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| 1 | |
Which of the following is one reason of greatest importance for businesses to incorporate? |
| | A) | Continuity of existence |
| | B) | Participation in dividends |
| | C) | Limited personal liability |
| | D) | Prospect of high profits |
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| 2 | |
A publicly owned corporation is required by law to do which of the following? |
| | A) | Prepare and issue financial statements in conformity with generally accepted accounting principles. |
| | B) | Have their annual statements audited by an independent firm of certified public accountants. |
| | C) | Comply with federal securities laws. |
| | D) | Do all of the above. |
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| 3 | |
Who has the primary function of setting corporate policies? |
| | A) | Stockholders |
| | B) | Board of directors |
| | C) | Operations officers |
| | D) | Chief executive officer (CEO) |
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| 4 | |
Ten thousand shares of common stock with a par value of $5 per share are issued at a price of $7 per share. The journal entry to record this transaction will include which of the following? |
| | A) | A debit to Cash for $50,000 |
| | B) | A credit to Additional Paid-in Capital for $20,000 |
| | C) | A credit to Capital Stock for $70,000 |
| | D) | A debit to Discount on Capital Stock for $20,000 |
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| 5 | |
Consider the following:
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Calculate the total paid-in capital of the corporation. |
| | A) | $8,700,000 |
| | B) | $1,700,000 |
| | C) | $4,900,000 |
| | D) | $11,900,000 |
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| 6 | |
Preferred Stock, with a par value of $50 per share and a dividend preference of 10%, is listed in the balance sheet with a total equity balance of $1,000,000. If dividends are declared and paid at the end of the year, what amount of dividends will be paid to the preferred shareholders? |
| | A) | $100,000 |
| | B) | $200,000 |
| | C) | $225,000 |
| | D) | $250,000 |
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| 7 | |
The dividend yield on preferred stock is 10% on a market price of $80 per share at the end of Year One. The preferred stock is selling for $40 at the end of Year Two. What is its dividend yield at the end of Year Two? |
| | A) | 20% |
| | B) | 10% |
| | C) | 8% |
| | D) | 16% |
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| 8 | |
Which of the following is false? |
| | A) | Book value is a historical concept. |
| | B) | Investors' confidence in a company's management can be measured. |
| | C) | Book value excludes amounts earned and retained by the corporation. |
| | D) | The sign of a successful corporation is when the market price of its stock exceeds the book value of its stock. |
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| 9 | |
Anchor, Incorporated has 100,000 shares of $50 par value common stock authorized and issued. The board of directors has authorized a 5-for-1 stock split. After the stock split, what will be the total number of shares issued and the par value per share? |
| | A) | 50,000 shares with a par value of $10 per share |
| | B) | 500,000 shares with a par value of $100 per share |
| | C) | 500,000 shares with a par value of $10 per share |
| | D) | 5,000,000 shares with a par value of $1 per share |
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| 10 | |
A corporation purchased treasury stock for $50,000 cash. The journal entry for this transaction included which of the following? |
| | A) | A debit to Cash and a credit to Common stock. |
| | B) | A debit to Treasury Stock and a credit to Cash. |
| | C) | A debit to Retained Earnings and a credit to Treasury Stock. |
| | D) | A debit to Treasury Stock and a credit to Preferred Stock. |
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