Orion Ch. 11

A cash dividend becomes a binding legal obligation on the declaration date. A True B False

A True

The acquisition of treasury stock by a corporation decreases its total assets and total stockholders' equity. A True B False

A True

Treasury stock should be reported in the financial statements of a corporation as a deduction from total paid-in capital and retained earnings. A True B False

A True

o find the return on common stockholders' equity, divide net income available to common stockholders by A average common stockholders' equity B ending total stockholders' equity C ending common stockholders' equity D average total stockholders' equity

A average common stockholders' equity

In calculating total stockholders' equity, which of the following are added? A total paid-in capital and retained earnings B total paid-in capital and common stock C retained earnings and paid-in capital in excess of par value D treasury stock and common stock

A total paid-in capital and retained earnings

Declared dividends are necessary in order for a corporation to pay a cash dividend. A : True B : False

A : True

In published annual reports, the individual sources of additional paid-in capital A : are often combined. B : are added to current liabilities. C : are shown in detail. D : are included in the notes to financial statements.

A : are often combined.

The rights or preferences associated with preferred stock include which of the following? Select all that apply. A : a priority claim to receive dividends in arrears before common stockholders receive dividend. B : a priority claim to corporate assets in case of liquidation. C : a priority claim to dividends. D : the right to vote.

A : a priority claim to receive dividends in arrears before common stockholders receive dividend. B : a priority claim to corporate assets in case of liquidation. C : a priority claim to dividends.

Which of the following statements are true? Select all that apply. A Capital stock and additional paid-in capital are two classifications of paid-in capital on the balance sheet. B Restrictions on retained earnings appear in notes to the financial statement. C Restrictions on retained earnings appear under stockholders' equity on a balance sheet. D Paid-in capital appears under stockholders' equity on a balance sheet.

A Capital stock and additional paid-in capital are two classifications of paid-in capital on the balance sheet. B Restrictions on retained earnings appear in notes to the financial statement. D Paid-in capital appears under stockholders' equity on a balance sheet.

The issuance of common stock affects This is correct answer : A only the paid-in capital account B both the paid-in capital account and the retained earnings account C only the income statement D only the retained earnings account

A only the paid-in capital account

Which of the following are reasons that a company would acquire treasury stock? Select all that apply. A to reissue shares to officers under compensation plans B to have additional shares available to use in acquiring other companies C as an asset investment D to increase trading of the company's stock in the securities market

A to reissue shares to officers under compensation plans B to have additional shares available to use in acquiring other companies D to increase trading of the company's stock in the securities market

A corporation can enter into binding legal contracts in its' own name. A : True B : False

A: True

Dividends in arrears on cumulative preferred stock should be disclosed in the notes to the financial statements. A : True B : False

A: True

Purchasing treasury stock is sometimes done to eliminate a hostile shareholder buyout. A : True B : False

A: True

Treasury stock is a corporation's own stock, which has been reacquired and held for future use. A : True B : False

A: True

When a corporation purchases treasury stock, the acquisition A requires that a gain or loss be recognized on the income statement B increases the company's total assets and total stockholders' equity C has no effect on total assets and total stockholders' equity D decreases the company's total assets and total stockholders' equity

Answer is D : decreases the company's total assets and total stockholders' equity

When a company offers a ________, this event does NOT require a formal journal entry on a corporation's books. A 100% stock dividend B 2 for 1 stock split C $1.00 per share cash dividend D 2% stock dividend

B 2 for 1 stock split

Taft Industries had 250,000 shares of common stock outstanding before a stock split occurred and 500,000 shares outstanding after the stock split. The stock split was A 1-for-5 B 2-for-5 C 2-for-1 D 5-for-1

B 2-for-5

When stock is issued in exchange for a noncash asset, the value recorded for the shares issued is best determined by the par value of the shares. A True B False

B False

________ is generally NOT reported for each class of stock on the balance sheet. A Number of shares authorized B Market value C Par value D Number of shares issued

B Market value

By dividing total cash dividends paid by net income, you can compute A return on preference stockholders' equity. B payout ratio. C capital ratio. D return on common stockholders' equity.

B payout ratio.

When companies set their dividend payout, they generally aim for a rate that is A low B sustainable C variable D high

B sustainable

Which of the following statements is true? A : The number of shares of issued stock equals unissued shares minus authorized shares. B : The number of shares of issued stock equals outstanding shares plus treasury shares. C : The number of shares of issued stock equals authorized shares minus treasury shares. D : The number of shares of issued stock equals outstanding shares plus authorized shares.

B : The number of shares of issued stock equals outstanding shares plus treasury shares.

Which of the following is true about corporations? A A stockholder is personally liable for the debts of the corporation. B The corporation's life is stipulated in its charter. C Stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. D Stockholders wishing to sell their corporation shares must get the approval of other stockholders.

B The corporation's life is stipulated in its charter.

Which of the following statements about a cash dividend are true? Select all that apply. A Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend. B The legality of a dividend does not indicate a company's ability to pay a dividend. C The legality of a cash dividend depends on state corporation laws. D Dividends are not a liability until declared.

B The legality of a dividend does not indicate a company's ability to pay a dividend. D Dividends are not a liability until declared.

Which of the following are preferences that are granted only to owners of preferred stock? Select all that apply. A the right to vote B the right to receive dividends in arrears before common stockholders receive dividends C first claim to dividends D preference to corporate assets in case of liquidation

B the right to receive dividends in arrears before common stockholders receive dividends C first claim to dividends D preference to corporate assets in case of liquidation

The authorized stock of a corporation is indicated in its by-laws. A True B False

B: False

Which of the following statements about retained earnings restrictions is NOT true? A Long-term debt contracts may impose a restriction on retained earnings as a condition for the loan. B The board of directors of a corporation may voluntarily create retained earnings restrictions for specific purposes. C Companies will not disclose retained earnings restrictions unless specifically requested by the stockholder. D Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased.

C Companies will not disclose retained earnings restrictions unless specifically requested by the stockholder.

Paid-in capital would appear under ________ on a balance sheet. A capital stock B additional paid-in capital C stockholders' equity D contra to stockholders' equity

C stockholders' equity

Harrison Corporation issues 39,000 shares of $50 par value preferred stock for cash at $60 per share. The effects of the transaction above will be under both _______ ________ and additional paid-in capital sections.

Capital Stock

Which of the following statements about the retained earnings statement is true? A It will not reflect net losses. B It is the owners' equity statement for a corporation. C It will, in some cases, fail to reconcile the beginning and ending retained earnings balances. D The amount of retained earnings cannot be associated with the balance of any asset account.

D The amount of retained earnings cannot be associated with the balance of any asset account.

When a company declares a stock dividend, the declaration will A change the total of stockholders' equity B increase total liabilities C increase total assets D increase paid-in capital

D increase paid-in capital

A corporation purchases 8,000 shares of its own $5 par common stock for $8 per share, recording it at cost. What will be the effect on total stockholders' equity? A : increase of $64,000 B : decrease of $40,000 C : increase of $40,000 D : decrease of $64,000

D : decrease of $64,000

Restricting retained earnings for the cost of treasury stock purchased is a ________ restriction. A contractual B voluntary C stock D legal

D : legal

In what way is a corporation different from a sole proprietorship or partnership? A A corporation's temporary accounts are closed at the end of the accounting period. B A corporation is an accounting economic entity. C A corporation is organized for the purpose of making a profit. D A corporation is subject to more federal and state government regulations.

D A corporation is subject to more federal and state government regulations.

____ ____ ______ are preferred dividends that are not declared when preferred stock is cumulative.

Dividends in arrears

Which of the following statements is true? A A stock split will increase the number of shares outstanding and will increase total stockholders' equity. B Both a stock split and a stock dividend will increase the number of shares outstanding but will have no effect on total stockholders' equity. C Both a stock split and a stock dividend will increase the number of shares outstanding and will both increase total stockholders' equity. D A stock split will increase the number of shares outstanding but will decrease total stockholders' equity.

correct Answer is B : Both a stock split and a stock dividend will increase the number of shares outstanding but will have no effect on total stockholders' equity.

When a company acquires treasury stock by buying back stock from shareholders, it _____________ the number of shares outstanding.

decreases

Most states DO/DO NOT permit the sale of common stock below par.

do not