ACCOUNTING chapter 8 Smartbook
If a company is forced to liquidate, the highest risk of losing their investment rests with ______ stockholders.
COMMON stockholders
Creditors cannot claim owners' personal assets as payment for the company's debts if the company is organization as a(n) __________
corporation
A chief advantage of the corporate form of business is ______.
limited liability
Distributions to owners of proprietorships are called _______:
withdrawals
True or false: The stated value of a share of stock is established by the federal government.
FALSE
Corporations normally list _________ stock before ________ stock in the stockholders' section of the balance sheet.
Preferred stock before common stock
When a company issues no-par common stock, the ______.
-entire amount of the proceeds is placed into the Common Stock account. -cash inflow is classified as a financing activity
Which of the following statements are true? -The balance sheet of a proprietorship contains a single Owner's Capital account. -Distributions to the owner of a proprietorship are called dividends. -The Retained Earnings account is shown on the balance sheet of a proprietorship. -Owner withdrawals are shown in the capital statement of a proprietorship.
-The balance sheet of a proprietorship contains a single Owner's Capital account. -Owner withdrawals are shown in the capital statement of a proprietorship.
Preferred stock ______. -has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders -always pays a dividend yearly, with any unpaid amounts paid in future years -has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to creditors -dividends are paid before dividends are distributed to common stockholders
-has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders -dividends are paid before dividends are distributed to common stockholders
Which of the following is NOT normally included in the articles of incorporation?
A forecast of projected profitability
The greatest potential for rewards when a corporation prospers rests with ______ stockholders.
COMMON stockholders
No-par stock may have a(n) ________ value which is an arbitrary amount established by the board of directors to the stock
STATED value
Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's balance sheet will show ______ of paid-in-capital in excess of par value.
$24-$15=$9 x 10,000 shares= 90,000
Which of the following statements are true? -Common stockholders have the right to buy and sell stock. -When a company liquidates, common stockholders are the least likely investors to bear the risk of loss. -Common stockholders do not have the right to vote on matters that affect the corporate charter. -All corporations have common stock.
-Common stockholders have the right to buy and sell stock. -All corporations have common stock.
Which of the following statements are true? -Dividends in arrears must be paid before a company can pay interest on debt. -If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever. -Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders. -Like creditors, preferred stockholders can force a company into bankruptcy if dividends in arrears are not paid.
-If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever. -Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders.
Which of the following statements are true? -Many states allow corporations to issue no-par stock. -To minimize the amount of assets that owners must maintain in the business, many corporations issue stock with very low par values. -Since the par value represents the legal capital, it constitutes the most important characteristic of stock. -Par value represents the purchase price of stock offered to executives and other premium investors.
-Many states allow corporations to issue no-par stock. -To minimize the amount of assets that owners must maintain in the business, many corporations issue stock with very low par values.
Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Which financial statements were affected by the stock issue?
-Statement of cash flows -Balance sheet
Which of the following statements are true? -A partnership is a separate legal entity created by the authority of a state government. -Corporations are subject to less regulation than proprietorships. -The requirements for establishing a corporation vary from state to state. -A proprietorship is the simplest form of business organization to organize and operate.
-The requirements for establishing a corporation vary from state to state. -A proprietorship is the simplest form of business organization to organize and operate.
Which of the following statements are true? -Treasury stock is stock that a company has repurchased from its investors. -Outstanding stock is stock that has a high probability of a significant increase in market value. -The number of shares outstanding may be less than the number of shares issued. -Authorized stock is the number of shares the members of the board of directors is permitted to purchase.
-Treasury stock is stock that a company has repurchased from its investors. -The number of shares outstanding may be less than the number of shares issued.
Book value per share is ______. -measured in historical dollars -calculated by dividing total stockholders' equity by the number of shares of stock owned by investors -the value investors are willing to pay for a share of stock -the price of stock on the date it was originally sold to an investor
-measured in historical dollars -calculated by dividing total stockholders' equity by the number of shares of stock owned by investors
The par value represents the ______. -minimum amount of assets that must be retained in the company as protection for creditors, when multiplied by the number of shares of stock issued -maximum liability of the investors -market value on the date of issue -price investors must pay to obtain a share of stock
-minimum amount of assets that must be retained in the company as protection for creditors, when multiplied by the number of shares of stock issued -maximum liability of the investors
When a corporation buys treasury stock, the: -total amount of stockholders' equity increases. -number of shares of stock outstanding decreases. -number of shares of stock authorized is not affected.
-number of shares of stock outstanding decreases. -number of shares of stock authorized is not affected.
Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value preferred stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. As a result of the stock issue: -the income statement was not affected. -total stockholder's equity increased by $150,000. -cash flow from financing activities increased by $240,000. -total liabilities increased by $90,000. -total assets increase by $240,000.
-the income statement was not affected. -cash flow from financing activities increased by $240,000. -total assets increase by $240,000.
Which of the following is not normally included in the articles of incorporation? -The expected life which may be listed as in perpetuity -The names and addresses of the members of the first board of directors -The corporation's name and proposed date of incorporation -A forecast of projected profitability
A forecast of projected profitability
The maximum number of shares of stock corporations are legally permitted to issue is the ______ number of shares.
AUTHORIZED number of shares
Thomas Company has $120,000 of assets, $40,000 of liabilities, $50,000 of stock, and $30,000 of retained earnings. Investors own 25,000 shares of Thomas' stock that has a current market value of $5.20 per share. Based on this The book value per share of the stock is:
book value= (50,000 + 30,000)/25,000 = $3.20 shares
