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Question(s) / Instruction(s):

A disadvantage of the corporate form of business entity is

a)            mutual agency for stockholders

b)            the ease of transfer of ownership

c)            unlimited liability for stockholders

d)            corporations are subject to more governmental regulations



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

a)            management.

b)            board of directors.

c)            stockholders.

d)            employees.



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

a)            Continuous life

b)            Separate legal existence

c)            Limited liability of stockholders

d)            Government regulation



The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?

a)            Treasury Stock

b)            Organizational Expenses

c)            Common Stock

d)            Retained Earnings



Stockholders' equity

a)            includes paid-in capital and liabilities

b)            is shown on the income statement

c)            is usually equal to cash on hand

d)            includes retained earnings and paid-in capital



The entry to record the issuance of common stock at a price above par includes a debit to

a)            Cash

b)            Common Stock

c)            Organizational Expenses

d)            Paid-In Capital in Excess of Par-Common Stock



The charter of a corporation provides for the issuance of 100,000 shares of common stock.  Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired.  What is the number of shares outstanding?

a)            40,000

b)            70,000

c)            50,000

d)            60,000



If Everly Company issues 1,000 shares of $5 par value common stock for $75,000, the account

a)            Common Stock will be credited for $75,000.

b)            Paid-in Capital in excess of Par Value will be credited for $70,000.

c)            Cash will be debited for $70,000.

d)            Paid-in Capital in excess of Par Value will be credited for $5,000.



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

a)            Paid-in Capital in Excess of Par Value.

b)            Cash.

c)            Legal Capital.

d)            Retained Earnings.



Alma Corp. issues 1,000 shares of $10 par value common stock at $16 per share.  When the transaction is recorded, credits are made to:

a)            Common Stock $16,000.

b)            Common Stock $10,000 and Retained Earnings $6,000.

c)            Common Stock $10,000 and Paid-in Capital in Excess of Par Value $6,000.

d)            Common Stock $10,000 and Paid-in Capital in Excess of Stated Value $6,000.



The liability for a dividend is recorded on which of the following dates?

a)            the date of announcement

b)            the date of record

c)            the date of declaration

d)            the date of payment



Which statement below is not a reason for a corporation to buy back its own stock.

a)            to increase the shares outstanding

b)            bonus to employees

c)            resale to employees

d)            for supporting the market price of the stock




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