Indicate whether each of the following statements is true or false. 1. 2. 3. 4. 5. The corporation is an entity separate and distinct from its owners. The liability of stockholders is normally limited to their investment in the corporation. The relative lack of government regulation is an advantage of the corporate form of business. There is no journal entry to record the authorization of capital stock. No-par value stock is quite rare today. False True

Indicate whether each of the following statements is true or false. 1. 2. 3. 4. 5. The corporation is an entity separate and distinct from its owners. The liability of stockholders is normally limited to their investment in the corporation. The relative lack of government regulation is an advantage of the corporate form of business. There is no journal entry to record the authorization of capital stock. No-par value stock is quite rare today. False True

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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?With regard to stock dividend, which of the following is true .Reduces a corporation's assets and stockholders' equity A .Does not affect total equity, but transfer amounts between the components of equity.B „The decision to declare a stock dividend resides with the shareholders .C Transfers a portion of equity from retained earnings to a cash reserve account.D
Whereas, a decrease of the authorized capital stock will not be approved by the SEC if the effect is to prejudice the rights of the creditors, and yet no such qualification is provided for under the Corporation Code when it comes to the increase in authorized capital stock, because – It is an application of the coverage of the trust fund that always makes an increase of authorized capital stock favorable or non-prejudicial to the creditors of the corporation. It is presumed that creditors of the corporation will always be happy with the increased of its authorized capital stock. No appraisal right is triggered by an increase in the authorized capital stock of the corporation. Creditors of the corporation, not being within the intra-corporate relationship, have no standing on matters that pertain to the capital structure of the corporation.
all of the following are true about the issuance of non-voting common stock except a. it has been issued when the corporation wishes to raise capital through the sale of common stock but does not want to relinquish its voting control o b. it has been issued as a defense against an unfriendly takeover c it tends to result in the dilution of voting rights of current stockholders od. it tends to result in unequal voting rights among the shareholders
Which of the following statements is incorrect? Issued shares of stocks include those that have been at one time been sold to the public and which have been subsequently retired. If an entity’s capital stock is retired, the Share Capital account is reduced by its par value, the number of shares is reduced by the stock retired and the treasury stock is credited at cost. Treasury shares may be reissued as dividends, in which case the cost of the shares should be charged to Retained Earnings. Though may be used in computing for the Share Capital, stated value is not similar to par value of stock.
Which of the following statements is false? a. one of the disadvantages of incorporation is the problem of "double taxation" b. the number of issued shares is equal to the total shares sold to date minus those held in treasury stock c. common stock is part of stockholders equity d. when the stock has a par value, the amount recorded in the common stock account is the par amount times the number of shares issued
Which of the following statements is NOT correct about the rights granted to common stockholders? Group of answer choices a. Stockholders may transfer their right to vote to a second party by means of a proxy. b. Dividends due to common stockholders are cumulative. c. Common stockholders have the right to elect a firm's directors. d. In large, publicly traded firms, managers typically have some stock but their personal holdings are generally insufficient to win voting control.
Companies often invest in the common stock of other corporations. The way we report these investments depends on the nature of the investment and the investor’s motivation for the investment. The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Required: 1. Obtain the relevant authoritative literature on accounting for a change from the cost method to the equity method for investments in common stock using the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ). 2. What is the specific citation that describes how to account for a change from the cost method to the equity method for investments in common stock? 3. What are the specific requirements?
At its recent general meeting, a shareholder asked the board to explain how it decides whether certain financial instruments are classified as equity whereas other seemingly similar financial instruments are classified as debt. The shareholder suggested that the directors do not understand the impact of the classification on investors and their analysis of the financial statements. Required(i) Explain the key classification differences between debt and equity under International Financial Reporting Standards (IFRSs).(ii) Explain why it is important for entities to understand the impact of the classification of a financial instrument as debt or equity in the financial statements.
Chapter 11 - Question 2: (a) What is meant by the limited liability of a stockholder? (b) Does this characteristic enhance or reduce a corporation’s ability to raise capital? (c) Explain.
16. Which of the following statements is NOT correct about the rights granted to common stockholders? a. Stockholders may transfer their right to vote to a second party by means of a proxy. b. Dividends due to common stockholders are cumulative. c. Common stockholders have the right to elect a firm's directors. d. In large, publicly traded firms, managers typically have some stock but their personal holdings are generally insufficient to win voting control.
Which of the following statements is false? A The declaration of a dividend may not result in a current liability. B A dividend payable in shares of the issuing company's stock is not reported as a current liability. C Undeclared dividends in arrears on cumulative preferred stock are not recognized as a liability. D Interest and dividends accrue as a liability as time passes.
Which of the following statements regarding an S-corporation true? Select one: a. It must pay a higher rate of taxes than other types of corporations. b. It cannot have more than 100 stockholders. c. It must be publicly-held. d. It must have more than 100 shares of outstanding stock.