acc 11 chapter 11

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Stockholders of a corporation directly elect

the board of directors.

Those most responsible for the major policy decisions of a corporation are the

board of directors.

The chief accounting officer in a company is known as the


Which one of the following would not be considered an advantage of the corporate form of organization?

Government regulation

The two ways that a corporation can be classified by ownership are

publicly held and privately held.

Which of the following would not be true of a privately held corporation?

Its shares are regularly traded on the New York Stock Exchange.

Allen Sutton has invested $600,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Sutton stand to lose?

Up to his total investment of $600,000

Which of the following statements reflects the transferability of ownership rights in a corporation?

A stockholder may dispose of part or all of his shares.

The officer that is generally responsible for maintaining the cash position of the corporation is the


A disadvantage of the corporate form of organization is

tax treatment.

If a stockholder cannot attend a stockholders’ meeting, he may delegate his voting rights by means of a(n)


Which of the following factors does not affect the initial market price of a stock?

The par value of the stock

Par value

is the value assigned per share in the corporate charter.

The term legal capital is a descriptive term for

par value.

A corporation has the following account balances: Common Stock, $1 par value, $40,000; Paid-in Capital in Excess of Par Value, $1,800,000. Based on this information, the

number of shares issued is 40,000.

The amount of stock that may be issued according to the corporation’s charter is referred to as the

authorized stock.

If Morgan Company issues 2,000 shares of $5 par value common stock for $140,000, the account

Paid-in Capital in Excess of Par Value will be credited for $130,000.

New Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000.

If common stock is issued for an amount greater than par value, the excess should be credited to

Paid-in Capital in Excess of Par Value.

Paid-in Capital in Excess of Par Value

is reported as part of paid-in capital on the balance sheet.

Which of the following represents the largest number of common shares?

Authorized shares

Treasury stock is

a corporation’s own stock, which has been reacquired and held for future use.

The acquisition of treasury stock by a corporation

decreases its total assets and total stockholders’ equity.

A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders’ equity?

Decrease by $700,000

Treasury stock should be reported in the financial statements of a corporation as a(n)

deduction from total paid-in capital and retained earnings.

Treasury Stock is a(n)

contra stockholders’ equity account.

The number of shares of issued stock equals

outstanding shares plus treasury shares

Which of the following is not a right or preference associated with preferred stock?

The right to vote

The Nice Corporation issues 10,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $1,100,000 and a credit or credits to

Preferred Stock for $1,000,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $100,000.

Dividends in arrears on cumulative preferred stock

must be paid before common stockholders can receive a dividend.

Outstanding stock of the Apex Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 6%, $10 par non-cumulative preferred stock. In 2006, Apex declared and paid dividends of $2,000. In 2007, Apex declared and paid dividends of $6,000. How much of the 2007 dividend was distributed to preferred shareholders?


On January 1, Bluefield Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,

-Bluefield’s Paid-in Capital in Excess of Par Value account increased $400,000. -Bluefield’s total stockholders’ equity was unaffected. -Bluefield’s Retained Earnings account decreased $1,200,000. All of the above.

The date on which a cash dividend becomes a binding legal obligation is on the

declaration date.

The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to

decrease total assets and stockholders’ equity.

The board of directors of Essex Company declared a cash dividend on November 15, 2007, to be paid on December 15, 2007, to stockholders owning the stock on November 30, 2007. Given these facts, the date of November 30, 2007, is referred to as the

record date.

Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

Retained Earnings Dividends Payable

A corporation records a dividend-related liability

on the declaration date.

Common Stock Dividends Distributable is classified as a(n)

stockholders’ equity account.

The effect of a stock dividend is to

change the composition of stockholders’ equity.

DEN Inc. has 1,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2007. What is the annual dividend on the preferred stock?

$4,000 in total

All of the following are true about a corporation except:

has the right to vote

proof of stock ownership is evidenced by a printed or engraved form known as a:

stock certificate

all of the following statements are true concerning treasury stock except:

does not change the number of shares outstanding

in order to pay a cash dividend:

-the corporation must have adequate retained earnings -the board of directors must declare a dividend -the corporation must have adequate cash All of the above

dividends can take the following forms:

-cash -property -script All of the above

when issuing cash dividends, the board of directors commits the corporation to a binding legal obligation:

the declaration date

a stock dividend results in:

-a decrease in retained earnings -an increase in paid-in-capital

upon receiving a stock dividend:

-a stockholder owns more shares -a stockholders interest has not changed

corporations issue stock dividends

-to satisfy stockholders dividends expectations without spending cash -to increase the marketability of its stock by increasing the number of shares outstanding and thereby decreasing the market price per share -to emphasize that a portion of stockholders equity has been permanently reinvested in the business and therefore is unavailable for cash dividends All of the above

a small stock dividend

-is less than 20%-25% of the corporations issued stock -is recorded at market value per share

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