Question 1

Preferred shares may be issued instead of common shares:

Accepted Answer

A)  To prevent dilution of voting ownership. 
B)  To increase the return earned by common shareholders. 
C)  To appeal to investors who believe that common shares are too risky. 
D)  To increase financial leverage. 
E)  All of these answers are correct. 
A)  To prevent dilution of voting ownership. 
B)  To increase the return earned by common shareholders. 
C)  To appeal to investors who believe that common shares are too risky. 
D)  To increase financial leverage. 
E)  All of these answers are correct.

Question 2

The equity section for the single proprietorship can be called owner's equity because the equity belongs to the owner. The equity section for a corporation can be calledshareholders' equity because the equity belongs to a group of owners known as shareholders.

Accepted Answer

A) True 
 B)False

Question 3

Owners of preferred shares often do not have:

Accepted Answer

A)  Ownership rights to assets of the corporation. 
B)  Rights in liquidation. 
C)  The right to sell their shares. 
D)  Voting rights. 
E)  Preference to dividends. 
A)  Ownership rights to assets of the corporation. 
B)  Rights in liquidation. 
C)  The right to sell their shares. 
D)  Voting rights. 
E)  Preference to dividends.

Question 4

A dividend preference for preferred shares means that:

Accepted Answer

A)  Preferred shareholders are allocated their dividends before any dividends are allocated to common shareholders. 
B)  Dividends are paid quarterly. 
C)  Preferred shareholders are guaranteed dividends. 
D)  Only preferred shareholders will receive dividends. 
E)  All of these answers are correct. 
A)  Preferred shareholders are allocated their dividends before any dividends are allocated to common shareholders. 
B)  Dividends are paid quarterly. 
C)  Preferred shareholders are guaranteed dividends. 
D)  Only preferred shareholders will receive dividends. 
E)  All of these answers are correct.

Question 5

The payment of a dividend will reduce the following two accounts:

Accepted Answer

A)  Common shares and cash. 
B)  Equity and cash. 
C)  Cash and dividends payable. 
D)  Retained earnings and dividends payable. 
E)  Equity and retained earnings. 
A)  Common shares and cash. 
B)  Equity and cash. 
C)  Cash and dividends payable. 
D)  Retained earnings and dividends payable. 
E)  Equity and retained earnings.

Question 6

The total amount of shares that a corporation's charter allows it to issue is:

Accepted Answer

A)  Authorized. 
B)  Common. 
C)  Outstanding. 
D)  Issued. 
E)  Preferred. 
A)  Authorized. 
B)  Common. 
C)  Outstanding. 
D)  Issued. 
E)  Preferred.

Question 7

When a corporation sells shares directly, it pays a brokerage house to issue the shares.

Accepted Answer

A) True 
 B)False

Question 8

When a corporation issues only one class of shares they are:

Accepted Answer

A)  Special shares. 
B)  Private shares. 
C)  Common shares. 
D)  Public shares. 
E)  Preferred shares. 
A)  Special shares. 
B)  Private shares. 
C)  Common shares. 
D)  Public shares. 
E)  Preferred shares.

Question 9

The equity of a corporation changes because of profits or losses, distributions of incomes dividends) and shareholder investments.

Accepted Answer

A) True 
 B)False

Question 10

Pam Corporation sold 10,000 common shares at $25 per share cash. The entry to record this transaction would include:

Accepted Answer

A)  A credit to Common Shares for $25,000. 
B)  A credit to Cash for $250,000. 
C)  A debit to Common Shares for $250,000. 
D)  A debit to Contributed Capital for $250,000. 
E)  A credit to Common Shares for $250,000. 
A)  A credit to Common Shares for $25,000. 
B)  A credit to Cash for $250,000. 
C)  A debit to Common Shares for $250,000. 
D)  A debit to Contributed Capital for $250,000. 
E)  A credit to Common Shares for $250,000.

Question 11

The declaration of cash dividends reduces retained earnings.

Accepted Answer

A) True 
 B)False

Question 12

The category of equity for a corporation which represents the cumulative profits less losses and dividends is called:

Accepted Answer

A)  The income statement. 
B)  Preferred shares. 
C)  Retained earnings. 
D)  Financial leverage. 
E)  Contributed capital. 
A)  The income statement. 
B)  Preferred shares. 
C)  Retained earnings. 
D)  Financial leverage. 
E)  Contributed capital.

Question 13

Dallas Sports Ltd has 100 shares of $15, noncumulative, preferred shares outstanding, and $160,000 of common shares outstanding. In the company's first year of operation, no dividends were paid, but during the second year Dallas Sports paid dividends of$24,000. The dividend should be distributed as follows:

Accepted Answer

A)  $1,500 preferred; $22,500 common. 
B)  $1,400 preferred; $12,600 common. 
C)  $12,000 preferred; $12,000 common. 
D)  $7,000 preferred; $7,000 common. 
E)  $3,000 preferred; $21,000 common. 
A)  $1,500 preferred; $22,500 common. 
B)  $1,400 preferred; $12,600 common. 
C)  $12,000 preferred; $12,000 common. 
D)  $7,000 preferred; $7,000 common. 
E)  $3,000 preferred; $21,000 common.

Question 14

Dividends represent the distribution of profits to the managers of a corporation.

Accepted Answer

A) True 
 B)False

Question 15

A limited liability company is a corporation for professionals such as lawyers and accountants.

Accepted Answer

A) True 
 B)False

Question 16

Brian's Stereo Ltd issued preferred shares that have a $10 dividend. This means that:

Accepted Answer

A)  The amount of the dividend is $10 per year per share. 
B)  The market price is $100 per share. 
C)  Preferred shareholders have a guaranteed dividend. 
D)  Preferred shareholders are entitled to 10% of the annual profit. 
E)  The market price is $10 per share. 
A)  The amount of the dividend is $10 per year per share. 
B)  The market price is $100 per share. 
C)  Preferred shareholders have a guaranteed dividend. 
D)  Preferred shareholders are entitled to 10% of the annual profit. 
E)  The market price is $10 per share.

Question 17

Dividends represent the distribution of profits to the shareholders of a corporation.

Accepted Answer

A) True 
 B)False

Question 18

The date a board of directors votes to pay a dividend is called the:

Accepted Answer

A)  Date of the annual shareholders meeting. 
B)  Date of declaration. 
C)  Date of record. 
D)  Liquidating date. 
E)  Date of payment. 
A)  Date of the annual shareholders meeting. 
B)  Date of declaration. 
C)  Date of record. 
D)  Liquidating date. 
E)  Date of payment.

Question 19

Common shares:

Accepted Answer

A)  Make shareholders liable for acts of the corporation because they share in ownership. 
B)  Are usually redeemable. 
C)  Always represent total contributed capital. 
D)  Allow shareholders to bind the corporation to contracts because they share in ownership. 
E)  Represent residual equity in a corporation. 
A)  Make shareholders liable for acts of the corporation because they share in ownership. 
B)  Are usually redeemable. 
C)  Always represent total contributed capital. 
D)  Allow shareholders to bind the corporation to contracts because they share in ownership. 
E)  Represent residual equity in a corporation.

Question 20

Bruce Corporation issued 8,000 common shares in exchange for land that has a fair market value of $184,000. The entry to record this transaction would include:

Accepted Answer

A)  A debit to Land for $8,000. 
B)  A debit to Common Shares for $8,000. 
C)  A debit to Common Shares for $184,000. 
D)  A credit to Land for $184,000. 
E)  A credit to Common Shares for $184,000. 
A)  A debit to Land for $8,000. 
B)  A debit to Common Shares for $8,000. 
C)  A debit to Common Shares for $184,000. 
D)  A credit to Land for $184,000. 
E)  A credit to Common Shares for $184,000.

Preferred shares may be issued instead of common shares:

The equity section for the single proprietorship can be called owner's equity because the equity belongs to the owner. The equity section for a corporation can be calledshareholders' equity because the equity belongs to a group of owners known as shareholders.

Owners of preferred shares often do not have:

A dividend preference for preferred shares means that:

The payment of a dividend will reduce the following two accounts:

The total amount of shares that a corporation's charter allows it to issue is:

When a corporation sells shares directly, it pays a brokerage house to issue the shares.

When a corporation issues only one class of shares they are:

The equity of a corporation changes because of profits or losses, distributions of incomes dividends) and shareholder investments.

Pam Corporation sold 10,000 common shares at $25 per share cash. The entry to record this transaction would include:

The declaration of cash dividends reduces retained earnings.

The category of equity for a corporation which represents the cumulative profits less losses and dividends is called:

Dividends represent the distribution of profits to the managers of a corporation.

A limited liability company is a corporation for professionals such as lawyers and accountants.

Brian's Stereo Ltd issued preferred shares that have a $10 dividend. This means that:

Dividends represent the distribution of profits to the shareholders of a corporation.

The date a board of directors votes to pay a dividend is called the:

Common shares:

Bruce Corporation issued 8,000 common shares in exchange for land that has a fair market value of $184,000. The entry to record this transaction would include:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Accounting for Debt and Share Investments

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters

Exam 12: Organization and Operation of Corporations

Preferred shares may be issued instead of common shares:

The equity section for the single proprietorship can be called owner's equity because the equity belongs to the owner. The equity section for a corporation can be calledshareholders' equity because the equity belongs to a group of owners known as shareholders.

Owners of preferred shares often do not have:

A dividend preference for preferred shares means that:

The payment of a dividend will reduce the following two accounts:

The total amount of shares that a corporation's charter allows it to issue is:

When a corporation sells shares directly, it pays a brokerage house to issue the shares.

When a corporation issues only one class of shares they are:

The equity of a corporation changes because of profits or losses, distributions of incomes dividends) and shareholder investments.

Pam Corporation sold 10,000 common shares at $25 per share cash. The entry to record this transaction would include:

The declaration of cash dividends reduces retained earnings.

The category of equity for a corporation which represents the cumulative profits less losses and dividends is called:

Dividends represent the distribution of profits to the managers of a corporation.

A limited liability company is a corporation for professionals such as lawyers and accountants.

Brian's Stereo Ltd issued preferred shares that have a $10 dividend. This means that:

Dividends represent the distribution of profits to the shareholders of a corporation.

The date a board of directors votes to pay a dividend is called the:

Common shares:

Bruce Corporation issued 8,000 common shares in exchange for land that has a fair market value of $184,000. The entry to record this transaction would include:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Accounting for Debt and Share Investments

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters