MGMT 210 CH 11

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total _________. Multiple choice question. $750 $2,500 $500

$2,500

A small stock dividend is a distribution of _____% or less of previously outstanding shares. Multiple choice question. 20 15 25

25

On January 1, Lang, Inc. has 100,000 shares of stock issued and outstanding. The board of directors of Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend of at least ______ shares of stock. Multiple choice question. 25,001 20,001 30,001 50,001

25,001 Reason: A large stock dividend is a distribution of 25% of previously issued outstanding shares.

_________ stock is the number of shares that a corporation's charter allows it to sell. Multiple choice question. Issued Authorized Outstanding

Authorized

Roger Hillcrest owns 100 shares of $10 par, 5% noncumulative preferred stock. During the current year, there are no dividends declared or paid. If there is a large cash dividend paid in the following year, Roger would be entitled to up to $______ for the previous year before common shareholders are paid.

Blank 1: 0

Mario Hernandez owns 25 shares of $100 par, 5% cumulative preferred stock. During the current year, no dividends are declared or paid. The unpaid amount of $_____ considered dividends in______

Blank 1: 125 Blank 2: arrears

Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $_________.

Blank 1: 19500

_____ stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.

Blank 1: Authorized

(Cumulative/noncumulative) preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Blank 1: Cumulative

_______ preferred stock has a feature that limits dividends to a maximum amount each year.

Blank 1: Nonparticipating or Noncumulative

Philip's Inc. reports stockholders' equity on its financial statements. The two items reported in the stockholders' equity section of Philip's balance sheet are _____ Capital and Retained Earnings.

Blank 1: Paid-in or Contributed

_________ stock typically includes preference for receiving dividends and for the distribution of corporate assets during a liquidation.

Blank 1: Preferred

Dean, Inc.'s charter indicates a par value of $1 per share. Dean issues 100 shares at a market value of $8 per share. The journal entry to record this transaction will include a debit to the account in the amount of $.

Blank 1: cash Blank 2: 800

Investors who buy a corporation's stock sometimes receive a stock ______ as proof of share ownership.

Blank 1: certificate

Darby, Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same rights and characteristics; therefore, the stock is called ______ stock.

Blank 1: common

Darby, Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same rights and characteristics; therefore, the stock is called ________ stock.

Blank 1: common

On June 1, the board of directors of Dylan, Inc. declare a cash dividend of $1 per share. On June 1, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a (debit/credit) to the Common Dividend Payable account.

Blank 1: credit

Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $1 par for $.

Blank 1: credit Blank 2: 100

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) to the preferred stock account in the amount of $.

Blank 1: credit Blank 2: 100

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, for $.

Blank 1: credit Blank 2: 500

A corporation with a (debit/credit) balance for retained earnings is said to have a retained earnings deficit. This can arise when a company incurs cumulative losses or pays more dividends than total earnings.

Blank 1: debit

On June 1, the board of directors of Big, Inc. declare a 20% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a (debit/credit) to Retained Earnings in the amount of $.

Blank 1: debit Blank 2: 10000

While stockholders elect the board of directors of a corporation, the board of __________ hires the president, vice president and other officers, who manage the corporation.

Blank 1: directors

A ____ on stock occurs when a corporation issues its stock for less than par (or stated) value; however, most states prohibit stock to be sold for less than the par (or stated) value.

Blank 1: discount

The board of directors authorizes a cash or distribution of cash to its investors.

Blank 1: dividend

A stock dividend that is greater than 25% of the previously outstanding shares of stock is considered to be a (small/large) stock dividend.

Blank 1: large

Jordan Inc.'s charter states that there are 50,000 shares of stock authorized with a par value of $5 per share. This typically means that investors must pay a (minimum/maximum) of $5 per share to invest in the corporation.

Blank 1: minimum

The costs to start a corporation are called _______ expenses.

Blank 1: organization

When the board of directors authorizes a cash dividend to investors, there are three important dates involved—the date of declaration, date of record, and date of .

Blank 1: payment

Martin, Inc.'s charter authorizes 50,000 shares of stock with a par value of $1 per share. 1,000 shares of stock are issued at a market value of $5 per share. This means that the shares of stock are issued at a (premium/discount) .

Blank 1: premium

Corporations can be separated into two types. A _____ held corporation does not offer its stock for public sale and usually has few stockholders. A _____ held corporation offers its stock for public sale and can have thousands of stockholders.

Blank 1: privately, closely, or private Blank 2: publicly or public

A charter application usually must be signed by the prospective stockholders called incorporaters or _________ . Then, it is filed with the appropriate state official.

Blank 1: promoters

A _________ is a document that gives a designated agent the right to vote the stock.

Blank 1: proxy

A(n) _________ keeps stockholder records and prepares official lists of stockholders for stockholder meetings and dividend payments.

Blank 1: registrar

Carefree, Inc. has 20,000 shares issued and outstanding. On August 1, the board authorizes a 20% stock dividend. This is considered a (large/small) stock dividend.

Blank 1: small

Mario, Inc. declares a 2-for-1 stock _________. This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.

Blank 1: split

A corporation can sell ______ directly or indirectly (through a brokerage).

Blank 1: stock

Capital __________ is a general term that refers to any shares issued to obtain capital (owner financing).

Blank 1: stock

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate .

Blank 1: taxation or taxes

A(n) _______ agent assists with purchases and sales of shares by receiving and issuing certificates as necessary.

Blank 1: transfer

Stockholders have the right _______ to at stockholders' meetings.

Blank 1: vote

_____________ is a general term that refers to any shares issued to obtain capital (owner financing). Multiple choice question. Preferred stock Capital stock Stock options

Capital stock

The board of directors of Chester, Inc. authorizes a $0.10 cash dividend to its 10,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will debit which of the following accounts and for what amount? Multiple choice question. Common Dividend Payable for $1,000. Cash for $1,000. Common Dividend Expense for $1,000.

Common Dividend Payable for $1,000.

Carin, Inc. declared a 50% stock dividend on January 15, when there were 10,000 shares of $1 par value stock issued and outstanding, and the market value was $20. The entry to record the distribution of stock will include a debit to the ______ account, in the amount of _______. Multiple choice question. Common Stock Dividend Distributable; $5,000 Common Stock; $100,000 Common Stock Dividend Distributable; $100,000 Common Stock; $5,000

Common Stock Dividend Distributable; $5,000 Reason: This is a large stock dividend. On the date of distribution, the Common Stock Dividend Distributable will be debited for $1 par value x 5,000 shares. Common Stock will be credited for par value, $5,000.

Payton, Inc.'s charter authorized 100,000 shares of stock with a par value of $1 per share. Payton issues 100 shares at a market value of $5 per share. The journal entry to record this transaction will include a credit to _____ in the amount of _______.

Common Stock, $1 par; $100

Identify the disadvantages of the corporate form of business. (Check all that apply.) Multiple select question. Corporate taxation Government regulation Limited liability Transferable ownership rights Lack of mutual agency

Corporate taxation Government regulation

J. Flores owns a business and is trying to decide whether to incorporate. While researching corporations, she has determined the following facts. Which of these facts is not correct? Multiple choice question. Corporations have ease of capital accumulation. Corporations have lack of mutual agency. Corporations limit shareholders' liability. Corporations dissolve when owners transfer rights. Corporations incur double taxation.

Corporations dissolve when owners transfer rights.

Zion, Inc. declares a 10% stock dividend when there are 10,000 shares of $1 par value stock issued and outstanding and the market value is $5 per share. On the date of payment, Zion will issue the stock and record the transaction with which of the following entries? (Check all that apply.) Multiple select question. Credit to Common Stock for $1,000. Credit to Common Stock for $5,000. Debit to Common stock Dividend Distributable for $5,000. Credit to Cash for $5,000. Debit to Common Stock Dividend Distributable for $1,000.

Credit to Common Stock for $1,000. Debit to Common Stock Dividend Distributable for $1,000.

Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.) Multiple select question. Credit to Cash for $500. Credit to Paid-In Capital, in Excess of Stated Value for $450. Debit to Common Stock for $100. Debit to Cash for $500. Credit to Common Stock for $50. Credit to Common Stock for $500.

Credit to Paid-In Capital, in Excess of Stated Value for $450. Debit to Cash for $500. Credit to Common Stock for $50.

_______ preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders. Multiple choice question. Nonparticipating Noncumulative Participating Cumulative

Cumulative

When a corporation declares and pays a cash dividend, there are three notable important dates. Which date does not require a formal journal entry to the financial statements? Multiple choice question. Date of record Date of declaration Date of payment

Date of record

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.) Multiple select question. Debit to Cash for $200. Credit to Common Stock, $1 par for $200. Debit to Common Stock, $1 par for $200. Credit to Cash for $200.

Debit to Cash for $200. Credit to Common Stock, $1 par for $200.

The board of directors of Anchor, Inc. authorizes a $0.50 cash dividend to its 100,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will include which of the following accounts? (Check all that apply.) Multiple select question. Debit to Cash Debit to Retained Earnings Debit to Common Dividend Payable Credit to Cash Credit to Common Dividend Payable Credit to Retained Earnings

Debit to Common Dividend Payable Credit to Cash

Identify the advantages of the corporate form of business. (Check all that apply.) Multiple select question. Ease of capital accumulation Limited liability of stockholders Government regulation Corporate taxation Continuous life

Ease of capital accumulation Limited liability of stockholders Continuous life

True or false: An advantage of purchasing preferred stock is that preferred shareholders are guaranteed to receive dividend payments each year. True false question. True False

False Reason: A preference for dividends does not ensure dividends. If the directors do not declare a dividend, neither the preferred nor the common stockholders receive one.

True or false: To record a stock split, debit Retained Earnings and credit Common Stock. True false question. True False

False. Reason: No journal entry is required for a stock split.

Organization expenses, or the costs to organize a corporation, include which of the following? (Check all that apply.) Multiple select question. Dividends Depreciation Legal fees Charter fees

Legal fees Charter fees

Identify which of the following is not generally a right of common stockholders. Multiple choice question. Vote at stockholders' meetings Receive dividends if issued Manage operations Share any remaining assets if the corporation is liquidated Purchase proportional shares if new stock is issued Sell stock

Manage operations

_________ value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued at any price without the possibility of a minimum legal capital. Multiple choice question. General No-par Par

No-par

__________ preferred stock confers no right to prior period unpaid dividends. Multiple choice question. Noncumulative Participating Nonparticipating Cumulative

Noncumulative

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts? (Check all that apply.) Multiple select question. Cash Equipment Paid-in Capital in Excess of Par Value Paid-in Capital in Excess of Land Common Stock

Paid-in Capital in Excess of Par Value Common Stock

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to _________ in the amount of _______. Multiple choice question. Paid-in Capital, in Excess of Par; $8,000 Cash; $10,000 Common Stock; $10,000 Paid-in Capital, in Excess of Par; $10,000

Paid-in Capital, in Excess of Par; $8,000

The market value per share is the price at which stock is bought and sold. Which of the following factors does not influence market value? Multiple choice question. Par value Dividends Expected future earnings Growth

Par value

_________ has/have special rights that give it priority over other types of stock in one or more areas. Multiple choice question. Common stock Corporate stock Employee options Preferred stock

Preferred stock

On March 15, the board of directors of Richmond, Inc. declare a cash dividend of $1 per share. On March 15, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a debit to the _________ account. Multiple choice question. Cash Retained Earnings Common Dividend Payable

Retained Earnings

Stockholders' equity, reported on the balance sheet, consists of which of the following accounts? (Check all that apply.) Multiple select question. Retained Earnings Dividends Paid-in Capital Corporate Liabilities

Retained Earnings Paid-in Capital

On January 1, the board of directors of Shante, Inc. declared a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a debit to _____ in the amount of ______. Multiple choice question. Common Stock; $5,000 Retained Earnings; $5,000 Retained Earnings; $1,000 Common Stock Dividend Distributable $1,000 Common Stock; $1,000 Common Stock Dividend Distributable; $5,000

Retained Earnings; $5,000

_____ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case. Multiple choice question. General Adjusted-par Stated

Stated

Which of the following statements is false regarding stock splits? Multiple choice question. Stock splits decrease the par value of each share of stock. Stock splits increase retained earnings. Stock splits increase the number of shares of stock issued.

Stock splits increase retained earnings.

Rank the following groups in order of authority--with the highest authority at the top.

Stockholders board of directors president, vice president, and other officers employees

Which of the following is not a reason that a corporation would issue preferred stock? Multiple choice question. To raise capital without sacrificing control To obtain a tax advantage over corporations with no preferred stock To boost the return earned by common stockholders To appeal to certain investors who want less risk

To obtain a tax advantage over corporations with no preferred stock

There are several reasons why a board of directors would authorize a stock dividend. Which of the following is not a reason for a stock dividend? Multiple choice question. To keep the market price of the stock affordable To provide evidence of management's confidence in the corporation To reduce the par value of the stock

To reduce the par value of the stock

A corporation can pay a brokerage house to issue its stock. Some brokerage houses underwrite an indirect issuance of stock; they buy the stock from the corporation and resale it to investors. True false question. True False

True

True or false: A corporation has agreed to pay a $0.10 cash dividend on shares of common stock. On the date of record, no formal journal entry is required. True false question. True False

True

True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency. True false question. True False

True

Which of the following is not a characteristic of a corporation? Multiple choice question. Government regulation Transferable ownership rights Unlimited liability of stockholders Continuous life Corporate taxation

Unlimited liability of stockholders

No-par value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued ___________ without the possibility of a minimum legal capital. Multiple choice question. only to preferred stockholders only to friends and family at any price

at any price

The stockholders of a corporation elect the Multiple choice question. president and vice presidents board of directors employees

board of directors

A _________ is the distribution of cash to its owners. This is determined by the board of directors. Multiple choice question. dividend expense common stock dividend cash dividend

cash dividend

A ___________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held. Multiple choice question. partnership limited liability partnership sole proprietorship corporation

corporation

On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash. The entry to record this transaction would include a (debit/credit) ________ to the preferred stock account in the amount of _______. Multiple choice question. credit; $5,000 credit; $1,000 debit; $5,000 debit; $1,000

credit; $1,000 Reason: The preferred stock account is credited for the par value of $10 per share. The excess is credited to the Paid-In Capital account.

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) _______ to Common Stock for ______. Multiple choice question. debit; $2,500 credit; $500 debit; $500 credit; $2,500

credit; $500

On January 1, the board of directors of Zion, Inc. declare a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. On March 15, the date of payment, Zion issued the stock. The entry necessary on March 15 would include a (credit/debit) ______ to Common Stock Dividends distributable for ______. Multiple choice question. debit; $5,000 credit; $5,000 debit; $1,000 credit; $1,000

debit; $1,000 Reason: On the date of payment, the Common Stock Dividends Distributable account is debited for the par value amount.

Bryce, Inc. declared a 50% stock dividend on March 15, when there were 1,000 shares of $1 par value stock issued and outstanding, and the market value was $5. The entry to record the declaration will include (debit/credit)_______ to the Retained Earnings account, in the amount of _______. Multiple choice question. debit; $500 credit; $500 debit; $1,000 credit; $1,000

debit; $500

Franz Inc. declared a 50% stock dividend when there were 10,000 shares of $1 par value stock issued and outstanding, and the market value was $5 per share. On the date of payment, the entry to record distribution of stock will include a (debit/credit) ______ to the common stock dividend distributable account, in the amount of $_____. Multiple choice question. debit; 5,000 credit; 25,000 debit; 25,000 credit; 5,000

debit; 5,000 Reason: 50% is considered a large stock dividend which is recorded at par value. When the stock is issued, the common stock dividend distributable account is debited and common stock is credited at par value. $10,000 x $1 x 50%=$5,000.

When stock is cumulative preferred stock and the board of directors does not declare a dividend, the unpaid dividend amount is called: Multiple choice question. dividend distributable. dividend payable. dividend in arrears.

dividend in arrears.

Preferred stock usually carries a preference for dividends, meaning that: Multiple choice question. preferred shareholders will receive a higher percentage of dividend payouts preferred shareholders are guaranteed dividend payments each year dividends are allocated to preferred shareholders before they are issued to common shareholders

dividends are allocated to preferred shareholders before they are issued to common shareholders

Stock dividends are given to Multiple choice question. increase the per share stock price keep the market price of the stock affordable. decrease the number of outstanding shares.

keep the market price of the stock affordable.

A _____ dividend returns a portion of the capital contributed by stockholders. This requires a debit to one of the contributed capital accounts, instead of retained earnings, at the declaration. Multiple choice question. cash stock liquidating contributing

liquidating

A _____ dividend returns a portion of the capital contributed by stockholders. This requires a debit to one of the contributed capital accounts, instead of retained earnings, at the declaration. Multiple choice question. liquidating cash contributing stock

liquidating

The ______ value per share is the price at which a stock is bought and sold. Multiple choice question. par equity stated market

market

The _____ value of stock is an amount assigned per share by the corporation in its charter. In many states, this amount establishes the minimum legal capital, which refers to the least amount that the buyers of stock must contribute or be subject to paying at future dates. Multiple choice question. general market common par

par

A _____ on stock occurs when a corporation issues its stock for more than par (or stated) value. Multiple choice question. premium loss gain discount

premium

A stock __________ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share. Multiple choice question. split conversion dividend

split

Vernon, Inc.'s charter did not assign a par-value to its authorized stock. However, Vernon's directors assigned a(n) ________ value per share. This value becomes the minimum legal capital per share in this case. Multiple choice question. stated allocated adjusted-par

stated

The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the corporation's own stock, to existing shareholders. Multiple choice question. stock dividend dividend declaration cash dividend dividend authorization

stock dividend

A corporation is created by obtaining a charter from: Multiple choice question. initial stockholders an attorney the state government the federal government

the state government