Monday, January 18, 2021

If a company issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting equation?

If a company issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting equation?



A) Increase assets and increase liabilities.

B) Increase assets and increase revenue.

C) Increase assets and increase stockholders' equity.

D) Increase assets and decrease stockholders' equity.


Answer: C


If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?



A) Treasury Stock

B) Cash

C) Additional Paid-in Capital

D) Retained Earnings


Answer: C


The correct order from the smallest number of shares to the largest number of shares is:



A) Authorized, issued, and outstanding.

B) Outstanding, issued, and authorized.

C) Issued, outstanding, and authorized.

D) Issued, authorized, and outstanding.


Answer: B

If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?



A) Treasury Stock

B) Cash

C) Additional Paid-in Capital

D) Retained Earnings


Answer: C


The correct order from the smallest number of shares to the largest number of shares is:



A) Authorized, issued, and outstanding.

B) Outstanding, issued, and authorized.

C) Issued, outstanding, and authorized.

D) Issued, authorized, and outstanding.


Answer: B


Outstanding common stock specifically refers to:



A) Stock that is performing well.

B) Stock that has been authorized for issuance.

C) Stock issued plus treasury stock.

D) Stock in the hands of stockholders.


Answer: D

Advantages of the corporate form of business include which of the following?

Advantages of the corporate form of business include which of the following?


I. Double taxation

II. Ability to raise capital

III. Ability to transfer ownership

IV. More paperwork

V. Limited liability



A) II.

B) II., III., V.

C) I., II., III.

D) II., IV., V.



Answer: B


Which of the following statements regarding the corporate form of business is correct?



A) The disadvantages are that generating capital is difficult and that owners have limited liability.

B) Disadvantages are that the business is subject to government regulations and double taxation on its income.

C) One disadvantage is that ownership is easy to transfer.

D) All of the other answer choices are correct.


Answer: B


The articles of incorporation describe:



A) The nature of the firm's business activities.

B) The shares of stock to be issued.

C) The initial board of directors.

D) All of the other answer choices are correct.


Answer: D

All publicly held corporations are regulated by what government organization?

All publicly held corporations are regulated by what government organization?



A) The Financial Accounting Standards Board.

B) The Commission on Accounting Procedures.

C) The Accounting Principles Board.

D) The Securities and Exchange Commission.


Answer: D


The disadvantages of the corporate form of business include:



A) Ability to transfer ownership.

B) Additional taxes.

C) Limited liability.

D) Ability to raise capital.


Answer: B


Common stockholders usually have all of the following rights except:



A) To receive dividends when declared.

B) To share in the distribution of assets.

C) To elect board of directors.

D) To participate in the day-to-day operations.


Answer: D

Which of the following stages of equity financing comes last in the traditional order of progression?

Which of the following stages of equity financing comes last in the traditional order of progression?



A) Investment by friends and family of the founders.

B) Investment by the founders of the business.

C) Initial public offering (IPO).

D) Outside investment by "angel" investors and venture capital firms.


Answer: C


Which of the following is a reason that a corporation would prefer to issue stock instead of bonds?



A) Dividend payments can be deducted for income tax purposes but interest payments cannot.

B) Expansion is accomplished without surrendering ownership control.

C) The risk of going bankrupt is less.

D) All of the other answer choices are correct.


Answer: C


Which of the following is a disadvantage of an S Corporation?



A) Double Taxation

B) Liability

C) Restrictions on number of stockholders

D) Inability to transfer ownership


Answer: C

Which of the following stages of equity financing comes first in the traditional order of progression?

Which of the following stages of equity financing comes first in the traditional order of progression?



A) Investment by friends and family of the founders.

B) Initial Public Offering.

C) Investment by the founders of the business.

D) Outside investment by "angel" investors and venture capital firms.


Answer: C


Which of the following is not a true statement?



A) The debt to equity ratio measures a company's risk and is calculated as total liabilities divided by stockholders' equity.

B) Leverage enables a company to earn a higher return using debt than without debt.

C) Return on assets is calculated as net income divided by the ending balance for total assets.

D) The times interest earned ratio compares interest expense with income available to pay interest charges.



Answer: C


In terms of total sales, assets, and earnings, the dominant form of business organization is a:



A) Sole proprietorship.

B) Partnership.

C) Corporation.

D) Limited liability company (LLC).


Answer: C

A company's balance sheet reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is the company's stockholders' equity?

A company's balance sheet reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is the company's stockholders' equity?



A) $800,000

B) $320,000

C) $1,000,000

D) $2,000,000


Answer: A


Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?



A) Treasury Stock.

B) Common Stock.

C) Sales Revenue.

D) Retained Earnings.


Answer: C


The times interest earned ratio is calculated as



A) Interest expense/Net income.

B) Net income/Interest expense.

C) (Net income + interest expense + tax expense)/Interest expense.

D) Interest expense/(Net income + interest expense + tax expense).


Answer: C



Bull Gator Industries is considering a new assembly line costing $6,000,000. The assembly line will be fully depreciated

Bull Gator Industries is considering a new assembly line costing $6,000,000. The assembly line will be fully depreciated by the simplified s...