued shares. The number of issued shares equals or exceeds the number of authorized shares. The number of authorized shares equals or exceeds the number of outstanding shares. The number of treasury shares equals the number of outstanding shares. None of these

The number of authorized shares equals or exceeds the number of outstanding shares.

Which of the following is not a stockholder's right? The right to participate in management decisions All of these rights are stockholder rights The right to vote in the election for the board of directors The preemptive right The right to share in dividends

The right to participate in management decisions

Which of the following is false with regards to corporations? Privately held corporations tend to have fewer shareholders than publicly traded corporations. All of these are true. The stock of privately held corporations are traded on stock exchanges. Many privately held corporations are referred to as a closely held corporations. As a legal entity, corporations have not only many rights and privileges but also many duties and responsibilities.

The stock of privately held corporations are traded on stock exchanges.

For what reason might a company acquire treasury stock? To signal to the stock market that management believes the stock is overpriced To increase the number of shares of stock outstanding To increase profit To reissue the shares to officers and employees under bonus and stock compensation plans To decrease earnings per share

To reissue the shares to officers and employees under bonus and stock compensation plans

Which of the following is not considered to be a characteristic of the corporate form of organization? Ability to acquire capital through the issuance of stock Transferable ownership rights Separate legal existence Continuous life Unlimited liability of stockholders

Unlimited liability of stockholders

A disadvantage of the corporate form of organization is ease of transfer of ownership. additional taxes. professional management. continuity of life. separate legal existence from shareholders.

additional taxes.

The chief accounting officer in a company is known as the controller. treasurer. Chief Executive Officer president. vice-president.

controller.

Woodland Company declared a cash dividend of $2.00 per share on 50,000 shares of common stock on July 15. The dividend is to be paid one month later on August 15 to stockholders of record on July 31. The correct entry to be recorded on the date of payment of August 15 will include a debit to the Retained Earnings account and a credit to the Dividends Payable account. No journal entry is required. debit to the Dividends account and a credit to the Cash account. debit to the Dividends Payable account and a credit to the Cash account. debit to the Dividends account and a credit to the Dividends Payable account.

debit to the Dividends Payable account and a credit to the Cash account.

Woodland Company declared a cash dividend of $2.00 per share on 50,000 shares of common stock on July 15. The dividend is to be paid one month later on August 15 to stockholders of record on July 31. The correct entry to be recorded on the date of declaration of July 15 will include a No journal entry is required. debit to the Dividends account and a credit to the Cash account. debit to the Retained Earnings account and a credit to the Dividends Payable account. debit to the Dividends Payable account and a credit to the Cash account. debit to the Dividends account and a credit to the Dividends Payable account.

debit to the Dividends account and a credit to the Dividends Payable account.

The net effects on the corporation of the declaration and payment of a cash dividend are to decrease assets and decrease stockholders' equity. increase stockholders' equity and decrease liabilities. decrease liabilities and decrease stockholders' equity. increase assets and increase stockholders' equity. decrease assets and increase stockholders' equity.

decrease assets and decrease stockholders' equity.

Corporations have several officers who manage the corporation. One such officer is the controller. The controller None of these has custody of the corporation's funds and maintains the company's cash position. All of these maintains the corporation's accounting records, systems of internal controls, and prepares its financial statements, tax returns, and internal reports. has overall responsibility for managing the business.

maintains the corporation's accounting records, systems of internal controls, and prepares its financial statements, tax returns, and internal reports.

A corporation records a dividend-related liability on the declaration date. all of these on the payment date. when dividends are in arrears. on the record date.

on the declaration date.

The two ways that a corporation can be classified based on whether their ownership is traded on a stock exchange are secured and nonsecured. separate existence and non-separate existence. publicly held and privately held. stock and share. registered and non-registered.

publicly held and privately held.

Keller Company declared a cash dividend on November 15 to be paid on December 15 to stockholders owning the stock on November 30. Given these facts, the date of November 30, is referred to as the payment date. dividend date. record date. declaration date. transfer date.

record date.

Stockholders of a corporation directly elect the board of directors. the president of the corporation. all of the employees of the corporation. the treasurer of the corporation. the Chief Executive Officer of the corporation.

the board of directors.

Stockholders have all of the following rights except to share the corporate earnings through receipt of dividends. to vote in election of board of directors. to keep the same percentage ownership when new shares of stock are issued. to declare when a cash dividend will be paid. to share in assets upon liquidation in proportion to their holdings.

to declare when a cash dividend will be paid.

Corporations have several officers who manage the corporation. The officer who has custody of the corporation's funds and maintains the company's cash position is the controller. chief executive officer. All of these None of these treasurer.

treasurer.