Ch. 12

Which of the following statements is false regarding cash​ dividends? A. On the payment​ date, liabilities decrease and assets decrease B. On the declaration date a liability is created for the payment of cash dividends C. A journal entry is required on the date of record where liabilities are increased and​ stockholders' equity decreases D. The Cash Dividends account is closed to Retained Earnings at the end of the accounting period

A journal entry is required on the date of record where liabilities are increased and​ stockholders' equity decreases

Which of the following is considered an advantage of a partnership over a​ corporation? ​(check all that​ apply) A. There is no double taxation with a partnership .B. A partnership is less expensive to organize than a corporation .C. A partnership has the ability to raise more capital than a corporation D. All of the above are advantages

A partnership has the ability to raise more capital than a corporation There is no double taxation with a partnership

When a new partner is admitted by purchasing an existing​ partner's interest, which of the following is​ true? A. A journal entry is made to record the transfer of cash from the new partner to the existing partner B. Total assets of the partnership increases because cash is being added to the partnership C. Any existing partners must agree to admitting a new partner D. Total equity of the partnership increases because a new partner is admitted

Any existing partners must agree to admitting a new partner

When a partner has a debit balance in​ his/her capital​ account, this is called​ a(n) A. Contra asset account B. Equity subtraction C. Capital deficiency D. Partner withdrawal

Capital deficiency

When issuing​ no-par common​ stock, the entire amount received upon the issuance of the stock is credited to​ "Paid-In Capital in Excess of​ Par". True False

False

Assume Sheena Bright contributes to the partnership office furniture with an original cost of​ $10,000, accumulated depreciation of​ $4,000, and a current market value of​ $3,000. The office furniture would be recorded at a value of​ $6,000 for this owner contribution. True False

False *Must be market value

The portion of​ stockholders' equity that cannont be used for dividends is called A. Treasury Stock B. Preferred Stock C. Retained Earnings D. Legal Capital

Legal Capital

Which characteristic identifies a limited liability​ company? A. An LLC must have less than 100 members B. Members have limited personal liability C. The LLC must pay business income tax D. Members must elect separate managers to participate in the​ day-to-day management of the LLC

Members have limited personal liability

A​ corporation's own stock that it has previously issued and later reacquired is called​ _______ stock. A. Treasury B. Preferred C. Reacquired D. Cancelled

Treasury

A partnership balance sheet reports a separate capital account for each partner. True False

True

A small stock dividend increases​ Paid-In Capital but decreases Retained Earnings. True False

True

Any time a new partner is admitted into a​ partnership, the existing partnership dissolves and a new partnership is created. True False

True

Because preferred stock gives it owners some advantages over common​ stockholders, preferred stock is listed before common stock in the​ Paid-In Capital section of​ stockholders' equity on the balance sheet. True False

True

Which characteristic identifies a general​ partnership? A. The issuance of shares of stock to its owners B. Limited personal liability C. No business income tax D. Unlimited life

Unlimited life

A corporation with 100 or fewer stockholders that can elect to be taxed in the same way as a partnership is called​ a(n) A. S Corporation .B. Limited Liability Corporation C. Private Corporation D. C Corporation

S Corporation

The payment of cash dividends ​(check all that​ apply) A. Decreases assets .B. Increases​ Paid-In Capital C. Decreases Retained Earnings D. Decreases​ Paid-In Capital

Decreases assets Decreases Retained Earnings

A preferred stock dividend that has not been paid for the year and the preferred stock is cumulative is called a A. Deferred Dividend B. Noncumulative Dividend C. Dividend Payable D. Dividend in Arrears

Dividend in Arrears

A corporation can pay dividends to its shareholders in​ cash, stock, or other property. True Your answer is correct. False

False

Any remaining cash paid to the partners after all liabilities have been paid is based on the​ profit-and-loss-sharing ratio. True False

False

Articles of incorporation must be created by the state in which the partnership has its headquarters in order for a partnership to be a legal entity. True False

False

Generally Accepted Accounting Principles requires any large stock dividends to be accounted for based on the​ stock's market value at the time of distribution. True False

False

If a new partner is admitted to the partnership by contributing assets to the​ partnership, then the new​ partner's capital account will always equal the value of the assets​ he/she contributed. True False

False

If the assets of the partnership are sold at a​ gain, then the gain is allocated to each​ partner's capital account based on the balance of each​ partner's capital account. True False

False

Preferred stock where owners do not receive passed dividends from prior years is called cumulative preferred stock. True False

False

Which of the following statements are true regarding the issuance of a small stock dividend to common​ stockholders? ​(check all that​ apply) A. The Common Stock Dividend Distributable account is credited for the par value of the stock .B. The Stock Dividends account is debited on the distribution date based on the market value of the stock .C. The​ Paid-In Capital in Excess of Par account is credited for the issuance amount above the par value of the stock .D. The Stock Dividends account is debited on the distribution date based on the par value of the stock

The Common Stock Dividend Distributable account is credited for the par value of the stock The Stock Dividends account is debited on the distribution date based on the market value of the stock

Under what circumstance is it most likely for a new partner to offer a bonus to the existing partners when being admitted by directly contributing to the​ partnership? A. The existing partnership is considered an extremely successful business .B. The existing partners share the profits and losses equally C. The new partner is only able to contribute assets other than cash D. None of the above

The existing partnership is considered an extremely successful business

When a company announces a​ 2-for-1 stock split ​(check all that​ apply) A. There is no effect on​ assets, liabilities, or total​ stockholders' equity B. A journal entry is recorded where​ paid-in capital is increased and Retained Earnings is decreased. C. The par value of the stock is cut in half D. The market price of the stock is typically cut in half

There is no effect on​ assets, liabilities, or total​ stockholders' equity The par value of the stock is cut in half

On the declaration date of a stock​ dividend, the Stock Dividends Payable account is increased with a credit. True False

false

Which of the following lists the steps of liquidating a partnership in the correct​ order? A. ​1) Pay cash to the partners based on their capital​ balances, 2) Pay all the liabilities of the​ partnership, 3) Sell the assets of the partnership B. ​1) Sell the assets of the​ partnership, 2) Pay all partnership​ liabilities, 3) Pay the remaining cash to the partners .C. ​1) Pay all the liabilities of the​ partnership, 2) Sell the assets of the​ partnership, 3) Pay the remaining cash to the partners D. ​1) Pay cash to the partners based on their capital​ balances, 2) Sell the assets of the​ partnership, 3) Pay all the liabilities of the partnership

​1) Sell the assets of the​ partnership, 2) Pay all partnership​ liabilities, 3) Pay the remaining cash to the partners

Treasury stock is considered a A. Contra asset account with a normal credit balance B. A​ paid-in capital account with a normal credit balance C. A contra equity account with a normal debit balance .D. Liability account with a normal credit balance

A contra equity account with a normal debit balance

​Paid-in capital for a corporation includes Retained Earnings. True False

False

Which of the following describes a characteristic of a​ partnership? ​(check all that​ apply) A. Partnerships have an unlimited life B. Partners have unlimited personal liability .C. The partnership is taxed both at the partnership level and on each​ partner's individual tax return D. Every partner can bind the business to a contract within the scope of the​ partnership's regular business operations

Partners have unlimited personal liability Every partner can bind the business to a contract within the scope of the​ partnership's regular business operations

Which of the following financial statements is unique to a partnership that a sole proprietorship does not​ have? A. Statement of Partner Contributions B. Income Statement C. Statement of Retained Earnings D. Statement of​ Partners' Equity

Statement of​ Partners' Equity

Which of the following is true regarding the payment of stock dividends to common​ stockholders? Stock dividends have no effect on total​ stockholders' equity .B. Stock dividends can only be issued for preferred stock C. Stock dividends increase the amount of shares authorized for a company D. Stock dividends decrease assets and​ stockholders' equity

Stock dividends have no effect on total​ stockholders' equity

When a corporation issues stock for assets other than cash A. The transaction is recorded at either the market value of the stock issued or the market value of the assets received Your answer is correct.B. Total​ stockholders' equity remains unaffected C. The transaction is recorded at the par value of the stock issued because the market value of the assets received is usually undeterminable D. Retained Earnings is increased rather than​ Paid-In Capital

The transaction is recorded at either the market value of the stock issued or the market value of the assets received

When treasury stock is resold for less than its cost A. The Treasury Stock account is decreased with a debit B. Cash is decreased with a credit C. The​ Paid-In Capital from Treasury Stock Transactions account is decreased with a debit up to the amount of its credit balance D. Retained Earnings is always decreased with a debit

The​ Paid-In Capital from Treasury Stock Transactions account is decreased with a debit up to the amount of its credit balance

When treasury stock is resold for more than its cost A. Total​ stockholders' equity remains unaffected B. The​ Paid-In Capital from Treasury Stock Transactions account is increased with a credit C. Retained Earnings is increased D. The Common Stock account is increased with a credit

The​ Paid-In Capital from Treasury Stock Transactions account is increased with a credit

When a corporation issues common stock at a​ premium, the amount received above the par value of the stock is credited to A. A gain account B. The Retained Earnings account C. A revenue account D. The​ Paid-In Capital in Excess of Par account

The​ Paid-In Capital in Excess of Par account

Any new assets purchased by the partnership belong to the partnership and are jointly owned by each partner. True False

True

Companies may issue stock dividends rather than cash dividends because the company may want to reduce the market price of the stock to make it more attractive to investors by making it less expensive. True False

True

If a company has previously issued​ 1,000,000 shares of common stock and has​ 100,000 shares of common stock in its​ treasury, then the total outstanding common stock for the company is​ 900,000. True False

True

In a limited partnership the general partner has unlimited personal​ liability, but normally receives all excess profits after all the limited partners have received their share of income. True False

True

Preferred stockholders typically have the right to receive cash dividends before common stockholders. True False

True

Treasury Stock is located below Retained Earnings in the​ stockholders' equity section of the balance​ sheet, and is a reduction to​ stockholders' equity True False

True

When a partner has a capital deficiency upon​ liquidation, the partner must contribute cash to the partnership in the amount of the deficiency. True False

True

Whenever a company issues​ stock, assets increase and​ stockholders' equity increases. True False

True

if a new partner is considered so valuable to the partnership by the existing​ partners, then the existing partners may agree to give the new partner a bonus when being admitted to the partnership. True False

True