Accounting Seminar – 6

Multiple-choice questions

21. 
    The costs of bringing a corporation into existence, including legal fees, promoter fees and amounts paid to obtain a charter are called:
    

1. 
   Minimum legal capital
   
2. 
   Stock subscriptions
   
3. 
   Organization costs
   
4. 
   Cumulative costs
   
5. 
   Prepaid fees
   

21. 
    The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a:
    

1. 
   Preemptive right
   
2. 
   Proxy right
   
3. 
   Right to call
   
4. 
   Financial leverage
   
5. 
   Voting right
   
21. 
    Buying stock in a corporation is attractive to investors because:
    
    1. 
       Stockholders are not liable for the corporation's actions and debts
       
    2. 
       Stock is easily transferred
       
    3. 
       A corporation has unlimited life
       

D. Shareholders are not agents of the corporation

E. All of the above

16. 
    A proxy is:
    
    4. 
       A legal document that gives a designated agent of a stockholder the power to vote the stock
       
    5. 
       A contractual commitment by an investor to purchase unissued shares of stock
       

4. 
   An amount of assets defined by state law that stockholders must invest and leave invested in a corporation
   

4. 
   The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation
   

4. 
   An arbitrary amount assigned to no-par stock by the corporation's board of directors
   
1. 
   The board of directors of a corporation:
   
   4. 
      Are elected by the corporate registrar
      
   5. 
      Are responsible for day-to-day operations of the business
      
   6. 
      Do not have the power to bind the corporation to contracts, due to lack of mutual agency
      
   7. 
      May not also be executive officers of the corporation, due to the separate entity principle
      
   8. 
      Are responsible for and have final authority for managing corporate activities
      
2. 
   The total amount of stock that a corporation's charter allows it to issue is referred to as:
   
   4. 
      Issued stock
      
   5. 
      Outstanding stock
      
   6. 
      Common stock
      
   7. 
      Preferred stock
      
   8. 
      Authorized Stock
      
3. 
   Par value of a stock refers to the:
   
   4. 
      Issue price of the stock
      
   5. 
      Value assigned to a share of stock by the corporate charter
      
   6. 
      Market value of the stock on the date of the financial statements
      
   7. 
      Maximum selling price of the stock
      
   8. 
      Dividend value of the stock
      
4. 
   When all of the authorized shares have the same rights and characteristics, the stock is called:
   
   4. 
      Preferred stock
      
   5. 
      Common stock
      
   6. 
      Par value stock
      
   7. 
      Stated value stock
      
   8. 
      No-par value stock
      

21. 
    An amount of assets defined by state law that stockholders must invest and leave invested in a corporation, which is intended to protect the creditors of the corporation is called the:
    

4. 
   Par value of preferred
   
5. 
   Minimum legal capital
   
6. 
   Premium capital
   
7. 
   Stated value
   
8. 
   Working capital
   

22. 
    The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is:
    

4. 
   Always equal to its par value
   
5. 
   Always equal to its stated value
   
6. 
   Referred to as contributed capital
   
7. 
   Referred to as retained earnings
   
8. 
   Always below its stated value
   
1. 
   Stated value of no-par stock is:
   
   4. 
      Another name for redemption value
      
   5. 
      An amount assigned to par value stock by the state of incorporation
      
   6. 
      The market value of the stock on the date of issuance
      

4. 
   The difference between the par value of stock and the amount below or above par value contributed by the stockholder
   

4. 
   An amount assigned to no-par stock by the corporation's board of directors
   

2

24. 
    Stockholders' equity consists of:
    
    1. 
       Long-term assets
       
    2. 
       Contributed capital and retained earnings
       
    3. 
       Contributed capital and par value
       
    4. 
       Retained earnings and cash
       
    5. 
       Premiums and discounts
       

24. 
    A class of stock that does not have a par value and can usually be issued at any price without creating a minimum legal capital deficiency is called:
    

1. 
   Convertible stock
   
2. 
   No-par stock
   
3. 
   Callable stock
   
4. 
   Noncumulative stock
   
5. 
   Discounted stock
   
24. 
    A corporation's minimum legal capital is often defined to be the total par value of the shares:
    
    1. 
       Issued
       
    2. 
       Authorized
       
    3. 
       Subscribed
       
    4. 
       Outstanding
       
    5. 
       In treasury
       
25. 
    Owners of preferred stock often do not have:
    
    1. 
       Ownership rights to assets of the corporation
       
    2. 
       Voting rights
       
    3. 
       Preference to dividends
       
    4. 
       The right to sell their stock on the open market
       
    5. 
       Preference to assets at liquidation
       

24. 
    Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:
    

1.