Accounting Corp.

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1.

Stock is attractive to investors because stockholders are not liable for the corporation's

actions and debts and because stock is easily transferred. T

2. Market value per share is: The price at which a stock is bought and sold.

3. Stockholders are not liable for a corporation’s actions or debt. T

4. Par value of a stock refers to the: AMOUNT ASSIGNED PER SHARE BY THE

CORPORATION IN ITS CHARTER

5. Stockholders (who are not officers or managers) are able to bind the corporation to

contracts. F

6. Common stockholders always share equally with all other stockholders (including

preferred stockholders) in dividends. F

7. When a corporation issues par value stock at par, the journal entry consists of a debit to

Cash and a credit to Common Stock. T

8. When all authorized shares of a corporation’s stock have the same rights and

characteristics, the stock is called: COMMON STOCK

9. The preemptive right protects stockholders’ proportionate interest by allowing

stockholders to purchase their proportional share of any common stock later issued by a

corporation. T

10. A company issued 110 shares of $100 par value common stock for $13,000 cash. The

total amount of paid-in capital in excess of par is: 2,000

11. Stated value stock is: NO PAR STOCK HAS AN ASSIGNED “STATED VALUE” PER

SHARE
12. A company issued 60 shares of $100 par value common stock for $7,600 cash. The

journal entry to record the issuance is: DR. CASH 7,600, CR. COMMON STOCK 6,000,

CR SHARE PREMIUM / EXCESS PAR VALUE 1,600

13. Corporations avoid many of the government regulations that proprietorships and

partnerships must follow. F

14. Percy Corporation was formed on January 1. The corporate charter authorized 100,000

shares of $10 par value common stock. During the first month of operation, the

corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing

up the articles of incorporation. The entry to record this transaction would include:

DEBIT ORGANIZATION EXPENSE 5,000

15. A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The

journal entry to record the issuance is: DR. CASH 4,000, CR. COMMON SHARE /

TREASURY SHARE 2,100, CR. SHARE PREMIUM 1,900

16. A company issued 60 shares of $100 par value common stock for $7,000 cash. The total

amount of paid-in capital in excess of par is: 1,000

17. A corporation issued 5,000 shares of $10 par value common stock in exchange for some

land with a market value of $70,000. The entry to record this exchange is: DR. LAND

70,000, CR. COMMON STOCK / TREASURY SHARE 50,000, CR. SHARE

PREMIUM 20,000

18. A special right often granted to preferred stock is additional voting privileges. F

19. Organization expenses are the costs to start a corporation, such as legal fees, promoters’

fees, and payments for a charter. T

20. Stockholders’ equity consists of paid-in (or contributed) capital and retained earnings. T
21. A corporation issued 6,000 shares of its $2 par value common stock in exchange for land

that has a market value of $84,000. The entry to record this transaction would include: A

CREDIT TO PAID IN CAPITAL IN EXCESS PAR VALUE, COMMON STOCK OF

72,000

22. The number of shares that a corporation’s charter allows it to sell is referred to as:

AUTHORIZED STOCK

23. The costs to start a corporation, including legal fees, promoters’ fees, and payments for a

charter, are called: ORGANIZATIONAL EXPENSES

24. Organization expenses are the costs to start a corporation, such as legal fees, promoters’

fees, and payments for a charter. T

25. Stated value stock is no-par stock that has an assigned “stated” value per share. T

26. A corporation is an entity that is separate from its owners and has many of the same

rights as a person. T

27. A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13

per share. The entry to record this transaction would include: CREDIT COMMON

STOCK 14,000

28. The board of directors of a corporation: OVERSEEING CORPORATION ACTIVITIES

29. The price at which a share of stock is bought or sold is known as par value. F

30. Stockholders are not liable for a corporation’s actions or debt. T

31. Stockholders (who are not officers or managers) are able to bind the corporation to

contracts. F

32. A corporation sometimes issues more than one class of stock, including preferred stock

and different classes of common stock. T


33. When a corporation issues par value stock at par, the journal entry consists of a debit to

Cash and a credit to Common Stock. T

34. Statement I: Outstanding shares are unissued and issued shares currently held by
stockholders. FALSE
Statement II: If the company uses the journal entry method, issuance of share
capital for cash should be recorded with a credit to Unissued Share Capital
account. TRUE
35.

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