1. legal capital is best defined as a. the amount of capital the state of incorporation allows the company to accumulate a corporate form of business organization, legal cap- ital is best defined as over its existence. b. the par value of all capital stock issued. c. the amount of capital the feder...
1 legal capital is best defined as a the amount of capital the state of incorporation allows the company to accumulate a corporate form of business organization
legal cap ital is best defined as o
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Accounting Chapter 15 test bank
Accounting Chapter 15 test bank
Accounting Chapter 15 test bank
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Accounting Chapter 15 test bank
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1. legal capital is best defined as
b. the par value
a. the amount of capital the state of incorporation
of all capital
allows the company to accumulate
stock is- sued.
a corporate form of business organization, legal
cap- ital is best defined as
over its existence.
b. the par value of all capital stock issued.
c. the amount of capital the federal government
allows a corporation to generate.
d. the total capital raised by a corporation within
the limits set by the Securities and
Exchange Commission.
2. Total stockholders' equity represents
a. a claim to specific assets contributed by the c. a claim
own- ers. against a
b. the maximum amount that can be borrowed by portion of the
the enterprise. total assets of
c. a claim against a portion of the total assets of an enter- prise.
an enterprise.
d. only the amount of earnings that have been
retained in the business.
3. When a corporation issues its capital stock in
pay- ment for services, the least appropriate basis
for recording the transaction is the b. par value of
a. market value of the services received. the shares
b. par value of the shares issued. issued.
c. market value of the shares issued.
d. Any of these provides an appropriate basis
for recording the transaction.
4. Direct costs incurred to sell stock such as
underwrit- ing costs should be accounted for as
1. a reduction of additional paid-in capital.
2. an expense of the period in which the stock 1
is issued.
3. an intangible asset.
1/
, Accounting Chapter 15 test bank
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5. A "secret reserve" will be created if b. a capital
a. inadequate depreciation is charged to income. b. a expen- diture is
capital expenditure is charged to expense. c. charged to
liabilities are understated. expense.
d. stockholders' equity is overstated.
6. Stock that has a fixed per-share amount printed
on each stock certificate is called d. par value stock
a. stated value stock.
b. fixed value stock.
c. uniform value stock.
d. par value stock.
7. Which of the following is not a legal restriction
related to profit distributions by a corporation? b. The amount
a. The amount distributed to owners must be in dis- tributed in
com- pliance with the state laws governing any one year
corporations. can never ex-
b. The amount distributed in any one year can ceed the net in-
never exceed the net income reported for come reported
that year. for that year.
c. Profit distributions must be formally approved
by the board of directors.
d. Dividends must be in full agreement with the
capital stock contracts as to preferences
and participation.
8. In January 2012, Finley Corporation, a newly formed
a. decreased tota
company, issued 10,000 shares of its $10 par common stockholders'
equi-
stock for $15 per share. On July 1, 2012, Finley Cor- d. decreased
poration reacquired 1,000 shares of its outstanding the number
stock for $12 per share. The acquisition of these of issued
trea- sury shares shares.
a. decreased total stockholders' equity.
b. increased total stockholders' equity. 9. When treasury
c. did not change total stockholders' equity. stock is
2/
, Accounting Chapter 15 test bank
Study online at
purchased for more than
the par value of the stock
https://quizlet.com/_1atwsc ty.
and the cost method is used to
3/
, Accounting Chapter 15 test bank
Study online at
https://quizlet.com/_1atwsc
account for treasury stock, what account(s) should state- ment.
be debited?
a. Treasury stock for the par value and paid-in
capital in excess of par for the excess of
the purchase price over the par value.
b. Paid-in capital in excess of par for the
purchase price.
c. Treasury stock for the purchase price.
d. Treasury stock for the par value and retained
earn- ings for the excess of the purchase
price over the par value.
10.Gains" on sales of treasury stock (using the
cost method) should be credited to
a. paid-in capital from treasury stock.
b. capital stock.
c. retained earnings.
d. other income.
11.Porter Corp. purchased its own par value stock on
January 1, 2012 for $20,000 and debited the treasury
stock account for the purchase price. The stock was
subsequently sold for $12,000. The $8,000 difference
between the cost and sales price should be
recorded as a deduction from
a. additional paid-in capital to the extent that
previous net "gains" from sales of the same class of
stock are included therein; otherwise, from retained
earnings.
b. additional paid-in capital without regard as to
whether or not there have been previous net "gains"
from sales of the same class of stock included
therein.
c. retained earnings.
d. net income.
12.How should a "gain" from the sale of treasury stock
be reflected when using the cost method of
recording treasury stock transactions?
a. As ordinary earnings shown on the income
4/
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