Exam 12: Organization and Operation of Corporations

Shares are attractive to investors because shareholders are not liable for the corporation's actions and debts and because shares are easily transferred.

Callable preferred shares give the shareholders the option of exchanging their preferred shares into common shares at a specified rate.

When issuing shares, the initial investment is credited to Retained Earnings.

The equity section of a corporation's balance sheet is called Corporation Equity.

Preferred shares that give the shareholders the option of exchanging their preferred shares for common shares at a specified rate are known as:

The statement of changes in equity for a corporation shows both how retained earnings and share capital have changed during the accounting period.

A corporation can issue two general types of shares: common and preferred.

Authorized shares are the total number of shares outstanding.

The financial statement that shows the changes to a corporation's contributed capital is called:

Shares are most commonly issued for cash.

The accounting equation for a corporation is:

The main differences between profit reported by a proprietorship and a corporation are income tax expense and salaries paid to owners.

Dillon Snowboards Ltd issued 60 no-par-value common shares for $10,000. The amount of contributed capital arising from this transaction is:

Which of the following occurs at the date of record?

The achievement of an increased return on common shares by paying dividends on preferred shares or interest at a rate that is less than the rate of return earned with theassets invested in the corporation by the preferred shareholders or creditors is called:

The two main areas of the equity section of a corporation's balance sheet are share capital and retained earnings.

If a corporation is authorized to issue 1,000 preferred shares, which have a current market value of $80 per share, it has $80,000 worth of shares outstanding.

The right of common shareholders to protect their proportionate interest in acorporation by having the first opportunity to buy additional shares of common shares issued by the corporation is called:

Profits or losses are recorded in a share capital account.

All of the following are given as possible motivations for a corporation to issue preferred shares except: