Multiple Choice Answers

Question 1 of 20
Stockholders’ investment appears in
A. Paid-In Capital.
B. Owner’s Equity.
C. Retained Earnings.
D. Cash.
Question 2 of 20
The ownership of a corporation consists of the
A. governing body.
B. officers of the corporation.
C. stockholders.
D. board of directors.
Question 3 of 20
Sunrise Online issued 500 shares of its $10 common stock in exchange for equipment with a fair market value of $7,500. The entry to record the transaction would include a
A. debit to Equipment for $5,000.
B. debit to Common Stock for $5,000.
C. credit to Paid-In Capital in Excess of Par Value for $2,500.
D. credit to Common Stock Subscribed for $5,000.
Question 4 of 20
The articles of incorporation are submitted by the incorporators to the _______ for approval.
A. IRS
B. Office of the Secretary of State
C. Securities and Exchange Commission
D. governor of the state
Question 5 of 20
In exchange for $1,500 legal services to help set up the new company, Hickory Grove Corporation issued 100 shares of $10 par value stock to its attorney. The entry to record the issuance of the stock would include a
A. credit to Common Stock for $1,000.
B. debit to Common Stock for $1,000.
C. credit to Common Stock for $1,500.
D. debit to Paid-In Capital in Excess of Par Value for $500.
Question 6 of 20
The entry to record MidIowa.net’s selling 800 shares of $6.00 par value common stock at $8.00 would be which of the following?
A. Debit Cash $6,400; credit Common Stock $4,800; credit Paid-In Capital in Excess of Par Value—Common $1,600
B. Debit Cash $4,800; credit Common Stock $4,800
C. Debit Cash $6,400; debit Paid-In Capital in Excess of Par Value—Common $1,600; credit Common Stock $8,000
D. None of the above
Question 7 of 20
Which of the following would normally not appear in the Stockholders’ Equity section of the balance sheet?
A. Cash
B. Paid-In Capital
C. Common Stock
D. Preferred Stock
Question 8 of 20
When stock is exchanged for noncash assets,
A. debit the asset for prior book value and credit Common Stock for cash received.
B. debit assets for market value and credit Common Stock for par value; if needed, credit Paid-In Capital in Excess of Par.
C. debit assets for market value and credit Common Stock for market value.
D. debit assets for par value and credit Common Stock for par value.
Question 9 of 20
Antiques.com’s outstanding stock is 75 shares of $60, 8% cumulative nonparticipating preferred stock, and 2,000 shares of $10 par value common stock. Antiques paid $2,400 cash dividends during the year. Common stockholders received
A. $2,400.
B. $360.
C. $2,040.
D. $0.
Question 10 of 20
Washington Corporation issued 4,000 shares of its $20 par value common stock for $23 per share. The entry to record the issuance would include a
A. debit to Cash for $80,000.
B. credit to Common Stock for $12,000.
C. credit to Common Stock for $80,000.
D. debit to Paid-In Capital in Excess of Par Value for $12,000.
Question 11 of 20
Preferred stock that’s given a right to share with the common stock in dividends in excess of a stated preferred dividend rate is called
A. nonparticipating.
B. participating.
C. cumulative.
D. noncumulative.
Question 12 of 20
The Harvester Corporation issued 40 shares of $20 par value stock to its accountant. The shares are in full payment for her $900 fee for helping to set up the new company. The entry to record the issuance of the stock would include a
A. credit to Common Stock for $900.
B. debit to Common Stock for $900.
C. credit to Common Stock for $800.
D. debit to Common Stock for $800.
Question 13 of 20
Dolly’s Best issued 200 shares of its $10 common stock in exchange for used packaging equipment with a fair market value of $2,400. The entry to record the acquisition of the equipment would include a
A. debit to Equipment for $2,000.
B. debit to Paid-In Capital in Excess of Par for $400.
C. credit to Common Stock for $2,400.
D. debit to Equipment for $2,400.
Question 14 of 20
ABC sells 400 shares of its $23 par common stock for $27. The entry would entail credit(s) to
A. Cash for $9,200.
B. Paid-In Capital in Excess of Par—Common for $800 and Common Stock for $10,800.
C. Paid-In Capital in Excess of Par—Common for $1,600 and Common Stock for $9,200.
D. Common Stock for $10,800.
Question 15 of 20
A major disadvantage of a corporation is the
A. difficulty in transferring ownership.
B. limited life.
C. difficulty in raising capital.
D. double taxation of the corporation’s income and of dividends paid to shareholders.
Question 16 of 20
Custer.com’s outstanding stock is 100 shares of $100, 6% cumulative nonparticipating preferred stock, and 1,000 shares of $10 par value common stock. Custer paid $2,000 cash dividends, including one-year dividends in arrears to preferred stockholders. Common stockholders received
A. $0.
B. $800.
C. $1,818.
D. $600.
Question 17 of 20
The entry to record selling 300 shares of no-par common stock with a stated value of $60 for $70 would be which of the following?
A. Debit Cash $21,000; credit Common Stock $21,000
B. Debit Cash $18,000; credit Common Stock $18,000
C. Debit Cash $21,000; credit Common Stock $18,000; debit Paid-In Capital in Excess of Par Value—Common $3,000
D. Debit Cash $21,000; credit Common Stock $18,000; credit Paid-In Capital in Excess of Stated Value—Common $3,000
Question 18 of 20
Officers of the corporation are
A. appointed by the stockholders.
B. stockholders of the corporation.
C. appointed by the board of directors.
D. None of the above
Question 19 of 20
If preferred dividends are limited to the stated rate of dividend, the preferred stock is
A. noncumulative.
B. cumulative.
C. participating.
D. nonparticipating.
Question 20 of 20
Which of the following is a characteristic of a corporation?
A. The stockholders have limited liability.
B. When stockholders sell their shares, the corporation is dissolved.
C. A corporation cannot own property in its name.
D. Cash dividends to the stockholders are nontaxable.