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1 | |
Which of the following is true regarding corporations? |
| | A) | The president and various vice presidents are elected by the stockholders. |
| | B) | A proxy is a temporary president hired by the board of directors. |
| | C) | Corporate charters are issued by the federal government. |
| | D) | A corporation is a separate legal entity that may sue and be sued as if it were a person. |
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2 | |
John Hill owns 51% of the capital stock of Hill Corporation. Which of the following actions would not be permissible for John Hill to take? |
| | A) | To cause those persons he chooses to become directors of the corporation. |
| | B) | To serve personally both as a director and as president of the corporation. |
| | C) | To arrange for members of his immediate family to become directors and/or officers of the corporation. |
| | D) | To withdraw from the corporation such amounts of the paid-in capital and retained earnings as he decides to be appropriate. |
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3 | |
In the closing of the accounts at the end of the period, which of the following is closed directly into the Retained Earnings account? |
| | A) | The Income Summary account. |
| | B) | The Capital Stock account. |
| | C) | Revenue and expense accounts. |
| | D) | The Dividends Payable account. |
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4 | |
Which of the following best describes the relationship between revenue and retained earnings? |
| | A) | Revenue increases net income, which in turn increases retained earnings. |
| | B) | Revenue represents a cash receipt; retained earnings is an element of stockholders' equity. |
| | C) | Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends. |
| | D) | Retained earnings is equal to revenue minus expenses. |
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5 | |
The accountant for Bernardo Corporation failed to record a dividend declared in December of 1999. On Bernardo Corporation's balance sheet at December 31, 1999: |
| | A) | Assets and stockholders' equity are both overstated. |
| | B) | Liabilities are understated and retained earnings are overstated. |
| | C) | Cash and liabilities are both overstated. |
| | D) | The balance sheet is accurate, since the dividends have not been paid yet. |
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6 | |
If a corporation issues some of its common stock in exchange for assets other than cash, the transaction should be recorded at the: |
| | A) | Current market value of the assets received. |
| | B) | Stated value of the shares issued. |
| | C) | Par value of the shares issued. |
| | D) | Book value of the shares issued. |
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7 | |
Quinta Corporation is authorized to issue 1,000,000 shares of $5 par value capital stock. The corporation issued half the stock for cash at $20 per share, earned $200,000 during the first three months of operation, and declared a cash dividend of $50,000. The total paid-in capital of Quinta Corporation after three months of operation is: |
| | A) | $2,500,000. |
| | B) | $5,000,000. |
| | C) | $10,000,000. |
| | D) | $10,150,000 |
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2002 McGraw-Hill Higher Education