ACCT 2110 FINAL – Flashcards
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which of the following statements is false regarding the issuance of stock versus bonds to raise capital for a corporation? a. the declaration of dividends reduces the amount of the corporations taxable income b. interest accrues; whereas, divided do not accrue c. the payment of bond interest is a contractual requirement d. the declaration of dividends is at the discretion of the board of directors
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the declaration of dividends reduces the amount of the corporations taxable income
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in which of the following organization forms are the owners legal responsibility for the debt of the business limited to the amount they invested in the business? a. sole proprietorship b. corporation c. partnership d. cooperative
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corporation
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select the type of business that is most likely to obtain large amounts of resources by issuing stock a. partnership b. corporation c. sole proprietorship d. none are correct
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corporation
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which of the following is not a characteristic of a corporation? a. corporations are organized as a separate legal taxable entity b. ownership is divided into shares of stock c. corporations experience an ease in obtaining large amounts of resources by issuing stock d. corporations resources are limited to their individual stockholders resources
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a corporations resources are limited to their individual stockholders resources
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Which of the following is not characteristic of a corporation? a. The financial loss that a stockholder may suffer from owning stock in a public company is limited. b. Cash dividends paid by a corporation are deductible as expenses by the corporation. c. A corporation can own property in its name. d. Corporations are required to file federal income tax returns.
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Cash dividends paid by a corporation are deductible as expenses by the corporation.
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Characteristics of a corporation include: a. shareholders who are mutual agents. b. direct management by the shareholders (owners). c. its inability to own property. d. shareholders who have limited liability.
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shareholders who have limited liability.
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One of the main disadvantages of the corporate form is the: a. professional management. b. double taxation of dividends. c. charter. d. corporation must issue stock.
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double taxation of dividends.
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A disadvantage of the corporate form of business entity is: a. mutual agency for stockholders. b. unlimited liability for stockholders. c. corporations are subject to more governmental regulations. d. the ease of transfer of ownership.
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corporations are subject to more governmental regulations.
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Under the corporate form of business organization: a. ownership rights are easily transferred. b. a stockholder is personally liable for the debts of the corporation. c. stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.
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ownership rights are easily transferred.
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Which one of the following would not be considered an advantage of the corporate form of organization? a. Government regulation b. Separate legal existence c. Continuous life d.Limited liability of stockholders
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Government regulation
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The ability of a corporation to obtain capital is: a. less than a partnership. b. about the same as a partnership. c. restricted because of the limited life of the corporation. d. enhanced because of the limited liability and the ease of share transferability
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enhanced because of the limited liability and the ease of share transferability
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Which of the following statements is true with regard to equity capital? a. The number of shares actually in the hands of stockholders are called outstanding shares. b. It is unusual for corporations to have more than one class of stock outstanding at any point in time. c. Preferred stock represents the shares of stock that have been permanently retired. d. Issued shares represent the maximum number of shares that can be issued by a corporation.
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The number of shares actually in the hands of stockholders are called outstanding shares.
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Authorized shares represent the: a. number of previously issued shares that have been repurchased by the corporation. b. number of shares that the corporation has sold. c. number of shares that are currently held by stockholders. d. maximum number of shares of stock that a company can legally issue.
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maximum number of shares of stock that a company can legally issue.
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issued shares represent the: a. number of previously issued shares that have been repurchased by the corporation. b. number of shares that the corporation has distributed to owners to date. c. number of shares that are currently held by stockholders. d. maximum number of shares that can be sold by the corporation.
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number of shares that the corporation has distributed to owners to date.
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Outstanding shares represent the: a. number of previously issued shares that have been repurchased by the corporation. b. number of shares that the corporation has sold. c. number of shares that are currently held by stockholders. d. maximum number of shares that can be sold by the corporation.
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number of shares that are currently held by stockholders.
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Par value represents the: a. arbitrary amount that establishes a minimum price for the stock when it is first issued. b. current market price of the stock. c. amount for which any treasury shares have been acquired by the corporation. d. amount for which treasury shares may be reissued.
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arbitrary amount that establishes a minimum price for the stock when it is first issued.
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Porter Hardware, Inc. issues $2 par common stock. Which of the following is true? a. $2 per share is presented on the balance sheet in the common stock account. b. $2 per share is the maximum selling price for these shares of stock. c. Liabilities will increase as a result of this transaction. d. $2 in dividends will be paid to the stockholders as a result of this transaction.
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$2 per share is presented on the balance sheet in the common stock account.
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Prady, Inc. began operations on October 1, 2011, with 3,000 shares of $2 par common stock authorized. Prady issued all of its common stock during 2011 and 2012. On December 31, 2012, Prady repurchased 1,000 shares of its outstanding shares, then reissued 500 of these shares on March 1, 2013. On June 1, 2013, Prady declared a 2-for-1 stock split. As a result of this stock split, which of the following is true? a. Assets decreased. b. Stockholders' equity decreased. c. Stockholders' equity increased. d. Total stockholders' equity remained the same.
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Total stockholders' equity remained the same.
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If a corporation declares a 2-for-1 stock split, which of the following is true? a. A new class of stock must be authorized with twice the number of issued shares. b. The number of outstanding shares is half the number that was outstanding before the split. c. The number of outstanding shares is twice the number that was outstanding before the split. d. The number of authorized shares is doubled, while the par value is reduced to half of the pre-split par value.
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The number of outstanding shares is twice the number that was outstanding before the split.
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if a corporation declares a 2-for-1 stock split, which of the following is true? a. The amount of stockholders' equity doubles as a result of the split. b. The amount of capital stock doubles as a result of the split. c. The price of each share will be doubled as a result of the split. d. A stockholder who previously held 100 shares will have 200 shares after the split.
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A stockholder who previously held 100 shares will have 200 shares after the split.
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If a corporation declares a 2-for-1 stock split, which of the following is true? a. A journal entry is required to show the effect on the stockholders' equity accounts. b. The stockholders will have a higher proportionate ownership share after the split. c. The par value will be reduced to half of the pre-split par value. d. The market price of the stock is expected to increase after the split.
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The par value will be reduced to half of the pre-split par value
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Magnum Corporation had 60,000 of its $3 par common stock issued before its recent 3-for-1 stock split. The market price of the stock was $30 per share before the split. Which of the following is true as a result of the split? a. There were 20,000 shares of common stock issued after the split. b. The balance in the common stock account increased to $180,000. c. The market price of the stock was not affected. d. The par value of the stock decreased to $1 per share.
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The par value of the stock decreased to $1 per share.
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When a corporation decides whether to pay a cash dividend, which of the following is an important consideration? a. The balances in the corporation's cash account to determine cash available for dividends. b. The number of authorized shares of the corporation's stock. c. The book value of the treasury stock. d. The balance of paid-in capital in excess of par on the corporation's stock accounts.
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The balances in the corporation's cash account to determine cash available for dividends.
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When a corporation declares a cash dividend, which of the following is true? a. Cash decreases. b. Liabilities decrease. c. Equity decreases. d. No entry is necessary.
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Equity decreases.
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After a corporation declares a cash dividend, what takes place on the date of record? a. Cash decreases. b. Liabilities decrease. c. Equity decreases. d. No entry is necessary
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No entry is necessary
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When a corporation pays a previously declared cash dividend, which of the following is true? a. Cash increases. b. Liabilities decrease. c. Equity decreases. d. No entry is necessary.
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Liabilities decrease.
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When a corporation declares a stock dividend, which of the following is true? a. Cash decreases. b. Equity remains the same. c. Equity decreases. d. Retained earnings increases.
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Equity remains the same.
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When a corporation declares a small stock dividend, which of the following is false? a. Cash decreases. b. Total stockholders' equity remains the same. c. The capital stock accounts increase. d. Retained earnings decreases.
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Cash decreases.
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On June 1, 2011, Donner Technologies declared a $50,000 cash dividend to be distributed to its common stockholders of record on June 15, 2011. The dividend will be paid on July 1, 2011. The required journal entry on June 1 includes a: a. $50,000 debit to retained earnings. b. $50,000 debit to dividends payable. c. $50,000 credit to cash. d. $50,000 credit to common stock.
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$50,000 debit to retained earnings.
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On January 15, 2011, Rockney Systems, Inc. paid a cash dividend that had been declared prior to the end of its 2010 fiscal year. The entry to pay the dividends includes a debit to: a. Cash and a credit to Dividends Payable. b. Dividends Payable and a credit to Cash. c. Retained Earnings and a credit to Dividends Payable. d. Dividends Payable and a credit to Retained Earnings.
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Dividends Payable and a credit to Cash.
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When is a liability for cash dividends created? a. At the end of each fiscal year. b. At the date of declaration. c. At the date of record. d. At the date of payment.
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At the date of declaration.
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Which of the following is the appropriate general journal entry to record the declaration of a cash dividends? a. Retained Earnings Cash b. Dividends Payable Cash c. Additional Paid-in Capital Dividends Payable d. Retained Earnings Dividends Payable
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Retained Earnings Dividends Payable
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What is the primary reason for a stock split? a. To distribute cash to the investor. b. To decrease the market value of the stock. c. To decrease the number of shares outstanding. d. To increase the capital stock of the corporation
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To decrease the market value of the stock.
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Many stockholders choose to invest in preferred stock because: a. preferred stock can always be converted into common stock at the stockholder's option. b. the preferred dividend distributions are generally increased each year. c. dividends are distributed to preferred stockholders before common stockholders. d. preferred stockholders includes the right to participate in management decisions through voting privileges.
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dividends are distributed to preferred stockholders before common stockholders
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If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders? a. They must forgo dividends for any periods when no dividends are declared. b. They have the right to receive current-year dividends and all unpaid dividends from prior years. c. They will receive a fixed dividend each year regardless of the amount of dividends declared. d. They will have an option to convert their shares to common stock at a specified date.
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They have the right to receive current-year dividends and all unpaid dividends from prior years.
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Dividends in arrears are required to be reported in: a. a liability account. b. a contra-equity account. c. the stockholders' equity section of the balance sheet. d. the notes to the financial statements.
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the notes to the financial statements.
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The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for cash at $70 per share. The entry to record the transaction will consist of a debit to Cash for $700,000 and a credit or credits to: a. Preferred Stock for $700,000. b. Preferred Stock for $500,000 and Additional Paid-in Capital for $200,000. c. Preferred Stock for $500,000 and d. Retained Earnings for $200,000. d. Paid-in Capital from Preferred Stock for $700,000.
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Preferred Stock for $500,000 and Additional Paid-in Capital for $200,000.
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Treasury shares represent the: a. number of previously issued shares that have been repurchased by the corporation. b. number of shares that the corporation has sold. c. number of shares that are currently held by stockholders. d. maximum number of shares that can be sold by the corporation
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number of previously issued shares that have been repurchased by the corporation.
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All of the following are reasons that a corporation may purchase treasury stock except: a. if it needs the stock for its employee stock bonus program. b. if it desires to make an investment in its own stock and is reported as an asset. c. to buy out the ownership of stockholders. d. to increase the reported amount of earnings per share.
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if it desires to make an investment in its own stock and is reported as an asset.
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Which of the following statements is true regarding a corporation's purchase of treasury stock? a. The cost of treasury stock is a reduction in stockholders' equity. b. Dividends must still be paid on treasury stock because it is still issued. c. Treasury stock is reported as an asset because it is considered an investment in the corporation's own stock. d. Treasury stock is no longer considered issued once it is back in the hands of the issuer.
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The cost of treasury stock is a reduction in stockholders' equity.
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The excess of sales price of treasury stock over its cost should be credited to: a. Treasury Stock Receivable b. Premium on Capital Stock c. Additional Paid-In Capital d. Income from Sale of Treasury Stock
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Additional Paid-In Capital
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Earnings per share is an indication of how much: a. the company has in cash for each share of outstanding common stock. b. the company earned for each share of outstanding common stock. c. the company paid as dividends for each share of common stock held by stockholders. d. the company earned for each share of outstanding common and preferred stock.
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the company earned for each share of outstanding common stock.
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Cash paid for preferred stock dividends should be shown on the statement of cash flows under: a. investing activities. b. financing activities. c. both investing and financing activities. d. operating activities
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financing activities.
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On the statement of cash flows, the cash flows from financing activities section would include: a. receipts from the sale of investments. b. payments for the acquisition of investments. c. receipts from a note receivable. d. receipts from the issuance of capital stock
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receipts from the issuance of capital stock
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Cash dividends paid on common stock would be reported in the statement of cash flows in: a. the cash flows from financing activities section. b. the cash flows from investing activities section. c. a separate schedule. d. the cash flows from operating activities section.
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the cash flows from financing activities section.
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The stockholders' equity accounts of Jamison Corporation include $37,500 of common stock with a par value of $0.50, and 5,000 shares of treasury stock with a total cost of $25,000. The total number of shares outstanding for Jamison Corporation are: a. 32,500 shares. b. 70,000 shares. c. 75,000 shares. d. 80,000 shares.
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70,000 shares.
