Accounting Chapter 11

38. A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The current number of outstanding shares after these transactions have been accounted for is:

D) 9 million shares.

23. Which of the following statements about a corporation is not correct?

D) A corporation's owners have unlimited liability.

30. The stockholders' equity section of the balance sheet includes all of the following except:

D) Dividends.

36. A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The number of authorized shares after these transactions are accounted for is:

B) 20 million shares.

39. A company has 110,000 shares authorized, 50,000 shares issued, and 5,000 shares of treasury stock. How many shares are outstanding?

A) 45,000

21. For a business to be considered a corporation:

B) it must be organized as a separate legal entity.

28. Which of the following is an advantage of debt financing?

C) Interest is tax deductible.

27. Features of common stock usually include all of the following except:

C) primary claim to the company's assets in case of liquidation.

1. Corporations are governed by federal law.

False

11. A liability for dividends is recorded on the date of record.

False

6. The par value of stock indicates what the stock is worth.

False

9. A company that pays no dividends is always a poor investment.

False

12. A stock dividend decreases the market price of the company's stock.

True

14. Unpaid dividends on cumulative preferred stock are called dividends in arrears.

True

19. The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

True

4. Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

True

8. A corporation does not have a legal obligation to pay dividends.

True