ch 11 accounting bs

If a company does not have any accumulated other comprehensive income (loss), stockholders' equity is the:

) amount the company received in exchange for all stock issued plus the amount of Retained Earnings minus the cost of treasury stock

24. Holders of common stock receive certain benefits, such as a residual claim, which is the:

) right to share in any remaining assets after creditors have been paid off, should the company cease operations

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

false

A corporation's charter establishes the number of shares of stock that will be issued in an initial public offering (IPO). t/f

false, an IPO is the very first issuance

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

false, it's insignificant and unrelated to the market value of a stockq

1. Corporations are governed by federal law. t/f

false, state law not federal

13. A stock split increases total stockholders' equity. t/f

false, stock splits don't require an entry

. When a company reissues (or sells) shares of its treasury stock at an amount different than its cost, it reports a gain or a loss on the sale t/f

false, there is no report of gain or loss

16. Dividends in arrears are reported as current liabilities on the balance sheet. t./f

false, they are not liabilities until they are declared by the board of directors

. All other things being equal, the higher the return on equity ratio, the better the financial performance of the company t/f

true

10. State laws often restrict dividends to the amount of Retained Earnings.t/f

true

12. A stock dividend decreases the market price of the company's stock. t/f

true

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

true

2. A major advantage of debt financing is that interest expense is tax deductible. t/f

true

20. Income tax expense would be found on the income statement of a corporation, but not on the income statement of a sole proprietorship. t./f

true

3. Issuing stock to obtain financing is called equity financing. t/f

true

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

true

One reason why a company may choose a stock split over a stock dividend is that the stock split does not reduce Retained Earnings. t/f

true

Preferred stock is generally classified as stockholders' equity under both GAAP and IFRS t/f

true

Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation t/f

true

the price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings t./f

true

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

false

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

45,000

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company issues 12 million shares to investors and later REPURCHASES 3 million shares. The number of issued shares after these transactions have been accounted for is:

A) 12 million shares.

A corporate charter specifies that the company may issue 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 shares of treasury stock after these transactions have been accounted for is:

A) 3 million shares

Contributed capital totals $30,000, Retained Earnings equals $65,000, Treasury Stock equals $18,000, and Common Stock equals $10,000. If the company does not have any accumulated other comprehensive income (loss), stockholders' equity, what is the total amount of stockholders' equity?

B) $77,000

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.

40. Which of the following statements about issued and outstanding stock is correct?

B) Issued stock equals the sum of outstanding stock and treasury stock.

21. For a business to be considered a corporation:

B) it must be organized as a separate legal entity

The right of current stockholders to purchase additional shares of newly issued stock in order to maintain the same percentage ownership is called

B) preemptive rights.

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.

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

What of the following statements about Accumulated Other Comprehensive Income (Loss) is not correct?

D) Accumulated Other Comprehensive Income (Loss) is reported on the income statement.

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

D) Dividends

29. Which of the following statements about equity and debt financing is correct?

D) Equity financing can change stockholder control.

34. All of the following are a part of contributed capital except:

D) Retained Earnings

22. Advantages of the corporate form include all of the following except:

D) legal liability of its owners is unlimited

. Which of the following statements about the benefits enjoyed by the owners of common stock is not correct?

If the company ceases operations, stockholders share in any assets remaining before creditors have been paid