Final Exam Review

Chapter 11 Questions

Chapter 11 Answers

A corporation __________ have a legal obligation to pay dividends.

does not

Contributed capital of $1,000,000 represents ___________ .

the amount stockholders have invested in exchange for stock.

When a company issues of shares of $0.10 par value common stock for $10 per share, it will record a _________ .

credit to Additional Paid-in Capital for the difference between the $10 price and the $0.10 par value.

Retained Earnings of $100,000 represent a corporation's cumulative earnings _______ and is shown on the ________ .

kept; balance sheet and statement or retained earnings.

which of the following statements are true about corporations?

- An advantage of equity over debt financing is corporations are not required to pay dividends or repay stockholders. - Two sources of financing for a corporation are debt and equity.

Mega Corporation repurchased 1,000 shares of its $1 par value common stock for $8,000. The effect of this transaction on the accounting equation includes a(n) __________ . (Check all that apply.)

- decrease in stockholders' equity - decrease in assets

Dividends Payable is a(n) _____________ account with a normal __________ balance and is initially recorded on the ___________ date. (Enter one word per blank.)

- liability account - credit - declaration

The effect on the accounting equation of declaring a cash dividend includes _________ .

1. An increase in liabilities 2. A decrease in stockholders equity.

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares.

100,000

A major advantage of the corporate form of ownership is ____________ .

Limited legal liability

If a corporation goes bankrupt, its stockholders _________ .

have residual claim to the assets after the creditors' claims have been satisfied.