CH. 13 Accounting

Which of the following characteristics is an advantage of the corporate form of business?

Limited liability of stockholders

Which of the following represents one of the basic rights of stockholders?

Stockholders may receive dividends from corporate earnings.

The par value of stock is ____.

The amount assigned by a company to a share of its stock.

Paid-in capital consists of ____.

amounts received from stockholders in exchange for stock

Preferred stock is a stock ____.

that gives its owners certain benefits over common stock

Preferred stockholders ____.

have the first claim on dividend funds.

Which of the following occurs when a stockholder invests cash in a corporation in exchange for stock?

both assets and stockholders’ equity are increased

The declaration and payment of cash dividends cause a ___ in both assets (Cash) and stockholders’ equity (Retained Earnings) for the corporation.

decrease

True/False: If preferred stock is noncumulative, then the company needs to pay dividends that were passed in previous years.

False

True/False: A dividend’s declaration date is the date the corporation records which stockholders get dividend checks.

False.

True/False: When a company has issued both preferred and common stock, the common stockholders are allocated their dividends first.

False

True/False: Stock dividends have no impact on the total amount of stockholders’ equity.

True

True/False: The declaration of a stock dividend creates a liability for the corporation.

False

True/False: A stock split decreases par value per share, whereas stock dividends do not affect par value per share.

True

True/False: A stock split, like any other stock issuance, cannot involve issuing more shares of stock than authorized in the corporate charter.

True

True/ False: A 3-for-1 stock split of a $3 par value share will result in three shares of $1 par value.

True

True/False: Memorandum entry is an entry in the journal that notes a significant event, but has no debit or credit amount.

True

Dividends in arrears are ____.

passed dividends on cumulative preferred stock

Which of the following is a reason for a company to announce a stock split?

To reduce the market price at which the stock is trading

True/False: Treasury stock is a contra equity account.

True

True/False: Treasury stock is recorded at cost without reference to par value.

True

The purchase of treasury stock ____.

decreases both assets and stockholders’ equity

Treasury stock causes the number of ___.

outstanding shares to go down