chapter 15 modified - TRUE-FALSEConceptual 1. A corporation...

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TRUE-FALSE —Conceptual 1. A corporation is incorporated in only one state regardless of the number of states in which it operates. True 2, The preemptive right allows stockholders the right to vote for directors of the company. False 3. Common stock is the residual corporate interest that bears the ultimate risks of loss. True 4. Earned capital consists of additional paid-in capital and retained earnings. False 5. True no-par stock should be carried in the accounts at issue price without any additional paid-in capital reported. True 6. Companies allocate the proceeds received from a lump-sum sale of securities based on the securities’ par values. False 7. Companies should record stock issued for services or noncash property at either the fair value of the stock issued or the fair value of the consideration received. True 8. Treasury stock is a company’s own stock that has been reacquired and retired. False 9. The cost method records all transactions in treasury shares at their cost and reports the treasury stock as a deduction from capital stock. False 10. When a corporation sells treasury stock below its cost, it usually debits the difference between cost and selling price to Paid-in Capital from Treasury Stock. True 11. Participating preferred stock requires that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any common dividends. False 12. Callable preferred stock permits the corporation at its option to redeem the outstanding preferred shares at stipulated prices. True 13. The laws of some states require that corporations restrict their legal capital from distribution to stockholders. True 14. The SEC requires companies to disclose their dividend policy in their annual report. False 15. All dividends, except for liquidating dividends, reduce the total stockholders’ equity of a corporation. False 16. Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind. True 17. When a stock dividend is less than 20-25 percent of the common stock outstanding, a company is required to transfer the fair market value of the stock issued from retained earnings. True 18. Stock splits and large stock dividends have the same effect on a company’s retained earnings and total stockholders’ equity. False
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Test Bank for Intermediate Accounting, Twelfth Edition 19. The rate of return on common stock equity is computed by dividing net income by the average common stockholders’ equity. False 20. The payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders. True 21. The residual interest in a corporation belongs to the a. management. b.
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chapter 15 modified - TRUE-FALSEConceptual 1. A corporation...

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