Mann_BLRB 9_TB_Ch35

Business Law and the Regulation of Business

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Chapter 35—Financial Structure of Corporations TRUE/FALSE 1. Warrick makes a $10,000 investment in a debenture issued by Wryteway Company. Warrick is now an unsecured creditor of Wryteway Company. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 2. A majority of the shareholders would have to approve the issuance of corporate bonds. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 3. An indenture is not a debt agreement. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 4. Debentures are the same as indentures. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 5. Clayton Tile has a secured bond on specific property of Ceramic Creations, Inc. Clayton’s claim against Ceramic is enforceable only against that specific property. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 6. A bondholder generally takes less of a financial risk than a shareholder of a corporation. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 7. A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corpor- ate assets of an ongoing company. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 8. A company does not have to issue all of the shares authorized by the corporate charter, but it cannot is- sue more shares than are authorized. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 9. "Blue Sky Laws" are state laws that regulate corporate stock issuance and sales. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic
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10. The federal government leaves corporate stock regulation to the states since corporations are state-cre- ated entities. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 11. Ready Equipment, Inc. authorized and specified in its charter 5,000 shares of stock to be issued. If it later needs to issue stock in excess of 5,000 shares, the charter will have to be amended. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 12. Treasury shares are shares that have been authorized but have not yet been issued. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 13. Under the Revised Act, dividends must always be paid in money. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 14. Article 8 of the UCC covers rules applicable to transfers of investment securities. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 15. The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company. ANS: F
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Mann_BLRB 9_TB_Ch35 - Chapter 35-Financial Structure of...

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