SB 8 Equity

Common stockholders have the right to ______.

vote on significant matters that affect the corporate charter participate in the election of directors share in the distribution of profits

Which of the following statements are true?

The number of shares outstanding may be less than the number of shares issued. Treasury stock is stock that a company has repurchased from its investors.

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 legal capital is $_________

150,000

Which of the following is not normally included in the articles of incorporation?

A forecast of projected profitability

Creditors cannot claim owners' personal assets as payment for the company's debts if the company is organization as a(n) ____________

Corporation

Which form of business organization offers the greatest ease of transferring ownership?

Corporation

Which of the following statements is true?

Corporations are not legally required to declare cash dividends.

The maximum number of shares of stock corporations are legally permitted to issue is the ______ number of shares.

authorized

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 ______.

cash flow from financing activities increased by $240,000 total assets increase by $240,000 the income statement was not affected

If a company is forced to liquidate, the highest risk of losing their investment rests with ______ stockholders.

common

A corporation becomes legally obligated to make a cash dividend on the ___________ date

declaration

The issue of no-par common stock does not affect the ______.

income statement

Which financial statements are NOT affected by the declaration of a dividend?

income statement statement of cash flows

Declaring a cash dividend ______.

increases liabilities and decreases stockholders' equity

A chief advantage of the corporate form of business is ______.

limited liability

Corporations normally list _______ stock before _________ stock in the stockholders' section of the balance sheet.

preferred; common

A company's financial statements are not impacted on the date of ______ of a cash dividend.

record

The party that owns the stock on the date of ______ is legally entitled to a cash dividend.

record

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. As a result of the stock issue, ______.

total assets increased by $240,000 the income statement was not affected

When a corporation purchases its own stock, the stock purchased is called ____________ stock

treasury

True or false: The financial statement effects of issuing stated value stock are identical to the financial statement effects of issue par value stock.

true

Which of the following statements are true?

All corporations have common stock. Common stockholders have the right to buy and sell stock.

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.

Which of the following statements are true?

Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders. If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever.

Which of the following statements are true?

The stock of closely held companies is not sold on major stock exchanges. Trading on a stock exchange is limited to the stockbrokers who are members of the exchange.

Stock certificates are used as evidence of ownership in ______.

Corporations

Which of the following characteristics make transferring the ownership of a proprietorship difficult?

Most proprietorships are owner operated. A buyer must purchase the entire business.

Authorized stock Issued stock Outstanding Stock Treasury Stock

The maximum number of shares a company can legally issue The total number of share the company has sold to investors The number of shares currently owned by investors The number of shares of stock that a company has repurchased from its investors

The date of record for a cash dividend ______.

has no effect on the financial statements

Match the account title shown in the right column with the order in which they are presented in the stockholders' equity section of a balance sheet. Use the number 1 to represent the account title shown first, the number 2 to represent the second title, and so on. 1 2 3 4 5 6

1 Par Value Preferred Stock 2 Stated Value Common Stock 3 Class B Common Stock 4 Paid-in Capital in Excess of Par Value Preferred Stock 5 Paid-in Capital in Excess of Stated Value Common Stock 6 Retained Earnings

Which of the following statements are true?

A proprietorship is the simplest form of business organization to organize and operate. The requirements for establishing a corporation vary from state to state.

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.

$90,000

The ability to raise huge amounts of capital is generally limited to organizations organized as _______________

Corporations

Which form of business organization offers the greatest opportunity to raise capital?

Corporations

Which of the following statements are true?

Trading on a stock exchange is limited to the stockbrokers who are members of the exchange. The stock of closely held companies is not sold on major stock exchanges.

Which financial statement is affected on both the date of declaration and the payment date of a dividend?

balance sheet

The greatest potential for rewards when a corporation prospers rests with ______ stockholders.

common

Corporations become legally obligated to pay dividends on the _____

declaration date

Paying a previously declared cash dividend ______.

decreases both liabilities and assets

Preferred stock ______.

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

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

Cumulative dividends ______.

may also be called dividends in arrears are dividends that accumulate for future payment when a company fails to pay a periodic dividend

The par value represents the ______.

minimum amount of assets that must be retained in the company as protection for creditors maximum liability of the investors

When a corporation buys treasury stock, the ______.

number of shares of stock authorized is not affected number of shares of stock outstanding decreases